What changed in this filing

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Item 1. Financial Statements

2026-01-20 compared with 2025-10-20 · 119 added, 115 removed, 535 unchanged (30% of the section changed)

30 unchanged sentences

150,000,000 shares authorized;

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

132,611,844 and 118,296,448 issued and outstanding at November 30, 2025 and February 28, 2025, respectively.

Additional paid-in capital

6 unchanged sentences

Three-Months Ended

Six-Months Ended

Nine-Months Ended

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

8 unchanged sentences

Gain on debt extinguishment – related party

Change in fair value of derivative warrant liability

Change in fair value of derivative liability

Net income (loss)

Basic and diluted loss per share

3 unchanged sentences

CONDENSED STATEMENTS OF SHAREHOLDERS’

Three and Six Months Ended August 31, 2025

Three and Nine Months Ended November 30, 2025

(amounts in thousands, except share data)

7 unchanged sentences

$ ( 507,733 )

Three and Six Months Ended August 31, 2024

Common shares issued for cash

Balance, November 30, 2025 (unaudited)

$ ( 502,232 )

Three and Nine Months Ended November 30, 2024

(amounts in thousands, except share data)

9 unchanged sentences

$ ( 500,638 )

Common shares issued for cash

Balance, November 30, 2024 (unaudited)

$ ( 501,178 )

See accompanying notes to these unaudited financial

1 unchanged sentence

CONDENSED STATEMENTS OF CASH FLOWS

Six Months Ended

Nine Months Ended

(amounts in thousands)

7 unchanged sentences

Changes in operating assets and liabilities:

Accounts receivable

Prepaid and other current assets

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Notes payable issued for the purchase of property and equipment

Note payable issued for prepaid software licensing

Fair value of convertible note payable

1 unchanged sentence

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

See accompanying notes to

these unaudited financial statements.

See accompanying notes to these unaudited financial

AURA SYSTEMS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

THREE AND SIX MONTHS ENDED AUGUST 31, 2025 AND

THREE AND NINE MONTHS ENDED NOVEMBER 30, 2025

(Amounts in thousands, except share and per

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The accompanying unaudited condensed financial

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

statements as of and for the three and nine months ended on November 30, 2025 and 2024, have been prepared in conformity with accounting

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

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

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 results of operations for the period ended November 30, 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 six month period ended August 31, 2025,

During the nine month period ended November 30,

2025, the Company recognized a net loss of $ 2,104 and used cash in operating activities of $ 2,397 .

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.

As of November 30, 2025, the Company

also has a shareholder deficit of $ 36,928 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,

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risk on cash and cash equivalents.

During the three months ended August 31, 2024,

During the three months ended November 30, 2025,

one customer accounted for 93 % and one customer accounted for 7 % of revenues.

During the three months ended November 30, 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 six months ended August 31, 2024, one customer accounted

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

During the nine months ended November 30, 2025,

one customer accounted for 90 % of revenues.

During the nine months ended November 30, 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 August 31, 2025, four vendors accounted

As of November 30, 2025, four vendors accounted

for 38 %, 13 %, 12 % and 11 % of accounts payable.

56 unchanged sentences

The following table sets forth by level, within

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

the fair value hierarchy, the Company’s assets and liabilities at fair value as of November 30, 2025 and February 28, 2025:

November 30, 2025

(amounts in thousands)

3 unchanged sentences

The Company estimated the fair value of the derivative

liability using the Binomial Model.

liability using the Black-Scholes option pricing 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 August 31,

the derivative liability measured at fair value on a recurring basis using unobservable level 3 inputs for the period ended November 30,

2025, as follows:

3 unchanged sentences

Change in fair value of derivative liability

August 31, 2025

November 30, 2025

Loss per share

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

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

For the nine months ended November 30, 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

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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.

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

on the Company’s disclosures.

Other recent accounting pronouncements issued

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(b) Convertible notes payable 2 – past due

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

(a) In Fiscal 2013 and 2014, the Company issued nine 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 August 31, 2025 and February 28, 2025, the outstanding balance of the convertible notes payable amounted to $ 1,403 and are past due.

As of November 30, 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 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

As of November 30, 2025 and February 28, 2025, the outstanding balance of the convertible notes payable amounted to $ 90 and $ 110 , respectively, and are past due.

At November 30, 2025, the total outstanding convertible

notes payable of $ 1,493 and accrued interest of $ 565 are convertible into 1,934,768 shares of common stock at conversion rates ranging

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

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

As of November 30, 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 August 31, 2025 and February 28, 2025, the outstanding balance of the convertible note amounted to $ 20 and is past due.

As of November 30, 2025 and February 28, 2025, the outstanding balance of the convertible note amounted to $ 20 and is past due.

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 .

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 .

The Company accounted for the amended terms of the Kopple note payable as a debt extinguishment, and recorded a loss on debt extinguishment

of $ 19,324 .

As of November 30, 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.

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

to be paid by December 2025;

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

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.

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 .

At February 28, 2025, Kopple alleged that the Company failed to comply with certain non-monetary terms including failing to hold a shareholders’ meeting by August 1, 2024, or otherwise secure additional shares needed to allow the exercise Kopple’s conversion rights, and failure to pay 20 % of all collected revenues within 10 days of the end of each fiscal quarter.

(iii) effective August 30, 2024, the Company granted Kopple a 36 month right (but not an 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) during Fiscal 2025, requires the Company to pay 20 % of all collected revenues within 10 days of the end of each fiscal quarter;

(v) 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 ;

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

Fiscal 2026 Amendments to the Kopple note payable

In 2025, the $ 2,052 installment payment (principal,

interest and fees), due in December 2024, was extended four times through December 31, 2025.

In exchange for these extensions, fees totaling

$ 325 , were incurred and recorded as interest expense during fiscal 2026, of which $ 248 was payable as of December 31, 2025.

is currently in negotiations with the noteholder regarding another installment payment extension.

At February 28, 2025, Kopple alleged that the Company failed to comply with certain non-monetary terms, including failing to hold a shareholders’ meeting by August 1, 2024, or otherwise secure additional shares needed to allow the exercise Kopple’s conversion rights, and failure to pay 20 % of all collected revenues within 10 days of the end of each fiscal quarter in Fiscal 2025.

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.

3 unchanged sentences

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 August 31, 2025, the total outstanding

Management believes such covenants are normal for this type of transaction and that meeting them will not

affect the Company's operations.

At November 30, 2025, the total outstanding

convertible notes payable-related party of $ 12,279 and accrued interest of $ 3,655 are convertible into 147,388,470 shares of common stock

31 unchanged sentences

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 .

During Fiscal 2026, the Company obtained a loan

of $ 280 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 13.70 % per annum and will mature in October 2026.

The aggregate total of the note payable-software

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

licenses as of November 30, 2025, amounted to $ 281 .

(d) Notes payable – machinery and other

3 unchanged sentences

and will mature in April 2029.

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

As of November 30, 2025, the outstanding balance of the note payable amounted to $ 201 .

(e) Note payable-other

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

As of November 30, 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

NOTE 5 – NOTE PAYABLE-RELATED PARTY

Notes payable-related parties consisted of the following:

(amounts in thousands)

(a) Note payable-Jiangsu Shengfeng – past due

(a) Jiangsu Shengfeng Note

Note payable-Jiangsu Shengfeng – past due

On November 20, 2019, the Company owned 49 % of

9 unchanged sentences

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

As of August 31, 2025

As of November 30,

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

9 unchanged sentences

administrative and production operations, including warehousing, within an approximately 18 square foot facility in Lake Forest, California.

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

The Lake Forest facility lease is for 66-months effective February 2021 through November 30, 2026.

The initial monthly base rental rate

16 unchanged sentences

related to leases for the period are as follows:

Six Months ended

2025 Six Months ended

2025 Nine Months

(amounts in thousands)

1 unchanged sentence

Other Information

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

Cash paid for amounts included in the measurement of lease liabilities for the years ended November 30, 2025 and 2024, respectively $ 78 $ 141

Weighted average remaining lease term – operating leases (in years) 1.25 1.75

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The fair value of the

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

derivative liability at November 30, 2025 and February 28, 2025 was $ 15,611 and $ 17,565 , respectively.

The following tables summarize the derivative

7 unchanged sentences

NOTE 9 – SHAREHOLDERS’ DEFICIT

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

On November 30, 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 six-months ended August 31, 2024, the

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

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 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

securities with the earliest maturity date first.

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 August 31, 2025 (see Note

During the nine months ended November 30, 2025,

the Company issued 14,315,396 shares of common stock for approximately $ 2,769 in cash.

During the nine months ended November 30, 2024,

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

On November 30, 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 November 30, 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 securities with the earliest maturity date first.

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 November

30, 2025 (see Note 8).

Stock Options

11 unchanged sentences

( 1,250,000 )

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:

Total options, November 30, 2025

Exercisable, November 30, 2025

There was no intrinsic value as of November 30,

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

The exercise prices and

information related to options under the 2011 Plan outstanding on November 30, 2025, are as follows:

Exercise Price Stock Options

2 unchanged sentences

Life Weighted

Exercise Price

Outstanding Weighted

Exercise Price

50 7,000,000 7,000,000 4.91 $ 0.46 $ 0.46

Outstanding, February 28, 2025

Outstanding, August 31, 2025

There was no intrinsic value as of August 31,

Outstanding, November 30, 2025

Exercisable, November 30, 2025

There was no intrinsic value as of November 30,

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 August 31, 2025, are as follows:

information related to the warrants as November 30, 2025, are as follows:

Exercise Price Stock Warrants

2 unchanged sentences

Life Weighted

Exercise Price

Outstanding Weighted

Exercise Price

of Warrants Exercisable

$ 0.50 3,451,664 3,451,664 5.22 $ 0.50 0.50

1 unchanged sentence

NOTE 10 – RELATED PARTY TRANSACTIONS

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 six months ended August 31, 2025

As of November 30, 2025, and February 28, 2025,

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

For the nine months ended November

30, 2025 and 2024, the Company incurred total fees to Bettersea of $ 114 and $ 82 , respectively, for consulting services.

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.

As of November

30, 2025 and February 28, 2025, a total of approximately $ 274 and $ 225 , respectively, was due to Bettersea and included in accounts payable

and accrued expenses.

As of November 30, 2025, and February 28, 2025,

accrued expenses include accrued payroll due to officers of $ 340 and $ 272 , respectively.

NOTE 11 – CONTINGENCIES

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Three Months Ended

Six Months Ended

Nine Months Ended

Cost of sales

10 unchanged sentences

NOTE 13 – SUBSEQUENT EVENTS

Subsequent to August 31, 2025, the Company issued

Subsequent to November 30, 2025, the Company issued

3,340,000 shares of common stock in exchange for cash proceeds of approximately $ 334,000 .

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