What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-09-10 compared with 2025-06-13 · 47 added, 61 removed, 129 unchanged (46% of the section changed)

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This Management’s

Discussion and Analysis of Financial Condition and Results of Operations includes forward-looking statements.

Discussion and Analysis of Financial Condition and Results of Operations include forward-looking statements.

For cautions about relying

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being engineered and design.

We recently completed a 250-kW

electric motor prototype based on our axial flux induction for EV applications.

This activity is in conjunction with a large European

tier 1 automotive supplier interest and inputs.

We also completed the design for a 250-kW generator based on our axial flux induction

We expect to build this new generator over the next few months.

We have also in May 2024 completed the installation of our

new smaller 10-kW mobile power generator on a Polaris type ATV platform for US military applications.

We started working directly with

Polaris to perfect the output from the new generator on their platform.

We completed the designs for 5 horsepower axial flux induction

motor for swimming pool pump applications, and we also completed the design for a 10 horsepower axial flux induction motor for irrigation

pump applications.

We are also currently in discussions for usage of our technology for numerous wind turbines applications.

During fiscal

2025 we also applied for 3 new patents related to axial flux induction machines.

We recently completed the

design for 1.5, 3.75 kW a new 10 kW and second generation of 250 kW machines for both electric motor and generator applications.

currently designed a 50 kW and a new 5 kW machines for specific military applications.

We are also currently in discussions for usage

of our technology for numerous wind turbines applications.

In fiscal 2025 and 2026 we

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motor design (Ph.D.) Power electronics & control (Ph.D.) and mechanical design (M.S.M.E).

We have also acquired the latest in advance

We have also acquired the latest in advanced

engineering tools such as Ansys Maxwell finite elements, MATLAB and 3-D solid work.

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Fiscal 2026 compared to Fiscal 2025

Net revenue was $50 for Fiscal

2025, compared to $56 for Fiscal 2024.

Revenues continue to be negatively impacted due to a generally low level of resources on our legacy

products as well as our shift to the development and production of numerous prototypes for our new product line.

We cannot project with

confidence the timing or amount of revenue that we can expect until the prototypes are completed, which should be in Fiscal 2026.

Net revenue was $278,000 for

Fiscal 2026, compared to $50,000 for Fiscal 2025.

Revenues continue to be negatively impacted due to a generally low level of resources

on our legacy products as well as our shift to the development and production of numerous prototypes for our new product line.

project with confidence the timing or amount of revenue that we can expect until the prototypes are completed, which should be in Fiscal

Cost of Goods

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for Fiscal 2026, compared to $29,000 for Fiscal 2025.

This resulted in a gross profit of $21 compared to a gross loss of $137 for Fiscal

The gross loss and related gross margin for Fiscal 2024 were largely influenced by the low volume of shipments, which reduced our

ability to fully absorb fixed operating costs.

This resulted in a gross profit of $253,000 for Fiscal 2026, compared to gross profit

of $21,000 for Fiscal 2025.

The increase in gross profit was due to the increase in net revenue.

Engineering, Research and Development

Engineering, research and

development expenses were $1,249 for Fiscal 2025, compared to $750 for Fiscal 2024.

The increase is a result of the Company’s augmented

engineering activities, including (i) successfully recruiting new additions to the engineering staff;

(ii) licensing of modeling and design

software tools for the full 12-month period;

as well as (iii) additional expenses incurred in the process of designing, fabricating and

testing the new version of our electronic control unit (“ECU”) for our AuraGen ® /VIPER products.

development expenses were approximately $1.6 million for Fiscal 2026, compared to $1.2 million for Fiscal 2025.

The increase is a result

of the Company’s augmented engineering activities, including (i) successfully recruiting new additions to the engineering staff;

(ii) licensing of modeling and design software tools for the full 12-month period;

as well as (iii) additional expenses incurred in the

process of designing, fabricating and testing the new version of our electronic control unit (“ECU”) for our AuraGen ® /VIPER

Selling, General and Administrative Expense

Selling, general and administration

(“SG&A”) expenses for Fiscal 2025 were $3,586 as compared to $1,873 for Fiscal 2024, an increase of $1,713 or 91%.

increase in SG&A was due to increased headcount and pay increases, and $1,342 in stock-based compensation.

(“SG&A”) expenses for Fiscal 2026 were $2.2 million as compared to $3.6 million for Fiscal 2025.

The decrease in SG&A

was due to a $1.5 million decrease in stock-based compensation.

Other Income (Expense) and Interest Expense

Interest expense increased by $345 to $1,810 for Fiscal 2025, as compared

to $1,465 for Fiscal 2024.

During Fiscal 2025, the Company recorded a gain on debt settlement of $179 and a loss on debt extinguishment

of $19,324 (see Notes 7 and 9 of the accompanying financial statements), both of which did not occur in the prior year period.

estimated the fair value of the conversion option derivative liability using a Black-Scholes option pricing model and recorded the change

in fair value of the derivative liability of $4,629 and $9 at February 28, 2025 and February 29, 2024, respectively.

Interest expense increased

by $0.4 million to $2.2 million for Fiscal 2026, as compared to $1.8 million for Fiscal 2025.

The Company estimated the fair value of

the conversion option derivative liability using a Black-Scholes option pricing model and recorded the change in fair value of the derivative

liability of $(5.3) million and $4.6 million at February 28, 2026 and 2025, respectively.

We recorded net losses of

approximately $21,138 and $4,216 for Fiscal 2025 and 2024, respectively.

The increase in our net loss was due to several factors, as noted

above, including increased stock-based compensation expense, the recording of a loss on debt extinguishment to a related party, and the

change in fair value of our derivative liability.

approximately $10.9 million and $21.1 million for Fiscal 2026 and 2025, respectively.

The decrease in our net loss was due to several

factors, as noted above, including decreased stock-based compensation expense, the recording of a loss on debt extinguishment to a related

party in the prior year, and the change in fair value of our derivative liability.

Liquidity and Capital Resources

For the year ended February

28, 2025, we recorded a net loss of $21.1 million.

used cash in operations of $3.2 million, and at February 28, 2025, had a stockholders’

28, 2026, we recorded a net loss of $10.9 million, used cash in operations of $3.2 million, and at February 28, 2026, had a stockholders’

deficit of $44.8 million.

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

Prior to Fiscal 2020, in order

to maintain liquidity, we relied upon external sources of financing, principally equity financing and private indebtedness.

bank line of credit and will require additional debt or equity financing to fund ongoing operations.

Based on a cash flow analysis performed

by management, we estimate that we will need an additional $6 million to maintain existing operations for Fiscal 2026 and increase the

volume of shipments to customers.

We cannot assure the reader that additional financing will be available nor that the commercial targets

will be met in the amounts required to keep the business operating.

The issuance of additional shares of equity in connection with such

financing could dilute the interests of our existing stockholders, and such dilution could be substantial.

If we cannot raise the needed

funds, we will also be forced to make further substantial reductions in our operating expenses, which could adversely affect our ability

to implement our current business plan and ultimately our viability as a company.

Prior to Fiscal 2026, to maintain

liquidity, we relied on external sources of financing, principally equity and private indebtedness.

We have no bank line of credit and

will require additional debt or equity financing to fund ongoing operations.

Based on a cash flow analysis conducted by management, we

estimate that we will need an additional $5 million to maintain existing operations for Fiscal 2027 and to increase shipment volume to

We cannot assure the reader that additional financing will be available, nor that the commercial targets will be met in the

amounts required to keep the business operating.

The issuance of additional equity shares in connection with such financing could dilute

the interests of our existing stockholders, and the dilution could be substantial.

If we cannot raise the funds needed, we will also be

forced to make further substantial reductions in our operating expenses, which could adversely affect our ability to implement our current

business plan and ultimately our viability as a company.

Legal Proceedings”

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

What changed 10-K

Item 7. Management’s Discussion and Analysis