What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2026-09-10 compared with 2025-06-13 · 441 added, 750 removed, 781 unchanged (60% of the section changed)

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

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.

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, 2026,

that our disclosure controls and procedures were not effective.

Management’s Annual Report on Internal Control Over Financial

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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.

During Fiscal 2026, and as of the date of this Report, we continue to work with an outside consultant with experience and expertise in

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

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Robert Lempert as directors of the Company in their stead.

As a result of Aura’s refused to

As a result of Aura’s refusal to

recognize the legal effectiveness of the consents, in April 2019, stockholders filed suit in the Court of Chancery of the State of

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

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

Biographical information with

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

Salvador Diaz-Versón,

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and The Geneva companies were middle market investment bankers.

Douglas brings to the Board extensive experience in cooperate communication

Douglas brings to the Board extensive experience in corporate communication

and investment banking.

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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.

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

In January 2016, Ms.

left the Company to pursue other business ventures.

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 .

She holds a B.S degree in business from California State

University, Northridge.

Robert Lempert .

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Stock Option Plan.

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 2026, no stock

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

compensation was awarded to 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, was awarded to the Company’s directors.

EXECUTIVE COMPENSATION

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For Fiscal 2026, Ms.

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.

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

For Fiscal 2025, Ms.

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.

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

Outstanding Equity Awards at 2026 Fiscal Year-End

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during Fiscal 2026 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 Table.

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 granted

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

No stock options were exercised during Fiscal 2026

by the individuals named in the Summary Compensation Table.

Employment Contracts, Termination of Employment Contracts and Change

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David Mann (6)

Gary Campbell

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

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The mailing address for each of the officers and directors is c/o Aura Systems, Inc., 20431 North Sea, Lake Forest, CA 92630.

Includes 750,000 warrants exercisable within 60 days of February 28, 2025.

Includes 500,000 warrants exercisable within 60 days of February 28, 2025

Includes 750,000 warrants exercisable within 60 days of February 28, 2025.

Includes warrants to purchase 360,000 shares exercisable within 60 days of February 28, 2025.

Includes warrants to purchase 400,000 shares exercisable within 60 days of February 28, 2025, as well as 1,411,931 shares, 979,204 of which Mr.

Includes 500,000 options exercisable within 60 days of February 28, 2026.

Includes 500,000 options exercisable within 60 days of February 28, 2026

Includes 1,000,000 options exercisable within 60 days of February 28, 2026.

Includes 500,000 options exercisable within 60 days of February 28, 2026.

Includes 500,000 options exercisable within 60 days of February 28, 2026, as well as 1,411,931 shares, 979,204 of which Mr.

Mann has sole dispositive power and approximately 432,727 of which, Mr.

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Securities to be

(Excluding Securities

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.

(1) 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, 2026 (See Note 13 to the Financial Statements).

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The following table sets

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

forth the aggregate fees billed to us by Weinberg for the years ended February 28, 2026 and 2025:

(amounts in thousands)

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AURA SYSTEMS, INC.

June 13, 2025

September 9, 2026

/s/ Cipora Lavut

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on the date indicated.

/s/ Cipora Lavut

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

September 9, 2026

Robert Lempert

/s/ Gary Douglas

June 13, 2025

/s/ Salvador Diaz-Verson, Jr.

June 13, 2025

Salvador Diaz-Verson, Jr.

September 9, 2026

Diaz-Verson, Jr.

September 9, 2026

Diaz-Verson, Jr.

Index to Financial Statements

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Financial Statements of Aura Systems, Inc.:

Balance Sheets as of February 28, 2025 and February 29, 2024 F-4

Statements of Operations - Years ended February 28, 2025 and February 29, 2024 F-5

Statements of Stockholders’ Deficit - Years ended February 28, 2025 and February 29, 2024 F-6

Statements of Cash Flows - Years ended February 28, 2025 and February 29, 2024 F-7

Balance Sheets as of February 28, 2026 and 2025 F-4

Statements of Operations - Years ended February 28, 2026 and 2025 F-5

Statements of Stockholders’ Deficit - Years ended February 28, 2026 and 2025 F-6

Statements of Cash Flows - Years ended February 28, 2026 and 2025 F-7

Notes to Financial Statements F-8 to F-23

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING

To the Shareholders and the Board of Directors

of Aura Systems, Inc.

REPORT OF INDEPENDENT REGISTERED

PUBLIC ACCOUNTING FIRM

To the Shareholders and the Board of Directors of Aura Systems, Inc.

Opinion on the Financial Statements

We have audited the accompanying balance sheets

of Aura Systems, Inc.

(the “Company”) as of February 28, 2025 and February 29, 2024, the related statements of operations,

stockholders’ deficit, and cash flows for the years then ended, and the related notes (collectively referred to as the “financial

statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company

as of February 28, 2025 and February 29, 2024, and the results of its operations and its cash flows for the years then ended, in conformity

with accounting principles generally accepted in the United States of America.

We have audited the accompanying balance sheets of Aura Systems, Inc.

“Company”) as of February 28, 2026 and 2025, the related statements of operations, stockholders’ deficit, and cash flows

for the years then ended, and the related notes (collectively referred to as the “financial statements”).

In our opinion,

the financial statements present fairly, in all material respects, the financial position of the Company as of February 28, 2026 and 2025,

and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted

in the United States of America.

Going Concern

The accompanying financial statements have been

prepared assuming that the Company will continue as a going concern.

As discussed in Note 1 to the financial statements, during the year

ended February 28, 2025, the Company incurred a net loss of $21 million, used cash in operations of $3 million, and at February 28, 2025,

had a stockholders’ deficit of $37 million.

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

ability to continue as a going concern.

Management’s plans in regard to these matters are also described in Note 1 to the financial

The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

The accompanying financial statements have been prepared assuming that the

Company will continue as a going concern.

As discussed in Note 1 to the financial statements, during the year ended February 28, 2026,

the Company incurred a net loss of $10.9 million, used cash in operations of $3.4 million, and at February 28, 2026, had a stockholders’

deficit of $44.8 million.

In addition, at February 28, 2026, notes payable and related accrued interest with an aggregate balance of $5.2

million have reached maturity and are past due.

These matters raise substantial doubt about the Company’s ability to continue as

a going concern.

Management’s plans in regard to these matters are also described in Note 1 to the financial statements.

The financial

statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These financial statements are the responsibility

of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our

These financial statements are

the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements

based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”)

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rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the

standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial

statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged

to perform, an audit of its internal control over financial reporting.

We conducted our audits in accordance

with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether

the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were

we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits we are required to obtain an understanding

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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 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.

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:

(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 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 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 our especially challenging, subjective,

or complex judgments.

The communication of the critical audit matter 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

Derivative Liability

As discussed in Notes 7 and 12, the

Company’s has a convertible note with a conversion feature that is accounted for as derivative liability.

The derivative liability

is measured at fair value at each reporting date, with changes in fair value recognized in earnings.

The Company estimated the fair

value of the derivative liability using the Black-Scholes option pricing model.

The valuation requires management to make significant

estimates and assumptions, including the expected volatility of the Company's common stock, expected term, risk-free interest rate, expected

dividend yield, and, where applicable, assumptions regarding the probability and timing of future events.

We identified the accounting and valuation

of the derivative liability as a critical audit matter due to the significant judgements and assumptions used by management.

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 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.

● Obtaining and reading the convertible note agreement, as

● Evaluating the valuation model management selected to determine

the fair value, and evaluating the reasonableness of management’s significant valuation assumptions.

● Performing a recalculation of the fair value estimate.

We have served as the Company’s auditor

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Los Angeles, California

June 13, 2025

September 9, 2026

1925 Century Park East, Suite 1120

Los Angeles, California 90067

www.weinbergla.com

AURA SYSTEMS, INC.

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Cash and cash equivalents $ 11 $ 23

Inventories 5 38

Prepaid and other current assets 232 220

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Security deposit 160 160

Total assets $ 1,363 $ 1,477

Liabilities and Shareholders’ Deficit

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Notes payable, current portion 365 212

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

Lease liabilities, current portion

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

Operating lease liabilities, current portion 160 279

Derivative liability 22,844 17,565

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Notes payable, net of current portion 734 440

Note payable-related party, net of current portion

Lease liabilities, net of current portion

Operating lease liabilities, net of current portion 21 183

Total liabilities 46,169 39,070

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150,000,000 shares authorized;

118,296,448 and 104,591,648 issued and outstanding at February 28, 2025 and February 29, 2024, respectively.

141,401,844 and 118,296,448 issued and outstanding at February 28, 2026 and 2025, respectively.

Additional paid-in capital 466,241 462,523

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

Net revenue $ 278 $ 50

Cost of goods sold 25 29

Gross profit (loss)

Gross profit 253 21

Operating expenses:

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Change in fair value of derivative liability ( 5,279 ) 4,629

Other income - 2

Net loss $ ( 10,933 ) $ ( 21,138 )

Basic and diluted loss per share $ ( 0.09 ) $ ( 0.19 )

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Balance, February 29, 2024 104,591,648 $ 10 $ 457,460 $ ( 478,990 ) $ ( 21,520 )

$ ( 474,774 )

Common shares issued for cash

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 1,601 1,601

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Common shares issued for cash 13,704,800 2 3,429 3,431

Net loss ( 21,138 ) ( 21,138 )

Balance, February 28, 2025 118,296,448 12 462,523 ( 500,128 ) ( 37,593 )

$ ( 500,128 )

Common shares issued for services 275,000 - 72 72

Common shares issued for cash 22,830,396 2 3,646 3,648

Net loss ( 10,933 ) ( 10,933 )

Balance, February 28, 2026 141,401,844 $ 14 $ 466,241 $ ( 511,061 ) $ ( 44,806 )

See accompanying notes to these financial statements.

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(amounts in thousands)

Net loss $ ( 10,933 ) $ ( 21,138 )

Adjustments to reconcile net loss to cash used in operating activities

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Changes in operating assets and liabilities:

Inventory 33 ( 37 )

Prepaid and other current assets 268 132

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Proceeds from issuance of notes payable - -

Principal payments of notes payable

Principal payments of notes payable and convertible notes payable ( 243 ) ( 206 )

Cash provided by financing activities 3,405 3,225

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Cash paid for:

Interest $ 163 $ 138

Supplemental schedule of non-cash transactions:

Right of use asset and lease liability $ - $ 47

Relative fair value of warrants issued for note payable

Notes payable issued for the purchase of property and equipment $ 390 $ 274

Notes payable issued for the purchase of annual software license $ 280 $ 179

Reclassification of prepaid expense to property and equipment

Adjustment effective interest rate of note payable

See accompanying notes to these financial statements.

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NOTES TO FINANCIAL STATEMENTS

Years ended February 28, 2025, and February

Years ended February 28, 2026,and 2025

(In thousands, except share and per share amounts)

NOTE 1 – ORGANIZATION AND OPERATIONS

Aura Systems, Inc., (“Aura”,

“We” or the “Company”) a Delaware corporation, is engaged in the development, commercialization, and sale of products,

systems, and components, using its patented and proprietary electromagnetic technology.

Aura develops and sells AuraGen ® axial

flux mobile induction power systems to the industrial, commercial, and defense mobile power generation markets.

Aura Systems, Inc., (“Aura”, “We” or the “Company”) a Delaware corporation, is engaged in the development, commercialization, and sale of products, systems, and components, using its patented and proprietary electromagnetic technology.

Aura develops and sells AuraGen ® axial flux mobile induction power systems to the industrial, commercial, and defense mobile power generation markets.

Going Concern

The accompanying financial

statements have been prepared assuming that the Company will continue as a going concern.

In accordance with Accounting Standards

Codification (“ASC”) 205-40, Going Concern , the Company’s management has evaluated whether there are conditions

and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern

within one year after the date the accompanying financial statements were issued.

During the fiscal year ended February 28, 2025, the

Company incurred a net loss of $ 21.1 million, used cash in operating activities of $ 3.2 million, and at February 28, 2025, had a stockholders

deficit of $ 37.6 million.

In addition, at February 28, 2025, notes payable and related accrued interest with an aggregate balance of $ 5.2

million have reached maturity and are past due.

These factors raise substantial doubts about the Company’s ability to continue as

a going concern within one year of the date that these financial statements are issued.

The accompanying financial statements do not include

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

Subsequent to February 28,

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.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.

In accordance with Accounting Standards Codification (“ASC”) 205-40, Going Concern , the Company’s management has evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date the accompanying financial statements were issued.

During the fiscal year ended February 28, 2026, the Company incurred a net loss of $ 10,933 , used cash in operating activities of $ 3,405 , and at February 28, 2026, had a stockholders' deficit of $ 44,806 .

In addition, at February 28, 2026, notes payable and related accrued interest with an aggregate balance of $ 5,246 have reached maturity and are past due.

These factors raise substantial doubts about the Company’s ability to continue as a going concern within one year of the date that these financial statements are issued.

The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

Subsequent to February 28, 2026, the Company issued 6,565,842 shares of common stock in exchange for cash proceeds of $ 788 .

In addition, aggregate proceeds of $ 617 were received for 4,148,533 shares of common stock to be issued.

The Company’s ability to continue as a going concern depends on its ability to continue implementing its business plan.

During the next twelve months, we intend to continue attempting to increase the Company’s sales of our AuraGen®/VIPER products, both domestically and internationally, and to add to our existing management team.

In addition, we plan to continue rebuilding the engineering and sales teams and, to the extent appropriate, utilize third-party contractors to support operations.

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, 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 that the Company is unable to generate profits and 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

Use of Estimates

The preparation of financial

statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and

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 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.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reported periods.

Significant 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.

Revenue Recognition

The Company recognizes revenue

in accordance with Financial Accounting Standard Board’s (“FASB”) Accounting Standards Codification (“ASC”)

Topic 606, Revenue from Contracts with Customers .

Our primary source of revenue

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 obligation to the customer.

The Company recognizes revenue in accordance with Financial Accounting Standard Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers .

Our primary source of revenue 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 obligation to the customer.

Cost of Goods Sold

Cost of goods sold primarily

consists of the salaries of certain employees and contractors, purchase price of consumer products, packaging supplies, inventory reserve

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.

Cost of goods sold primarily consists of the salaries of certain employees and contractors, purchase price of consumer products, packaging supplies, inventory reserve 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.

Cash and Cash Equivalents

Cash and equivalents include

cash on hand and cash in time deposits, certificates of deposit and all highly liquid debt instruments with original maturities of three

months or less.

Inventories are valued at

the lower of cost (first-in, first-out) or net realizable value, on an average cost basis.

We review the components of inventory on a

regular basis for excess or obsolete inventory based on estimated future usage and sales.

When evidence exists that the net realizable

value of inventory is lower than its cost, the difference is recognized as a loss in the period in which it occurs.

Once inventory has

been written down, it creates a new cost basis for inventory that may not be subsequently written up.

During the years ended February

28, 2025, and February 29, 2024, the Company wrote down inventories of $ 19 and $ 123 , respectively.

Cash and equivalents include cash on hand and cash in time deposits, certificates of deposit and all highly liquid debt instruments with original maturities of three months or less.

Inventories are valued at the lower of cost (first-in, first-out) or net realizable value, on an average cost basis.

We review the components of inventory on a regular basis for excess or obsolete inventory based on estimated future usage and sales.

When evidence exists that the net realizable value of inventory is lower than its cost, the difference is recognized as a loss in the period in which it occurs.

Once inventory has been written down, it creates a new cost basis for inventory that may not be subsequently written up.

During the years ended February 28, 2026 and 2025, the Company wrote down inventories of $ 0 and $ 19 , respectively.

Property and Equipment

Property and equipment are

recorded at historical cost and depreciated on a straight-line basis over their estimated useful lives of approximately three years up

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.

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

were no impairments of the Company’s property and equipment.

Property and equipment are recorded at historical cost and depreciated on a straight-line basis over their estimated useful lives of approximately three years up to ten years .

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

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.

At February 28, 2026 and 2025, management determined there were no impairments of the Company’s property and equipment.

Impairment of Long-lived Assets

The Company reviews its property

and equipment, right-of-use asset, and other long-lived assets, for impairment whenever events or changes in circumstances indicate that

the carrying amount of an asset group may not be recoverable.

Recoverability is measured by a comparison of the carrying amount of an

asset to the estimated undiscounted future cash flows expected to be generated by the asset.

If the carrying amount of an asset exceeds

its estimated undiscounted future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset

exceeds the fair value of the assets.

Fair value is generally determined using the asset’s expected future discounted cash flows

or market value, if readily determinable.

For the years ended February 28, 2025, and February 29, 2024, the Company had no impairment

of long-lived assets.

The Company determines whether

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.

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.

The Company reviews its property and equipment, right-of-use asset, and other long-lived assets, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable.

Recoverability is measured by a comparison of the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset.

If the carrying amount of an asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the assets.

Fair value is generally determined using the asset’s expected future discounted cash flows or market value, if readily determinable.

For the years ended February 28, 2026 and 2025, the Company had no impairment of long-lived assets.

The Company determines whether 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.

Customer Advances

Customer advances represent

consideration received from customers under revenue contracts for which the Company has not yet delivered to the customer the ordered

goods or services.

Customer advances represent consideration received from customers under revenue contracts for which the Company has not yet delivered to the customer the ordered goods or services.

Concentration of Credit and Other Risks

Financial instruments that

potentially subject the Company to concentrations of credit risk consist of cash and accounts receivable.

Cash is deposited with a limited

number of financial institutions.

The balances held at any one financial institution at times may be in excess of Federal Deposit Insurance

Corporation (“FDIC”) insurance limits of up to $ 250 .

We have not experienced any losses in such accounts and believe we are

not exposed to any significant risk on cash and cash equivalents.

During the year ended February

28, 2025, one customer accounted for 60 % and one customer accounted for 10 % of revenues.

During the year ended February 29, 2024, one

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

As of February 28, 2025,

four vendors accounted for 42 %, 12 %, 11 % and 9 % of accounts payable.

As of February 29, 2024, four vendors accounted for 42 %, 11 %, 11 %

and 10 % of accounts payable.

Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash and accounts receivable.

Cash is deposited with a limited number of financial institutions.

The balances held at any one financial institution may at times exceed the Federal Deposit Insurance Corporation (“FDIC”) insurance limit of $ 250 .

We have not experienced any losses in such accounts and believe we are not exposed to any significant risk with respect to cash and cash equivalents.

During the year ended February 28, 2026, one customer accounted for 95 % of revenues.

During the year ended February 28, 2025, one customer accounted for 60 % of revenues, and another accounted for 10 %.

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

As of February 28, 2026, five vendors accounted for 34 %, 13 %, 11 %, 10 %, and 10 % of accounts payable.

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

Research and Development

The Company engages in research

and development to stay current with changes in vehicle manufacture and design and to maintain an advantage over potential competition.

Research and development expenses relate primarily to the development, design, and testing of preproduction prototypes and models and

are expensed as incurred.

Research and development expenses relate primarily to the development, design, and testing of preproduction prototypes and models and are expensed as incurred.

Research and development costs for Fiscal 2026 and 2025 were approximately $ 1,562 and $ 1,249 , respectively.

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 uses an asset

and liability approach for accounting and reporting for income taxes that allows recognition and measurement of deferred tax assets based

upon the likelihood of realization of tax benefits in future years.

Under the asset and liability approach, deferred taxes are provided

for the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes

and the amounts used for income tax purposes.

A valuation allowance is provided for deferred tax assets if it is more likely than not

these items will either expire before the Company is able to realize their benefits, or that future deductibility is uncertain.

The Company’s

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

Derivative Financial Instruments

The Company evaluates its

financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives.

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 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.

The Company periodically issues stock options, 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 in the same manner as if the Company had paid cash for services.

The Company uses an asset-and-liability approach to accounting and reporting of income taxes, which allows recognition and measurement of deferred tax assets based on the likelihood of realization of tax benefits in future years.

Under the asset and liability approach, deferred taxes are provided for the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

A valuation allowance is provided for deferred tax assets if it is more likely than not that these items will either expire before the Company can realize their benefits or that their future deductibility is uncertain.

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

Derivative Liabilities

The Company evaluates its financial instruments to determine whether they are derivatives or contain features that qualify as embedded derivatives.

For derivative financial instruments accounted for as liabilities, the instrument is initially recorded at fair value and is then revalued at each reporting date, with changes in 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 Black-Scholes option pricing model.

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.

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 whether 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.

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

The Company determines the fair values of its financial instruments using a fair value hierarchy that 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 fair value:

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

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● Level 3 – Unobservable inputs.

The recorded amounts of inventory,

other current assets, accounts payable, and accrued expenses approximate their fair value due to their short-term nature.

amounts of notes payable and convertible notes payable approximate their respective fair values because of their current interest rates

payable in relation to current market conditions.

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:

The recorded amounts of inventory, other current assets, accounts payable, and accrued expenses approximate their fair value due to their short-term nature.

The carrying amounts of notes payable and convertible notes payable approximate their respective fair values because of their current interest rates payable in relation to current market conditions.

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, 2026 and 2025:

February 28, 2026

(amounts in thousands)

(amounts in thousands) Level 1 Level 2 Level 3 Total

Derivative liability – convertible note conversion option $ - $ - $ 22,844 $ 22,844

Total $ - $ - $ 22,844 $ 22,844

February 28, 2025

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

Level 1 Level 2 Level 3 Total

Derivative liability – convertible note conversion option $ - $ - $ 17,565 $ 17,565

Total $ - $ - $ 17,565 $ 17,565

The Company estimated the fair value of the derivative 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 February 28, 2026, as follows:

(amounts in thousands) Fair Value of

February 28, 2025 $ 17,565

Recognition of derivative liability for a convertible note payable conversion option

Change in fair value of derivative liability 5,279

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Earnings (loss) per share

The Company’s earnings

(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

dilutive securities were exercised.

For the years ended February

28, 2025, and February 29, 2024, the calculations of basic and diluted loss per share are the same because potential dilutive securities

would have had an anti-dilutive effect.

The Company’s earnings (loss) per share amount has 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 dilutive securities were exercised.

For the years ended February 28, 2026 and 2025, the calculations of basic and diluted loss per share are the same because potential dilutive securities would have had an anti-dilutive effect.

The potentially dilutive securities consisted of the following:

2026 February 28,

Warrants 6,451,664 6,511,664

Options 4,000,000 8,250,000

Convertible notes 176,479,241 59,092,024

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

is available that is evaluated regularly by the chief operating decision maker (“CODM”), in deciding how to allocate resources

and in assessing performance.

The Company’s operating segment consists of one component, and the Company’s Chief Executive

Officer, who is also the CODM, makes decisions and manages the Company’s operations as a single operating segment.

Total 186,930,905 73,853,688

The continuing impact of higher inflation and 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 2026 and may continue to impact its business in 2027.

The implications of higher government deficits and debt, tighter monetary policy, and potentially higher long-term interest rates may drive up the cost of capital for the business and increase the Company’s operating expenses.

Under ASC 280, Segment Reporting , operating segments are defined as components of an enterprise for which discrete financial information is available and evaluated regularly by the chief operating decision maker (“CODM”) to decide how to allocate resources and assess performance.

The Company’s operating segment consists of one component, and the Company’s Chief Executive Officer, who is also the CODM, makes decisions and manages the Company’s operations as a single operating segment.

Recently Issued Accounting Pronouncements

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;

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

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.

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.

Other recent accounting pronouncements 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

Inventories consisted of the following:

2026 February 28,

(amounts in thousands)

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NOTE 4 – PREPAID AND OTHER CURRENT ASSETS

Prepaid and other current

assets consisted of the following:

Prepaid and other current assets consisted of the following:

2026 February 28, 2025

1 unchanged sentence

Prepaid annual software licenses $ 216 $ 173

Vendor advances

Prepaid insurance 15 19

2 unchanged sentences

NOTE 5 – PROPERTY AND EQUIPMENT, NET

Property and equipment consisted

of the following:

Property and equipment consisted of the following:

2026 February 28,

(amounts in thousands)

1 unchanged sentence

Machinery and equipment 1,017 646

Vehicle 96 96

Computer equipment 136 105

2 unchanged sentences

Less accumulated depreciation and amortization ( 549 ) ( 328 )

Depreciation expense for the

years ended February 28, 2025, and February 29, 2024 was $ 137 and $ 105 , respectively.

Depreciation expense for the years ended February 28, 2026 and 2025 was $ 221 and $ 137 , respectively.

NOTE 6 – CONVERTIBLE NOTES PAYABLE

Convertible notes payable

consisted of the following:

Convertible notes payable consisted of the following:

2026 February 28,

2 unchanged sentences

(b) Convertible notes payable 2 – past due 90 110

Unamortized debt discount

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

Net $ 1,493 $ 1,513

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

The notes were originally due in 2014 to 2017 and were all amended in 2017 to change the maturity to April 8, 2022.

As of February 28, 2026 and 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 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:

As of February 28, 2026 and 2025, the outstanding balance of the convertible notes payable amounted to $ 90 and $ 110 , respectively, and are past due.

At February 28, 2026, the total outstanding convertible notes payable of $ 1,493 and accrued interest of $ 586 are convertible into 1,934,768 shares of common stock at conversion rates ranging from $ 0.20 to $ 1.40 per share.

NOTE 7 – CONVERTIBLE NOTE PAYABLE-RELATED PARTY

Convertible note payable – related party consisted of the following:

2026 February 28,

(amounts in thousands)

2 unchanged sentences

Total $ 12,279 $ 12,279

(a) Convertible note payable-former Director

1 unchanged sentence

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

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

The convertible note is unsecured, bears interest at 5 % per annum, and was due January 24, 2022.

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.

As of February 28, 2026 and 2025, 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 is unsecured, bears interest at a rate of 10 % per annum, and matures 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.

As of February 28, 2026 and 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 .

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.

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 .

During the year ended February 28, 2025, 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 February 28, 2026 and 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 due December 2024 (extended to 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 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.

During the year ended February 28, 2026, the $2,000 installment payment originally due in December 2024, was extended through December 31, 2025.

In exchange for the extension, fees totaling $ 325 were incurred and recorded as interest expense.

The Company is currently in negotiations with the noteholder regarding another installment payment extension to September 30, 2026.

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 of 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 the terms, the Company has provided for interest using default rate of 15 % per annum and reported the entire convertible note payable as current.

The Company disputes Kopple’s alleged failures to perform the non-monetary terms and is currently in discussion with Kopple to resolve this matter.

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 investment activities, as defined in the agreement, including a covenant not to 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 meeting them will not affect the Company's operations.

At February 28, 2026, the total outstanding convertible notes payable-related party of $ 12,279 and accrued interest of $ 3,931 are potentially convertible into 174,520,697 shares of common stock at conversion price of $ 0.069 per share.

NOTE 8 – NOTES PAYABLE

Notes payable consisted of the following:

(amounts in thousands)

(amounts in thousands) February 28,

2026 February 28,

Secured notes payable

(a) Note payable-EID loan $ 150 $ 150

(b) Notes payable-vehicle and equipment

(b) Notes payable-vehicle 32 46

2 unchanged sentences

(e) Note payable-other 10 10

Total $ 1,099 $ 652

Current ( 365 ) ( 212 )

Non-current $ 734 $ 440

(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.

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 issued two notes payable to purchase

equipment and a vehicle for $ 288 .

The notes are secured by the equipment and vehicle purchased.

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 2022, the Company issued a note payable to purchase a vehicle for $ 78 .

The note is secured by the vehicle purchased.

The 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 $ 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.

During Fiscal 2024, the Company obtained a loan of $ 155 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 28, 2026, the outstanding balance of the note payable amounted to $ 64 .

During Fiscal 2025, the Company obtained a loan of $ 168 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 matured and was paid in full 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 .

As of February 28, 2026, the outstanding balance of the note payable amounted to $ 280 , of which, $ 233 is past due.

The Company is currently in discussion with the note holder to resolve this matter.

The aggregate total of the note payable-software licenses as of February 28, 2026, amounted to $ 344 .

(d) Notes payable – machinery and other equipment

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, 2026, the outstanding balance of the note payable amounted to $ 189 .

During Fiscal 2026, the Company obtained a loan of $ 390 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 August 2032.

As of February 28, 2026, the outstanding balance of the note payable amounted to $ 374 .

The aggregate total of the note payable-machinery and other equipment as of February 28, 2026, amounted to $ 563 .

(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.

As of February 28, 2026 and 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 annum.

NOTE 9 – NOTES PAYABLE-RELATED PARTIES

Notes payable-related parties consisted of the

(amounts in thousands)

Notes payable-related parties consisted of the following:

(amounts in thousands) February 28,

2026 February 28,

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

(b) Note payable- Gagerman – past due

(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 .

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 per share.

In June 2022, the first installment

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

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 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 payable-Jiangsu Shengfeng – past due $ 733 $ 733

On November 20, 2019, the Company owned 49 % of a Chinese joint venture named Jiangsu Shengfeng.

The Joint venture advanced $ 700 to Aura in prior years for products that the Company failed to deliver to the joint venture.

The Company reached a preliminary 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.

As a result, in November 2019, the Company issued a non-interest-bearing promissory note for $ 700 to the joint venture, payable over an 11-month period beginning on March 15, 2020, and ending on February 15, 2021.

The joint venture ceased operations in 2020 due to COVID-19 and has not resumed operations.

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

As of February 28, 2026 and 2025, the outstanding balance of this note payable amounted to $ 733 .

NOTE 10 – ACCRUED INTEREST

Accrued interest consisted

of the following:

Accrued interest consisted of the following:

2026 February 28,

(amounts in thousands)

2 unchanged sentences

Convertible notes payable - related party – Others (see Note 7) 1,168 1,016

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

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

Notes payable (see Note 8) 12 21

Total $ 4,528 $ 2,875

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.

In February 2021, the Company consolidated its administrative and production operations, including warehousing, into an approximately 18,000 -square-foot facility in Lake Forest, California.

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

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

and supplemental cash flow information related to leases for the period are as follows:

The initial monthly base rental rate was approximately $ 22 per month and will escalate by 3 % each year to approximately $ 26 per month in 2026.

The lease liability was determined by discounting future lease payments under the lease terms at a 10 % per annum discount rate.

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 the commencement date based on the present value of lease payments over the lease term.

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 and supplemental cash flow information related to leases for the period are as follows:

2026 Year ended

2 unchanged sentences

Other Information

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

Cash paid for amounts included in the measurement of lease liabilities for the years ended February 28, 2026 and 2025, respectively $ 280 $ 285

Weighted average remaining lease term – operating leases (in years) 0.7 1.7

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 $ 181

Maturities of the Company’s

lease liability is as follows:

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

Year Ending February 28:

2 unchanged sentences

Present value of lease liabilities $ 181

In June 2026, the Company amended its facility lease agreement to extend the lease term to August 2028 and revise the monthly lease payments.

The amendment will be accounted for as a lease modification in June 2026, including remeasurement of the lease liability and corresponding right-of-use asset using the discount rate in effect on the modification date.

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

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 stock.

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)

As a 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 option.

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.

The fair value of the derivative liability at February 28, 2026 and 2025 was $ 22,844 and $ 17,565 , respectively.

The following tables summarize the derivative liability:

(amounts in thousands, except share and per share data) February 28,

2026 February 28,

2024 - Issuance

Stock price $ 0.16 $ 0.34

Risk free interest rate 3.46 % 4.01 %

5 unchanged sentences

NOTE 13 – STOCKHOLDERS’ DEFICIT

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 .

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.

On February 28, 2026 and 2025, the Company had 150,000,000 shares of $ 0.0001 par value common stock authorized for issuance.

During the year ended February 28, 2026, the Company issued 22,830,396 shares of common stock for approximately $ 3,648 in cash.

During the year ended February 28, 2026, the Company issued 275,000 shares of common stock for services with a fair value of $ 72 .

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.

On February 28, 2026, 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, 2026 (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).

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

In October 2011, the Company’s

shareholders approved the 2011 Director and Executive Officers Stock Option Plan (the “2011 Plan”).

Under the 2011 Plan, the

Company may grant options, or warrants, for up to 15 % of the number of shares of Common Stock of the Company outstanding from time to

Pursuant to this plan, the Board or a committee of the Board may grant an option to any person who is elected or appointed a director

or executive officer of the Company.

The exercise price of each option shall be at least equal to the fair market value of such shares

on the date of grant, and the term of the options may not be greater than five years.

A summary of the Company’s stock option activity

is as follows:

In October 2011, the Company’s shareholders approved the 2011 Director and Executive Officers Stock Option Plan (the “2011 Plan”).

Under the 2011 Plan, the Company may grant options, or warrants, for up to 15 % of the number of shares of Common Stock of the Company outstanding from time to time.

Pursuant to this plan, the Board or a committee of the Board may grant an option to any person who is elected or appointed a director or executive officer of the Company.

The exercise price of each option shall be at least equal to the fair market value of such shares on the date of grant, and the term of the options may not be greater than five years.

A summary of the Company’s stock option activity is as follows:

Shares Exercise

Price Weighted

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

Total options, February 29, 2024 4,250,000 $ 0.37 $ -

Granted 4,000,000 0.50 -

Exercised - - -

Expired - - -

Total options, February 28, 2025 8,250,000 $ 0.43 $ -

Granted - - -

Exercised - - -

Expired ( 4,250,000 ) - -

Total options, February 28, 2026 4,000,000 $ 0.50 $ -

Exercisable, February 28, 2026 4,000,000 $ 0.50 $ -

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

During the year ended February 28, 2026, no stock options were granted.

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 2011 Plan.

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;

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:

Treasury yield curve in effect at the time of measurement corresponding with the expected term of the share option award.

There was no intrinsic value as of February 28, 2026, 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 February 28, 2026, are as follows:

Exercise Price Stock Options

6 unchanged sentences

$ 0.50 4,000,000 4,000,000 8.26 $ 0.50 $ 0.50

Warrants Exercise

Outstanding, February 29, 2024 3,521,664 $ 0.83

Granted 3,000,000 1.00

Exercised - -

Expired ( 10,000 ) 1.40

Outstanding, February 28, 2025 6,511,664 $ 0.73

Exercised - -

Expired ( 60,000 ) 0.50

Outstanding, February 28, 2026 6,451,664 $ 0.73

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 as February 28, 2025, are as follows:

There was no intrinsic value as of February 28, 2026, 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 of February 28, 2026, are as follows:

Exercise Price Stock Warrants

9 unchanged sentences

NOTE 14 – INCOME TAXES

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.

For the years ended February 28, 2026 and 2025, the Company had no income tax expense due to recurring net loss.

For the years ended February 28, 2026 and 2025, a reconciliation of the effective income tax rate to the U.S.

statutory rate is as follows:

2026 Year ended

Federal tax benefit at statutory rate 21 % 21 %

1 unchanged sentence

Change in valuation allowance ( 28 )% ( 28 )%

As of February 28, 2025, and

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

Total 0 % 0 %

As of February 28, 2026 and 2025, the following table summarizes our deferred tax asset:

2026 February 28,

(amounts in thousands)

4 unchanged sentences

Net deferred tax asset (liability) $ - $ -

The provisions of ASC Topic

740, Accounting for Income Taxes, require an assessment of both positive and negative evidence when determining whether it is more likely

than not that deferred tax assets are recoverable.

For the years ended February 28, 2025, and February 29, 2024, based on all available

objective evidence, including the existence of cumulative losses, the Company determined that it was more likely than not that the net

deferred tax assets were not fully realizable.

Accordingly, the Company established a full valuation allowance against its net deferred

The Company intends to maintain a full valuation allowance on net deferred tax assets until sufficient positive evidence exists

to support reversal of the valuation allowance.

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

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

At February 28, 2025, the

Company had available Federal and state net operating loss carryforwards (“NOL”s) to reduce future taxable income.

purposes the amounts available were approximately $ 149.2 million and for state purposes the amounts available were approximately $ 102.5

The provisions of ASC Topic 740, Accounting for Income Taxes, require an assessment of both positive and negative evidence when determining whether it is more likely than not that deferred tax assets are recoverable.

For the years ended February 28, 2026 and 2025, based on all available objective evidence, including the existence of cumulative losses, the Company determined that it was more likely than not that the net deferred tax assets were not fully realizable.

Accordingly, the Company established a full valuation allowance against its net deferred tax assets.

The Company intends to maintain a full valuation allowance on net deferred tax assets until sufficient positive evidence exists to support reversal of the valuation allowance.

During the years ended February 28, 2026,and 2025, the valuation allowance increased by $ 1.5 million and $ 2.4 million, respectively.

At February 28, 2026, the Company had available Federal and state net operating loss carryforwards (“NOLs) to reduce future taxable income.

For Federal purposes the amounts available were approximately $ 154.5 million and for state purposes the amounts available were approximately $ 102.5 million.

The Federal carryforwards expire on various dates through 2045, and the state carryforwards expire on various dates through 2045.

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

are based in California, and it is subject to Federal and California state income tax.

Tax years after 2017 are open to examination by

United States and state tax authorities.

The Company follows the guidance

of ASC 740, which requires companies to determine whether it is “more likely than not” that a tax position will be sustained

upon examination by the appropriate taxing authorities before any tax benefit can be recorded in the financial statements.

provides guidance on the recognition, measurement, classification and interest and penalties related to uncertain tax positions.

February 28, 2025, and February 29, 2024, no liability for unrecognized tax benefits was required to be recorded or disclosed.

Our continuing practice is

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

As of February 28, 2025, and February 29,

2024, we have no accrued interest and penalties related to uncertain tax positions.

We are subject to taxation

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 are based in California, and it is subject to Federal and California state income tax.

Tax years after 2017 are open to examination by United States and state tax authorities.

The Company follows the guidance of ASC 740, which requires companies to determine whether it is “more likely than not” that a tax position will be sustained upon examination by the appropriate taxing authorities before any tax benefit can be recorded in the financial statements.

ASC 740 also provides guidance on the recognition, measurement, classification and interest and penalties related to uncertain tax positions.

As of February 28, 2026 and 2025, no liability for unrecognized tax benefits was required to be recorded or disclosed.

Our continuing practice is to recognize interest and/or penalties related to income tax matters in income tax expense.

As of February 28, 2026 and 2025, we have no accrued interest and penalties related to uncertain tax positions.

We are subject to taxation in the U.S.

and California.

Our tax years for 2015 and forward are subject to examination by our tax authorities.

We are not currently

under examination by any tax authority.

We are not currently under examination by any tax authority.

NOTE 15 – RELATED PARTY TRANSACTIONS

As of February 28, 2025 and

February 29, 2024, Bettersea LLC (“Bettersea”) was an 7.1 % and 8.8 %, respectively, shareholder in the Company.

For the years

ended February 28, 2025, and February 29, 2024, the Company incurred total fees to Bettersea of $ 161 and $ 151 , respectively, for consulting

As of February 28, 2025, and February 29, 2024, a total of approximately $ 225 and $ 223 , respectively, was due to Bettersea and

included in accounts payable and accrued expenses.

As of February 28, 2025, and

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

As of February 28, 2026 and 2025, BetterSea LLC (“BetterSea”) was a 7.1 % and 7.1 % shareholder in the Company, respectively.

For the years ended February 28, 2026 and 2025, the Company incurred total fees to BetterSea of $ 155 and $ 161 , respectively, for consulting services.

As of February 28, 2026 and 2025, a total of approximately $ 297 and $ 225 , respectively, was due to BetterSea and included in accounts payable and accrued expenses.

As of February 28, 2026 and 2025, accrued expenses include accrued payroll due to officers of $ 368 and $ 272 , respectively.

NOTE 16 – CONTINGENCIES

The Company is subject to

legal proceedings and claims that have arisen in the ordinary course of business.

Our management evaluates our exposure to these claims

and proceedings individually and in the aggregate and evaluates potential losses on such litigation if the amount of the loss is estimable

and the loss is probable.

The Company is subject to legal proceedings and claims arising in the ordinary course of business.

Our management evaluates our exposure to these claims and proceedings individually and in the aggregate and assesses potential losses from such litigation if the amount of the loss is estimable and the loss is probable.

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 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

stockholders of the Company controlling a combined total of more than 27.5 million shares delivered a signed written consent to the Company

removing Ronald Buschur as a member of the Company’s Board and electing Cipora Lavut as a director of the Company.

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.

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.

On March 26, 2019, various stockholders of the Company controlling a combined total of more than 27.5 million shares delivered a signed written consent to the Company removing Ronald Buschur as a member of the Company’s Board and electing Cipora Lavut as a director of the Company.

On March 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.

Douglas and Mr.

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.

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.

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 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.

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

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.

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

2026 Year Ended

Net sales $ 278 $ 50

Cost of sales 25 29

Gross profit 253 21

Employee compensation and benefits 1,895 987

8 unchanged sentences

NOTE 18 – SUBSEQUENT EVENTS

Subsequent to February 28,

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

Subsequent to February 28, 2026, the Company issued and sold 6,565,682 shares of its common stock for aggregate cash proceeds of approximately $ 788 .

In addition, aggregate proceeds of $ 574 were received for 4,816,135 shares of common stock to be issued.

Accordingly, the shares have not been issued, and the proceeds will be classified as a liability pending the Company obtaining the necessary stockholders' and regulatory approvals to increase its authorized shares or otherwise resolving the matter.

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