AURA SYSTEMS INC 10-K

ITEM 9A. CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures We conducted an evaluation under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. The term “disclosure controls and procedures”, as defined in Rules 13a-15I and 15d-15(e) under the Securities and Exchange Act of 1934, as amended (“Exchange Act”), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by the company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures also include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal 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, 2026, that our disclosure controls and procedures were not effective. Management’s Annual Report on Internal Control Over Financial Reporting The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) of the Securities Exchange Act of 1934. The Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with United States generally accepted accounting principles. Internal control over financial reporting includes policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with United States generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisitions, use or disposition of the Company’s assets that could have a material effect on the financial statements. Management has assessed the effectiveness of the Company’s internal control over financial reporting as of February 28, 2026. In making these assessments, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control-Integrated Framework. Based on this assessment, because of the material weakness described below, the Company’s management concluded that as of February 28, 2026, the Company’s internal control over financial reporting was not effective to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. Management identified a material weakness in our internal control over financial reporting related to the Company having an insufficient number of full-time personnel with an appropriate level of U.S. GAAP knowledge and experience and ongoing training in the application of U.S. GAAP and SEC disclosure requirements commensurate with the Company’s financial reporting requirements. Notwithstanding the identified material weaknesses, management has concluded that the Financial Statements included in this Annual Report on Form 10-K present fairly, in all material respects, the Company’s financial position, results of operations and cash flows for the periods disclosed in conformity with U.S. GAAP. 24 Planned Remediation of Material Weaknesses Our management has been actively engaged in developing and implementing remediation plans to address material weakness described above. These remediation efforts are ongoing and include or are expected to include increasing personnel resources and technical accounting expertise within the accounting function. During Fiscal 2026, and as of the date of this Report, we continue to work with an outside consultant with experience and expertise in U.S. GAAP and public company SEC accounting and reporting requirements to assist management with its accounting and reporting of complex and/or non-recurring transactions and related disclosures. Changes in Internal Control Over Financial Reporting There were no changes in the Company’s internal control over financial reporting that occurred during the Company’s fiscal year ended February 28, 2026, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. Inherent Limitations on Effectiveness of Controls The Company does not expect that its disclosure controls and procedures or its internal control over financial reporting will prevent all errors and all fraud. A control procedure, no matter how well conceived and operated, can provide only reasonable not absolute assurance that the objectives of the control procedure are met. Because of the inherent limitations in all control procedures, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any control procedure also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control procedure, misstatements due to error or fraud may occur and not be detected. ITEM 9B. OTHER INFORMATION None Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections. None 25 PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE Directors and Executive Officers In March 2019, stockholders of the Company controlling a majority of the outstanding shares of the Company’s common stock delivered signed written consents to the Company removing Ronald Buschur, William Anderson, and Si Ryong Yu as members of the Company’s Board and electing Ms. Cipora Lavut, Mr. David Mann, and Dr. Robert Lempert as directors of the Company in their stead. 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 Delaware pursuant to Section 225 of the Delaware General Corporations Law, seeking an order confirming the validity of the consents. On July 8, 2019 the Court of Chancery entered final judgment in favor of the stockholder plaintiffs, confirming that (a) Ronald Buschur, 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. Lavut, Mr. Mann and Dr. 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 stockholder action filed in the Court of Chancery, such stockholders may be potentially entitled to recoup their litigation costs from the Company under Delaware’s corporate benefit doctrine and/or other legal provisions. To date, no final determination has been made as to the amount of recoupment, if any, to which such stockholders may be entitled. In July 2019 the employment of Melvin Gagerman was terminated. (See Item 3, Legal Proceedings for more information.) Also in July 2019, the Board of Directors appointed Ms. Lavut to succeed Mr. Gagerman as President of Aura, appointed Mr. Mann to succeed Mr. Gagerman as Chief Financial Officer of the Company, and appointed Dr. Lempert Secretary of Aura. In February 2022, the Board of Directors appointed Mr. Steven Willett to succeed Mr. Mann as the Company’s Chief Financial Officer. Mr. Mann remains on the Board of Directors. The following table sets forth the names, ages, and offices of all our current directors and executive officers. Our officers are appointed by, and serve at the pleasure of, the Board of Directors. The stockholders at the annual meeting elect our directors to serve until the next meeting. Name Age Title Gary Douglas 78 Director, Member of the Audit Committee Salvador Diaz-Verson, Jr. 72 Director, Chairman of the Audit Committee David Mann 53 Director, Chairman of the Compensation Committee, Member of the Nominating Committee and Member of the Audit Committee, Acting Chief Financial Officer Cipora Lavut 70 President, Chairman of the Board, Member of Nominating Committee and Member of the Compensation Committee Robert Lempert 81 Secretary, Director, Chairman of the Nominating Committee and Member of the Compensation Committee Biographical information with respect to our current directors and executive officer is provided below. Salvador Diaz-Versón, Jr . Mr. Diaz-Versón, Jr. was elected as a director on March 29, 2018. Previously, he served as a director of the Company from 1997-2005 and again from June 2007 until January 2018. Mr. Diaz-Versón, Jr. is the founder, Chairman and President of Diaz-Verson Capital Investments, Inc., and was a registered investment advisor with the Securities and Exchange Commission until 2009. Mr. Diaz-Versón, Jr. served as President and member of the board of directors of American Family Corporation (AFLAC, INC.) from 1976 until 1992. Mr. Diaz-Versón, Jr. served as President and Chief Investment Officer of American Family Life Assurance Company, a subsidiary of AFLAC, Inc. He is currently Chairman of Miramar Securities. Mr. Diaz-Versón, Jr. has received two presidential appointments to the Christopher Columbus Fellowship Foundation; first by President George H.W. Bush in 1992 and subsequently by President Clinton in 2000. Mr. Diaz-Versón, Jr. is a trustee of the Florida State University Foundation and is a national trustee of the Boys and Girls Club of America. He also serves as a trustee of Clark Atlanta University. Mr. Diaz-Versón, Jr. is a graduate of Florida State University and was selected as a director in view of his lengthy experience in managing companies and his knowledge of capital investments. Gary Douglas . Mr. Douglas was elected as a director on March 29, 2018. Mr. Gary Douglas has a BBA in Management degree, with extensive experience in cooperate communication and investment banking. He is a principal in Douglas Strategic Communications LLC, a marketing strategy and communications consultancy, and Ex officio Chairman of Picture Marketing, Inc., a digital marketing company. Mr. Douglas also formally served as Chief Marketing Officer of O’Melveny Consulting LLP, a unit of a global law firm. He also served as President of SP/Hambros America and Division President of Geneva Learning Systems and Group Vice President of Business Development for the five Geneva Companies, both SP/Hambros and The Geneva companies were middle market investment bankers. Mr. Douglas brings to the Board extensive experience in corporate communication and investment banking. 26 Cipora Lavut . Is the current President and Chairwoman of the Board. She was one of Aura’s original founding members. From 1987 to 2002 Ms. Lavut served on Aura’s Board and as a Senior Vice President. During this period, Ms. Lavut was instrumental to Aura receiving large contracts from The Boeing Company, Litton Industries, and the United States Air Force. Ms. Lavut also provided critical investor relations and marketing support during this time. Ms. Lavut left Aura in 2002. At the request of Aura’s then Board of Directors and management, in 2006, Ms. Lavut returned to Aura as Vice President in charge of investor relations and corporate communication. In January 2016, Ms. Lavut left the Company to pursue other business ventures. She returned to Aura in June 2019. She holds a B.S degree in business from California State University, Northridge. Robert Lempert . Dr. Lempert graduated from the University of Pennsylvania and conducted his residency at the Albert Einstein Medical Center in Philadelphia. Dr. Lempert also served as a Captain in the U.S. Army and previously served on the Company’s Board from November 28, 2017 (when he was appointed by the then-Board to fill one of the two existing vacancies) until January 11, 2018. Dr. Lempert has been a significant investor, shareholder and an active advocate of Aura’s technology for more than 20 years. David Mann . Mr. Mann has been Vice President of Marketing for Mann Marketing, a manufacturing and import company, since 1990 and the Vice President of Sales of that company since 2007. From 2000 until 2007, Mr. Mann also served as Vice President of Operations. Mr. Mann has extensive experience dealing with all aspects of marketing and sales, as well as suppliers in both North America and China. Mr. Mann has been an investor in the Aura since 2007 and previously served as a director of the Company from November 28, 2017 (when he was appointed by the then-Board to fill one of the two existing vacancies) until January 11, 2018. Mr. Mann holds a degree in Business Administration from College St. Laurent, Montreal, Canada. Delinquent Section 16(a) Reports Our shares of common stock are registered under the Securities Exchange Act of 1934, and therefore our executive officers and directors and persons who beneficially own more than 10% of a registered class of our equity securities to file with the SEC initial statements of beneficial ownership, reports of changes in ownership and annual reports concerning their ownership of our common shares and other equity securities, on Forms 3, 4 and 5 respectively. Executive officers, directors and greater than 10% stockholders are required by the Securities and Exchange Commission regulations to furnish us with copies of all Section 16(a) reports they file. Based on our review of the copies of such forms received by us, and to the best of our knowledge, no executive officers, directors and persons holding greater than 10% of our issued and outstanding stock have filed the required reports during the years ended February 28 2026, and February 28, 2025. Code of Ethics We have adopted a Code of Ethics applicable to the Company’s Chief Executive Officer, Chief Financial Officer and all other members of the Company’s Finance Department. This Code of Ethics is posted on the Company’s website within a broader Code of Business Conduct and Ethics at www.aurasystems.com in the Investor Relations section. We intend to satisfy the disclosure requirement under Item 10 of Form 8-K regarding an amendment to, or a waiver from, the provision of our Code of Ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions and that relates to any element of such provision of our Code of Ethics by posting such information on our website within four business days of the date of such amendment or waiver. In the case of a waiver, the nature of the waiver, the name of the person to whom the waiver was granted, and the date of the waiver will also be disclosed. 27 Family Relationships None of our directors or executive officers is related to one another. Committees of the Board of Directors The Board maintains the following committees to assist it in discharging its oversight responsibilities. Audit Committee . The Audit Committee does not have a formal charter but is responsible primarily for overseeing the services performed by our independent registered public accounting firm, evaluating our accounting policies and system of internal controls, and reviewing our annual and quarterly reports before filing with the Securities and Exchange Commission. The current members of the Audit Committee are Mr. Salvador Diaz Versón Jr., Mr. David Mann and Mr. Gary Douglas. The Board of Directors has determined that the Audit Committee does not have a member who is an “audit committee financial expert” as such term is defined by the rules and regulations of the Securities and Exchange Commission. While the Board recognizes that the Board members serving on the Audit Committee do not meet the qualifications required of an “audit committee financial expert,” the Board believes that the appointment of a new director to the Board of Directors and to the Audit Committee at this time is not necessary as the level of financial knowledge and experience of the current member of the Audit Committee, including such member’s ability to read and understand fundamental financial statements, is sufficient to adequately discharge the Audit Committee’s responsibilities Compensation Committee . The Compensation Committee does not have a formal charter but reviews and recommends to the full Board the amounts and types of compensation to be paid to the Chairman and Chief Executive Officer; reviews and approves the amounts and types of compensation to be paid to our other executive officers and the non-employee directors; reviews and approves, on behalf of the Board, salary, bonus and equity guidelines for our other employees; and administers our equity plans. The Compensation Committee is currently comprised of Mr. David Mann, Ms. Cipora Lavut and Dr. Robert Lempert. Nominating Committee . The Nominating Committee does not have a formal charter but assists the Board in identifying qualified individuals to become directors, determines the composition of the Board and its committees, monitors the process to assess the Board’s effectiveness and helps develop and implement our corporate governance guidelines. The Nominating Committee also considers nominees proposed by stockholders. The Nominating Committee currently consists of Mr. David Mann, Ms. Cipora Lavut and Dr. Robert Lempert. Director Compensation Although we do not currently compensate our directors in cash for their service as members of our Board of Directors, the Board may, in its discretion, elect to compensate directors for attending Board and Committee meetings and to reimburse directors for out-of-pocket expenses incurred in connection with attending such meetings. Additionally, our directors are eligible to receive stock options under the 2011 Directors and Executive Officer Stock Option Plan. During Fiscal 2026, no stock 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 $1,342, was awarded to the Company’s directors. 28 ITEM 11. EXECUTIVE COMPENSATION The following table sets forth the compensation earned by or paid to the principal executive officer and the named executive officers during the Fiscal years ended February 28, 2026 and February 28, 2025. Summary Compensation Table Fiscal Salary Option Awards Non-Equity Incentive Compensation All Other Compensation Total Name and Principal Position Year ($) ($) ($) ($) ($) Cipora Lavut 2026 140,000 (1) - - 539 140,539 President 2025 140,000 (1) - - 539 140,539 (1) 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, with the balance deferred. (2) For Fiscal 2025, Ms. 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 The Board of Directors and Executive Officers have been granted various options to acquire the Company’s common stock under the Company’s 2011 Directors and Executive Officers Stock Option Plan (the “2011 Plan”) as detailed in the table below. All of these options were outstanding as of February 28, 2026. Name and Principal Position Stock Options & Warrants Outstanding Weighted Average Remaining Contractual Life in Years Weighted Average Exercise Price of Options & Warrants Outstanding Cipora Lavut, President and Board Chair 1,000,000 8.26 $ 0.50 Salvador Diaz-Verson, Jr., Director 500,000 8.26 $ 0.50 Gary Douglas, Director 500,000 8.26 $ 0.50 David Mann, Director 500,000 8.26 $ 0.50 Robert Lempert, Director 500,000 8.26 $ 0.50 Option Exercises and Stock Vesting During Fiscal 2026 No stock options were exercised during Fiscal 2026 by the individuals named in the Summary Compensation Table. Option Exercises and Stock Vesting During Fiscal 2025 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 in Control Arrangements We do not currently have any employment agreements with any of our Named Executive Officers. Potential Payments to the Named Executive Officers Upon Termination or Change in Control None of the named executive officers is entitled to any payments or benefits upon termination, whether by change in control or otherwise, other than benefits available generally to all employees. 29 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth, to the extent of our knowledge, certain information regarding our common stock owned as of February 28, 2026 (i) by each person who is known to be the beneficial owner of more than 5% of our outstanding common stock, (ii) by each of our Directors and the named executive officers in the Summary Compensation Table, and (iii) by all Directors and current executive officers as a group: Beneficial Ownership Table Beneficial Owner (1) Number of Shares of Common Stock Percent of Common Stock Salvador Diaz-Verson, Jr. (2) 819,750 * % Gary Douglas (3) 500,000 * % Cipora Lavut (4) 1,888,382 1.3 % Robert Lempert (5) 507,343 * % David Mann (6) 1,023,609 * % All current executive officers and Directors as a group (six) (2) (3) (4) (5) (6) 4,739,084 3.35 % 5% Stockholders Warren Breslow (7) 6,342,385 4.49 % BetterSea LLC (8) 8,364,735 5.93 % * Less than 1% of outstanding shares (1) Beneficial ownership is determined in accordance with rules of the Securities and Exchange Commission. The calculation of the percentage of beneficial ownership is based upon 141,401,844 shares of common stock outstanding on February 28, 2026. In computing the number of shares beneficially owned by any stockholder and the percentage ownership of such stockholder, shares of common stock which may be acquired by a such stockholder upon exercise or conversion of warrants or options which are currently exercisable or exercisable within 60 days of February 28, 2026, are deemed to be exercised and outstanding. Such shares, however, are not deemed outstanding for purposes of computing the beneficial ownership percentage of any other person. Shares issuable upon exercise of warrants and options which are subject to stockholder approval are not deemed outstanding for purposes of determining beneficial ownership. Except as indicated by footnote, to our knowledge, the persons named in the table above have the sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them. The mailing address for each of the officers and directors is c/o Aura Systems, Inc., 20431 North Sea, Lake Forest, CA 92630. (2) Includes 500,000 options exercisable within 60 days of February 28, 2026. (3) Includes 500,000 options exercisable within 60 days of February 28, 2026 (4) Includes 1,000,000 options exercisable within 60 days of February 28, 2026. (5) Includes 500,000 options exercisable within 60 days of February 28, 2026. (6) 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. Mann holds a power of attorney to vote such shares. (7) Includes the right to convert $3,000,000 and accrued interest of $1,162,911 convertible note payable to 2,946,722 common shares at a conversion price of $1.40. (8) Includes common shares only as of February 28, 2026. 30 Securities Authorized for Issuance Under Equity Compensation Plans as of February 28, 2026 Equity Compensation Plan Information as of February 28, 2026 a. b. c. Plan Category Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights Weighted Average Exercise Price for Options, Warrants and Rights Number of Securities For Future Issuances Under Equity Compensation Plans (Excluding Securities Reflected in Column (a.) Equity compensation plans approved by equity holders 8,250,000 $ 0.44 10,904,394 Equity compensation plans not approved by equity holders 1,500,000 $ 0.50 - (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). For additional information regarding options and warrants, see Note 13 to our financial statements appearing elsewhere in this report. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE Review and Approval of Related Party Transactions Our Audit Committee is responsible for the review and approval of all related party transactions required to be disclosed to the public under SEC rules. This procedure has been established by our Board of Directors in order to serve the interests of our shareholders. Related party transactions are reviewed and approved by the Audit Committee on a case-by-case basis. Under existing, unwritten policy no related party transaction can be approved by the Audit Committee unless it is first determined that the terms of such transaction is on terms no less favorable to us than could be obtained from an unaffiliated third party on an arms-length basis and is otherwise in our best interest. Director Independence Using the definition of “independence” included in the listing rules of The Nasdaq Stock Market, our Board has determined that Salvador Diaz-Versón, Jr. and Gary Douglas are both independent directors. ITEM 14. PRINCIPAL ACCOUNTING FEES AND DISCLOSURES Weinberg & Company, P.A. (“Weinberg”) was engaged to be the Company’s principal accountant and auditor in April 2022. The following table sets forth the aggregate fees billed to us by Weinberg for the years ended February 28, 2026 and 2025: Year Ended February 28, (amounts in thousands) 2026 2025 Audit Fees $ 147,000 $ 129,000 Audit-related fees - - Tax fees - - All other fees - - Total $ 147,000 $ 129,000 31 As defined by the SEC, (i) “audit fees” are fees for professional services rendered by our principal accountant for the audit of our annual financial statements and review of financial statements included in our Form 10-K, or for services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those Fiscal years; (ii) “audit-related fees” are fees for assurance and related services by our principal accountant that are reasonably related to the performance of the audit or review of our financial statements and are not reported under “audit fees;” (iii) “tax fees” are fees for professional services rendered by our principal accountant for tax compliance, tax advice, and tax planning; and (iv) “all other fees” are fees for products and services provided by our principal accountant, other than the services reported under “audit fees,” “audit-related fees,” and “tax fees.” Audit Fees Services provided to us by Weinberg with respect the audit of our annual financial statements and review of our annual report on Form 10-K for the year ended February 28, 2025, and for reviews of the financial statements which are included in our quarterly reports on Form 10-Q for the first three quarters of the year ended February 28, 2026. Audit Related Fees Weinberg did not provide any professional services to us during Fiscal 2026 or Fiscal 2025 which would constitute “audit related fees”. Tax Fees Weinberg did not provide any professional services to us during Fiscal 2026 or Fiscal 2025 which would constitute “tax fees”. All Other Fees Weinberg did not provide any professional services to us during Fiscal 2026 or Fiscal 2025 which would constitute “other fees”. Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditors Under the SEC’s rules, the Audit Committee is required to pre-approve the audit and permissible non-audit services performed by the independent registered public accounting firm in order to ensure that they do not impair the auditors’ independence. The SEC’s rules specify the types of non-audit services that an independent auditor may not provide to its audit client and establish the Audit Committee’s responsibility for administration of the engagement of the independent registered public accounting firm. Consistent with the SEC’s rules, the Audit Committee pre-approves all audit and permissible non-audit services provided by our independent auditors. These services may include audit services, audit-related services, tax and other services. Pre-approval is generally provided for up to one year, and any pre-approval is detailed as to the particular service or category of services and is generally subject to a specific budget. The independent auditors and management are required to periodically report to the Audit Committee regarding the extent of services provided by the independent auditors in accordance with this pre-approval, and the fees for the services performed to date. The Audit Committee may also pre-approve particular services on a case-by-case basis. During Fiscal 2026 and Fiscal 2025 all services provided by Weinberg were pre-approved by the Audit Committee in accordance with this policy. There were no hours expended on the principal accountant’s engagement to audit the registrant’s financial statements for the most recent Fiscal year that were attributed to work performed by persons other than the principal accountant’s full-time, permanent employees. 32 PART IV ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES Documents filed as part of this Form 10-K: 1. Financial Statements See Index to Financial Statements at page F-1 2. Financial Statement Schedules See Index to Financial Statements at page F-1 3. Exhibits See Exhibit Index ITEM 16. FORM 10-K SUMMARY None. INDEX TO EXHIBITS Description of Documents 3.1 Amended and Restated Certificate of Incorporation of Aura Systems, Inc. (Incorporated by reference to Exhibit 3.1 to Aura Systems, Inc.’s Form 10-K filed on June 15, 2009) 3.1(a) Certificate of Amendment to the Amended and Restated Certificate of Incorporation, dated February 14, 2018 (Incorporated by reference to Exhibit 3.1 to Aura Systems, Inc.’s Current Report on Form 8-K filed on February 21, 2018) 3.2 Amended and Restated Bylaws of Aura Systems, Inc. (Incorporated by reference to Exhibit 3.2 to Aura Systems, Inc.’s Report on Form 10-K filed on June 15, 2009) 10.1* Aura Systems, Inc. 2006 Stock Option Plan (Incorporated by reference to Exhibit 10.4 to Aura System, Inc.’s Form 10-K filed on March 25, 2008) 10.2* Form of Aura Systems, Inc. Non-Statutory Stock Option Agreement (Incorporated by reference to Exhibit 10.5 to Aura System, Inc.’s Form 10-K filed on March 25, 2008) 10.3 Second Amendment to Transaction Documents dated March 14, 2017 among Registrant and those persons who have signed the signature page thereto (Incorporated by reference to Exhibit 10.1 to Aura Systems, Inc.’s Quarterly Report on Form 10-Q filed on October 25, 2017) 10.4 Third Amendment to Transaction Documents dated April 8, 2017 among Registrant and those persons who have signed the signature page thereto (Incorporated by reference to Exhibit 10.2 to Aura Systems, Inc.’s Quarterly Report on Form 10-Q filed on October 25, 2017) 10.5 Second Amendment to Debt Refinancing Agreement dated April 9, 2017 by and between Aura Systems, Inc., on the one hand, and Warren Breslow and the Survivor’s Trust Under the Warren L. Breslow Trust, on the other hand (Incorporated by reference to Exhibit 10.3 to Aura Systems, Inc.’s Quarterly Report on Form 10-Q filed on October 25, 2017) 10.6 First Amendment to Unsecured Convertible Promissory Note dated June 15, 2017 by and between the Survivor’s Trust Under the Warren L. Breslow Trust and the Registrant (Incorporated by reference to Exhibit 10.1 to Aura Systems, Inc.’s Quarterly Report on Form 10-Q filed on October 25, 2017) 10.7 Agreement entered into on June 19, 2017 between Aura Systems Inc. and BetterSea LLC (Incorporated by reference to Exhibit 10.1 to Aura Systems, Inc.’s Current Report on Form 8-K/A filed on May 9, 2018) 10.11 Sino-Foreign Cooperative Joint Venture Contract dated January 27, 2017 between Aura Systems, Inc. and Jiangsu AoLunTe Electrical Machinery Industrial Col, Ltd. (Incorporated by reference to Exhibit 10.1 to Aura Systems, Inc.’s Form 8-K filed on February 1, 2017) 10.12* Aura Systems, Inc. Directors and Executive Officers Stock Option Plan (Incorporated by reference to Exhibit 10.67 to Aura Systems, Inc.’s Form S-1 filed on November 30, 2011) 14.1 Code of Ethics (Incorporated by reference to Exhibit 14.1 to Aura Systems, Inc.’s Annual Report on Form 10-K filed on June 13, 2018) 31.1 CEO Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 31.2 CFO Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 32.1 Certification pursuant to 18 U.S.C. Section 1350 101.INS Inline XBRL Instance Document 101.SCH Inline XBRL Taxonomy Extension Schema Document 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document 104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) * Indicates a management contract or compensatory plan or arrangement. In accordance with SEC Release 33-8238, Exhibit 32.1 and 32.2 are being furnished and not filed. Furnished herewith. XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections. 33 Signatures Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. AURA SYSTEMS, INC. Dated: September 9, 2026 By: /s/ Cipora Lavut Cipora Lavut President Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated. Signatures Title Date /s/ Cipora Lavut President (Principal Executive Officer), Board Chair September 9, 2026 Cipora Lavut /s/ David Mann Director September 9, 2026 David Mann /s/ Robert Lempert Director September 9, 2026 Robert Lempert /s/ Gary Douglas Director September 9, 2026 Gary Douglas /s/ Salvador Diaz-Verson, Jr. Director September 9, 2026 Salvador Diaz-Verson, Jr. 34 Index to Financial Statements Report of Independent Registered Public Accounting Firm (PCAOB Firm ID: 572 ) F-2 Financial Statements of Aura Systems, Inc.: 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 F- 1 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, 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, 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 audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable 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. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. 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. We believe that our audits provide a reasonable basis for our opinion. F- 2 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 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 it relates. 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. As a result, a high degree of auditor judgement and effort was required in performing audit procedures to evaluate the accounting treatment. The primary procedures we performed to address this critical audit matter included: ● Obtaining and reading the convertible note agreement, as amended. ● 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 since 2022. /s/ Weinberg & Company, P.A. Los Angeles, California September 9, 2026 1925 Century Park East, Suite 1120 Los Angeles, California 90067 Telephone: 310.601.2200 www.weinbergla.com F- 3 AURA SYSTEMS, INC. BALANCE SHEETS February 28, 2026 February 28, 2025 (amounts in thousands, except share data) Assets Current assets Cash and cash equivalents $ 11 $ 23 Inventories 5 38 Prepaid and other current assets 232 220 Total current assets 248 281 Property and equipment, net 799 618 Operating lease right-of-use asset 156 418 Security deposit 160 160 Total assets $ 1,363 $ 1,477 Liabilities and Shareholders’ Deficit Current liabilities Accounts payable and accrued expenses $ 2,555 $ 2,544 Accrued interest 4,528 2,875 Customer advances 457 447 Convertible notes payable, current portion-past due 1,493 1,513 Convertible note payable-related party, including $ 3,020 and $ 3,020 , respectively past due 12,279 12,279 Notes payable, current portion 365 212 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 Total current liabilities 45,414 38,447 Notes payable, net of current portion 734 440 Operating lease liabilities, net of current portion 21 183 Total liabilities 46,169 39,070 Commitments and contingencies Shareholders’ deficit Common stock: $ 0.0001 par value; 150,000,000 shares authorized; 141,401,844 and 118,296,448 issued and outstanding at February 28, 2026 and 2025, respectively. 14 12 Additional paid-in capital 466,241 462,523 Accumulated deficit ( 511,061 ) ( 500,128 ) Total shareholders’ deficit ( 44,806 ) ( 37,593 ) Total liabilities and shareholders’ deficit $ 1,363 $ 1,477 See accompanying notes to these financial statements. F- 4 AURA SYSTEMS, INC. STATEMENTS OF OPERATIONS Fiscal Years Ended February 28, 2026 2025 (amounts in thousands, except share and per share data) Net revenue $ 278 $ 50 Cost of goods sold 25 29 Gross profit 253 21 Operating expenses: Engineering, research and development 1,562 1,249 Selling, general and administration 2,166 3,586 Total operating expenses 3,728 4,835 Loss from operations ( 3,475 ) ( 4,814 ) Other income (expense): Interest expense, net (including $ 1,866 and $ 1,538 to related parties, respectively) ( 2,179 ) ( 1,810 ) Gain on debt settlement - 179 Loss on debt extinguishment – related party - ( 19,324 ) 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 ) Basic and diluted weighted-average shares outstanding 127,114,678 114,842,561 See accompanying notes to these financial statements. F- 5 AURA SYSTEMS, INC. STATEMENTS OF SHAREHOLDERS’ DEFICIT (in thousands, except share data) Common Stock Shares Common Stock Amount Additional Paid-In Capital Accumulated Deficit Total Shareholders’ Deficit Balance, February 29, 2024 104,591,648 $ 10 $ 457,460 $ ( 478,990 ) $ ( 21,520 ) Fair value of vested stock options 1,601 1,601 Modification of warrant agreement - related party 33 33 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 ) 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. F- 6 AURA SYSTEMS, INC. STATEMENTS OF CASH FLOWS Fiscal Years Ended February 28, 2026 2025 (amounts in thousands) Net loss $ ( 10,933 ) $ ( 21,138 ) Adjustments to reconcile net loss to cash used in operating activities Depreciation and amortization 221 137 Amortization of debt discount - 5 Inventory write-down - 19 Gain on debt settlement - ( 179 ) Loss on debt extinguishment – related party - 19,324 Change in fair value of derivative liability 5,279 ( 4,629 ) Fair value of vested stock options - 1,638 Common stock issued for services 72 - Changes in operating assets and liabilities: Inventory 33 ( 37 ) Prepaid and other current assets 268 132 Operating lease right-of-use asset 262 236 Accounts payable and accrued expenses 11 ( 85 ) Accrued interest 1,653 1,600 Customer advances 10 - Operating lease liability ( 281 ) ( 246 ) Cash used in operating activities ( 3,405 ) ( 3,223 ) Cash used in investing activities: Purchase of property and equipment ( 12 ) ( 103 ) Cash used in investing activities ( 12 ) ( 103 ) Cash flows from financing activities: Proceeds from issuance of common stock 3,648 3,431 Proceeds from issuance of notes payable - - Principal payments of notes payable and convertible notes payable ( 243 ) ( 206 ) Cash provided by financing activities 3,405 3,225 Net increase (decrease) in cash and cash equivalents ( 12 ) ( 101 ) Cash and cash equivalents-beginning of year 23 124 Cash and cash equivalents-end of year $ 11 $ 23 Cash paid for: Interest $ 163 $ 138 Supplemental schedule of non-cash transactions: Right of use asset and lease liability $ - $ 47 Notes payable issued for the purchase of property and equipment $ 390 $ 274 Notes payable issued for the purchase of annual software license $ 280 $ 179 See accompanying notes to these financial statements. F- 7 AURA SYSTEMS, INC. NOTES TO FINANCIAL STATEMENTS 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. 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, 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. 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. F- 8 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. 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 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 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, 2026 and 2025, the Company had no impairment of long-lived assets. Leases 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. F- 9 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. 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 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 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, 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. Income Taxes 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. F- 10 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 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; ● Level 2 – Inputs other than quoted prices in active markets for identical assets and liabilities that are observable either directly or indirectly; and ● 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. 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) Level 1 Level 2 Level 3 Total Liabilities Derivative liability – convertible note conversion option $ - $ - $ 22,844 $ 22,844 Total $ - $ - $ 22,844 $ 22,844 February 28, 2025 Level 1 Level 2 Level 3 Total Liabilities 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 Derivative Warrant Liability February 28, 2025 $ 17,565 Change in fair value of derivative liability 5,279 February 28, 2026 $ 22,844 F- 11 Earnings (loss) per share 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: February 28, 2026 February 28, 2025 Warrants 6,451,664 6,511,664 Options 4,000,000 8,250,000 Convertible notes 176,479,241 59,092,024 Total 186,930,905 73,853,688 Inflation 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. Segments 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; 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. 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. F- 12 NOTE 3 – INVENTORIES Inventories consisted of the following: February 28, 2026 February 28, 2025 (amounts in thousands) Raw materials $ - $ 7 Work-in-process 5 6 Finished goods - 25 Total inventory $ 5 $ 38 NOTE 4 – PREPAID AND OTHER CURRENT ASSETS Prepaid and other current assets consisted of the following: February 28, 2026 February 28, 2025 (amounts in thousands) Prepaid annual software licenses $ 216 $ 173 Prepaid insurance 15 19 Other prepaid expenses 1 28 Total prepaid and other current assets $ 232 $ 220 NOTE 5 – PROPERTY AND EQUIPMENT, NET Property and equipment consisted of the following: February 28, 2026 February 28, 2025 (amounts in thousands) Leasehold improvements $ 57 $ 57 Machinery and equipment 1,017 646 Vehicle 96 96 Computer equipment 136 105 Computer software 22 22 Furniture and fixtures 20 20 1,348 946 Less accumulated depreciation and amortization ( 549 ) ( 328 ) $ 799 $ 618 Depreciation expense for the years ended February 28, 2026 and 2025 was $ 221 and $ 137 , respectively. F- 13 NOTE 6 – CONVERTIBLE NOTES PAYABLE Convertible notes payable consisted of the following: February 28, 2026 February 28, 2025 (amounts in thousands) (a) Convertible notes payable 1 – past due $ 1,403 $ 1,403 (b) Convertible notes payable 2 – past due 90 110 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 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. The notes are unsecured, bear interest at rate of 10 % per annum, and matured in March 2024. The notes payable are convertible into shares of common stock at a conversion price of $ 0.20 per share. As of February 28, 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: February 28 2026 February 28, 2025 (amounts in thousands) (a) Convertible note payable to former director – past due $ 3,000 $ 3,000 (b) Convertible note payable to director – past due 20 20 (c) Convertible note payable – Kopple 9,259 9,259 Total $ 12,279 $ 12,279 (a) Convertible note payable-former Director On January 24, 2017, the Company entered into a debt refinancing agreement with a former director and current shareholder of the Company. As part of the agreement, the Company issued a $ 3,000 convertible note. The convertible note is unsecured, bears interest at 5 % per annum, 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, 2026 and 2025, the outstanding balance of the convertible note amounted to $ 3,000 and is past due. F- 14 (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 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, 2026 and 2025, the outstanding balance of the convertible note amounted to $ 20 and is past due. (c) Convertible note payable-Kopple 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. Other 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. F- 15 NOTE 8 – NOTES PAYABLE Notes payable consisted of the following: (amounts in thousands) February 28, 2026 February 28, 2025 Secured notes payable (a) Note payable-EID loan $ 150 $ 150 (b) Notes payable-vehicle 32 46 (c) Note payable - software license 344 208 (d) Notes payable – machinery and other equipment 563 238 Unsecured notes payable (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. 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 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 . (c) Note payable-software license 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 . F- 16 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, 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 following: (amounts in thousands) February 28, 2026 February 28, 2025 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: February 28, 2026 February 28, 2025 (amounts in thousands) Convertible notes payable (past due) (see Note 6) $ 585 $ 509 Convertible notes payable - related party – Kopple (see Note 7) 2,763 1,329 Convertible notes payable - related party – Others (see Note 7) 1,168 1,016 Notes payable (see Note 8) 12 21 Total $ 4,528 $ 2,875 NOTE 11 – LEASES 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 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. F- 17 The components of lease expense and supplemental cash flow information related to leases for the period are as follows: Year ended February 28, 2026 Year ended February 28, 2025 (amounts in thousands) Lease Cost Operating lease cost (included in general and administration in the Company’s statement of operations) $ 261 $ 352 Other Information 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: At February 28, 2026 Operating leases Long-term right-of-use assets $ 156 Short-term operating lease liabilities $ 160 Long-term operating lease liabilities 21 Total operating lease liabilities $ 181 Maturities of the Company’s lease liability is as follows: Year Ending February 28: Operating Lease 2027 $ 166 2028 11 2029 11 2030 1 2031 - Total lease payments 189 Less: Imputed interest/present value discount ( 8 ) 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. F- 18 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 stock. The Company analyzed the conversion option for derivative accounting consideration under ASC 815, Derivatives and Hedging. 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, 2025 Stock price $ 0.16 $ 0.34 Risk free interest rate 3.46 % 4.01 % Expected volatility 170 % 173 % Expected life in years 1.51 4.33 Expected dividend yield 0 % 0 % Number of common stock issuable 174,520,697 54,128,933 Fair value of derivative liability $ 22,844 $ 17,565 NOTE 13 – STOCKHOLDERS’ DEFICIT Common Stock 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). F- 19 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 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: Number of Shares Exercise Price Weighted Average Intrinsic Value (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, 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; 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. 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: Range of Exercise Price Stock Options Outstanding Stock Options Exercisable Weighted Average Remaining Contractual Life Weighted Average Exercise Price of Options Outstanding Weighted Average Exercise Price of Options Exercisable $ 0.50 4,000,000 4,000,000 8.26 $ 0.50 $ 0.50 F- 20 Warrants Number of Warrants Exercise Price 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 Granted - - Exercised - - Expired ( 60,000 ) 0.50 Outstanding, February 28, 2026 6,451,664 $ 0.73 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: Range of Exercise Price Stock Warrants Outstanding Stock Warrants Exercisable Weighted Average Remaining Contractual Life Weighted Average Exercise Price of Warrants Outstanding Weighted Average Exercise Price of Warrants Exercisable $ 0.50 3,451,664 3,451,664 4.97 $ 0.50 0.50 $ 1.00 3,000,000 3,000,000 1.19 $ 1.00 $ 1.00 NOTE 14 – INCOME TAXES 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: Year ended February 28, 2026 Year ended February 28, 2025 Federal tax benefit at statutory rate 21 % 21 % State tax benefit, net of federal benefit 7 % 7 % Change in valuation allowance ( 28 )% ( 28 )% Total 0 % 0 % As of February 28, 2026 and 2025, the following table summarizes our deferred tax asset: February 28, 2026 February 28, 2025 (amounts in thousands) Deferred tax asset Net operating loss carryforwards $ 42,609 $ 41,780 Gross deferred tax assets 42,609 41,780 Valuation allowance ( 42,609 ) ( 41,780 ) Net deferred tax asset (liability) $ - $ - F- 21 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. 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. NOTE 15 – RELATED PARTY TRANSACTIONS 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 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. F- 22 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. Lavut, Mr. Mann, Dr. Lempert, Mr. Douglas and Mr. Diaz-Versón, Jr. On July 8, 2019 the Court of Chancery entered final judgment in favor of the stockholder plaintiffs, confirming that (a) Ronald Buschur, Si Ryong Yu and William Anderson had been validly removed by the holders of a majority of the Company’s outstanding stock acting by written consent (b) Ms. Lavut, Mr. Mann and Dr. 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. NOTE 17. SEGMENT INFORMATION The Company operates and manages its business as one reportable and operating segment. The measure of segment assets is reported on the balance sheet as total consolidated assets. The Company derives revenue primarily in the United States of America and manages its business activities on a consolidated basis. The Company’s chief operating decision maker (CODM), its Chief Executive Officer , reviews financial information presented on a consolidated basis and decides how to allocate resources based on net loss. Consolidated net loss is used for evaluating financial performance. The monitoring of budgeted versus actual results is used in assessing performance of the Company and in establishing management’s compensation. Significant segment expenses include employee compensation, stock-based compensation, merchant fees, and consulting and outside provider costs. Other operating expenses include all remaining costs necessary to operate our business and primarily include advertising, corporate compliance, and overhead expenses. The following table presents the significant segment expenses and other segment items regularly reviewed by our CODM: Year Ended February 28, 2026 Year Ended February 28, 2025 Net sales $ 278 $ 50 Cost of sales 25 29 Gross profit 253 21 Less: Employee compensation and benefits 1,895 987 Stock-based compensation expense 72 1,601 Consulting and outside provider costs 425 288 Property lease and utility costs 482 509 Depreciation expense 221 154 Program software and licensing expense 309 233 Other operating expenses 324 1,063 Total operating expenses 3,728 4,835 Loss from operations $ ( 3,475 ) $ ( 4,814 ) NOTE 18 – SUBSEQUENT EVENTS 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. F- 23