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Item 1. Legal Proceedings

2026-09-22 compared with 2026-01-20 · 34 added, 86 removed, 9 unchanged (93% of the section changed)

Legal Proceedings

We are subject to the legal proceedings and claims

discussed below as well as certain other legal proceedings and claims that have not been fully resolved and that have arisen in the ordinary

course of business.

Our management evaluates our exposure to these claims and proceedings individually and in the aggregate and evaluates

potential losses on such litigation if the amount of the loss is estimable and the loss is probable.

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.

The Company settled

certain matters subsequent to year end that did not individually or in the aggregate, have a material impact on the Company’s financial

condition or operating results.

Between July 2017 and March 2022, the Company

was engaged in litigation with a former director, Robert Kopple, relating to more than $13 million and the current equivalent of the approximately

23 million warrants, exercisable for seven years at a price of $0.10 per share, which Mr.

Kopple and his affiliated entities (collectively

the “Kopple Parties”) claimed should have been originally issued to them pursuant to various agreements with the Company entered

to between 2013-2016.

In March 2022, the Company reached a settlement with the Kopple Parties that resolved all claims asserted against

the Company without any admission, concession or finding of any fault, liability or wrongdoing on the part of the Company.

Under the terms

of the settlement, the Company agreed to pay an aggregate amount of $10 million over a period of seven years, including $3 million initial

payment to be paid in June 2022.

$150 was paid in June 2022, and the balance of the initial payment of $2.85 million was extended to May

29, 2023, In exchange for the extension, the Company was required to pay $165 in extension and forbearance fees in cash and $430 in accrued

forbearance fees.

We are subject to the legal proceedings and claims discussed below as well as certain other legal proceedings and claims that have not been fully resolved and that have arisen in the ordinary course of business.

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

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.

The Company settled certain matters subsequent to year end that did not individually or in the aggregate, have a material impact on the Company’s financial condition or operating results.

Between July 2017 and March 2022, the Company was engaged in litigation with a former director, Robert Kopple, relating to debt and warrants, which Mr.

Kopple and his affiliated entities (collectively, “Kopple”) claimed should originally have been issued to them pursuant to various agreements entered into with the Company between 2013 and 2016.

In March 2022, the Company reached a settlement with Kopple that resolved all claims asserted against the Company without any admission, concession or finding of any fault, liability or wrongdoing on the part of the Company.

Under the terms of the settlement, the Company agreed to pay an aggregate amount of $10 million over a period of seven years, including an initial payment of $3 million to be paid in June 2022.

In June 2022, $150 was paid, and the balance of the initial payment of $2.85 million was extended to May 29, 2023.

In exchange for the extension, the Company was required to pay $165 in extension and forbearance fees in cash and $430 in accrued forbearance fees.

Beginning in January 2023, interest accrues on the unpaid balance at a rate of 6%, compounded annually.

including all accrued interest and deferred fees, are to be paid no later than eight years from the date of the initial payment.

Parties have also received seven-year warrants to purchase up to an aggregate of approximately 3.3 million shares of our common stock

at a price of $0.85 per share.

The settlement also provides for standard mutual general release provisions and includes customary representations,

warranties, and covenants, including certain increases in the amount payable to the Kopple Parties and the right of such parties to enter

judgment against the Company if the Company remains in uncured default in its payment obligations under the settlement.

During the year ended February 29, 2024, the note

was amended multiple times to extend the payment dates of the balance of the initial payment of $2,850, originally due in June 2022, and

the first installment payment of $1,000, originally due in June 2023 (collectively, the “past due principal”).

of these amendments, the Company incurred additional extension and forbearance fees totaling $450 and adjustment to principal balance

of $23 that was recorded as part of interest expense.

As of February 29, 2024, outstanding principal balance amounted to $10,938, including

the $3,850 past due principal (see below).

In March 2024, the Company and Kopple again amended

the note payable.

The amendment (i) replaced the requirement to pay the $3,850 past due principal balance with the requirement to pay

$2,000 due December 15, 2024, effectively extending the payment of $1,850 to future periods;

All amounts, including all accrued interest and deferred fees, are to be paid no later than eight years from the date of the initial payment.

Kopple has also received seven-year warrants to purchase up to an aggregate of approximately 3.3 million shares of our common stock at a price of $0.85 per share.

The settlement also provides for standard mutual general release provisions and includes customary representations, warranties, and covenants, including certain increases in the amount payable to Kopple and the right of such parties to enter judgment against the Company if the Company remains in uncured default in its payment obligations under the settlement.

In March 2024, the Company and Kopple again amended the note payable.

The amendment (i) replaced the requirement to pay the $3,850 past due principal balance with the requirement to pay $2,000 due December 15, 2024, effectively extending the payment of $1,850 to future periods;

(ii) increased the stated interest rate to 10%;

(iii) added a fee of $15 monthly until the Company makes a principal payment of $2 million by December 2024;

(iv) effective August

30, 2024, the Company will grant Kopple a conversion right that gives Kopple the option to be able to convert the note payable into equity

of the Company at a conversion price of the lower of $1.00 per share or 50% of the 10 day volume weighted average price of the Company’s

common stock;

(v) during Fiscal 2025, will require the Company to pay 20% of all collected revenues within 10 days of the end of each

fiscal quarter;

toward the outstanding debt reduction (vi) will require the Company to pay Kopple 20% of any amount raised in new capital

in the form of equity, debt or convertible debt above $3.5 million toward the outstanding debt reduction;

(vii) reduces the exercise price

of the warrants granted to Kopple in March 2022 from $0.85 per share to $0.50 per share;

and (vii) extends the warrant expiration date

from March 8, 2029, to March 31, 2031.

(iv) effective August 30, 2024, the Company will grant Kopple for 36 month conversion right that gives Kopple the option to be able to convert the note payable into equity of the Company at a conversion price of the lower of $1.00 per share or 50% of the 10 day volume weighted average price of the Company’s common stock;

(v) only during Fiscal 2025, will require the Company to pay 20% of all collected revenues within 10 days of the end of each fiscal quarter;

toward the outstanding debt reduction (vi) will require the Company to pay Kopple 20% of any amount raised in new capital in the form of equity, debt or convertible debt above $3.5 million toward the outstanding debt reduction;

(vii) reduces the exercise price of the warrants granted to Kopple in March 2022 from $0.85 per share to $0.50 per share;

and (vii) extends the warrant expiration date from March 8, 2029, to March 31, 2031.

The principal payment of $2 million was extended to March 31, 2025, for $100,000.

the principal payment was extended several times up to December 31, 2025 for an additional $225,000 payment.

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.

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.

Subsequently, the principal payment was extended several times up to September 30, 2026.

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

On March 27, 2019, those same stockholders delivered a further signed written consent to the Company removing William Anderson and Si Ryong Yu as members of the Company’s Board and electing Robert Lempert and David Mann as directors of the Company.

These written consents represented a majority of the outstanding shares of the Company’s common stock as of March 26, 2019, and March 27, 2019, respectively.

Because of Aura’s refusal to recognize the legal effectiveness of the consents, on April 8, 2019, the stockholders filed suit in the Court of Chancery of the State of Delaware pursuant to Section 225 of the Delaware General Corporations Law, seeking an order confirming the validity of the consents and declaring that Aura’s Board consists of Ms.

Douglas and Mr.

Diaz-Versón, Jr.

On July 8, 2019 the Court of Chancery entered final judgment in favor of the stockholder plaintiffs,

confirming that (a) Ronald Buschur, Si Ryong Yu and William Anderson had been validly removed by the holders of a majority of the Company’s

outstanding stock acting by written consent (b) Ms.

Lempert had been validly elected by the holders of a majority

of the Company’s outstanding stock acting by written consent, and (c) the Company’s Board of Directors validly consists of

Cipora Lavut, David Mann, Robert Lempert, Gary Douglas and Salvador Diaz-Versón, Jr.

As a result of prior management’s unsuccessful

opposition to this stockholders’ action filed in the Court of Chancery, such stockholders may be potentially entitled to recoup

their litigation costs from the Company under Delaware’s corporate benefit doctrine and/or other legal provisions.

To date, no final

determination has been made as to the amount of recoupment, if any, to which such stockholders may be entitled.

In addition to the other information set forth

in this report, you should carefully consider the risk factors disclosed in Item 1A, “Risk Factors,” of the Company’s

Fiscal 2024 Annual Report on Form 10-K issued on June 16, 2025.

Unregistered Sales of Equity Securities

and Use of Proceeds

During the nine months ended November 30, 2025,

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

On July 8, 2019 the Court of Chancery entered final judgment in favor of the stockholder plaintiffs, confirming that (a) Ronald Buschur, Si Ryong Yu and William Anderson had been validly removed by the holders of a majority of the Company’s outstanding stock acting by written consent (b) Ms.

Lempert had been validly elected by the holders of a majority of the Company’s outstanding stock acting by written consent, and (c) the Company’s Board of Directors validly consists of Cipora Lavut, David Mann, Robert Lempert, Gary Douglas and Salvador Diaz-Versón, Jr.

As a result of prior management’s unsuccessful opposition to this stockholders’ action filed in the Court of Chancery, such stockholders may be potentially entitled to recoup their litigation costs from the Company under Delaware’s corporate benefit doctrine and/or other legal provisions.

To date, no final determination has been made as to the amount of recoupment, if any, to which such stockholders may be entitled.

In addition to the other information set forth in this report, you should carefully consider the risk factors disclosed in Item 1A, “Risk Factors,” of the Company’s Fiscal 2026 Annual Report on Form 10-K issued on September 10, 2026.

Unregistered Sales of Equity Securities and Use of Proceeds

During the three months ended May 31, 2026, the Company issued 6,860,000 shares of common stock for approximately $751 in net cash.

Defaults Upon Senior Securities.

2 unchanged sentences

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

What changed 10-Q

Item 1. Legal Proceedings