# EDGAR Filing Document

**Accession Number:** 0000826253
**File Stem:** 0001213900-25-054252
**Filing Date:** 2025-6
**Character Count:** 244652
**Document Hash:** d0d2382dc0b0cac0ef9480025d5b49b2
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001213900-25-054252.hdr.sgml**: 20250613

**ACCESSION NUMBER**: 0001213900-25-054252

**CONFORMED SUBMISSION TYPE**: 10-K

**PUBLIC DOCUMENT COUNT**: 95

**CONFORMED PERIOD OF REPORT**: 20250228

**FILED AS OF DATE**: 20250613

**DATE AS OF CHANGE**: 20250613

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** AURA SYSTEMS INC
- **CENTRAL INDEX KEY:** 0000826253
- **STANDARD INDUSTRIAL CLASSIFICATION:** MISCELLANEOUS ELECTRICAL MACHINERY, EQUIPMENT & SUPPLIES [3690]
- **ORGANIZATION NAME:** 04 Manufacturing
- **EIN:** 954106894
- **STATE OF INCORPORATION:** DE
- **FISCAL YEAR END:** 0228

**FILING VALUES:**
- **FORM TYPE:** 10-K
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 000-17249
- **FILM NUMBER:** 251046155

**BUSINESS ADDRESS:**
- **STREET 1:** 10541 ASHDALE STREET
- **CITY:** STANTON
- **STATE:** CA
- **ZIP:** 90680
- **BUSINESS PHONE:** 3106435300

**MAIL ADDRESS:**
- **STREET 1:** 10541 ASHDALE STREET
- **CITY:** STANTON
- **STATE:** CA
- **ZIP:** 90680

?xml version='1.0' encoding='ASCII'?

**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

**Form 10-K**

(Mark One)

**☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

For the fiscal year ended February 28, 2025

OR

**☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

For the transition period from&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; to

Commission file number **0-17249**

**AURA SYSTEMS, INC.**

(Exact name of registrant as specified in its charter)

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| | |
|:---|:---|
| **Delaware** | **95-4106894** |
| (State or other jurisdiction of<br> incorporation or organization) | (I.R.S. Employer <br> Identification No.) |

---

**20431 North Sea**

**Lake Forest, CA 92630**

(Address of principal executive offices, zip code)

Registrant's telephone number, including area code: **(310) 643-5300**

Name of each exchange on which registered: **None**

Securities registered pursuant to Section 12(b) of the Act: **None**

Securities registered pursuant to Section 12(g) of the Act: **Common Stock**

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ☐ No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☐ No ☒

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of the "large accelerated filer," "accelerated filer," "non-accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐ Accelerated filer ☐ <br> Non-accelerated filer ☒ Smaller reporting company ☒ <br> Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

On August 31, 2024, the aggregate market value of the voting stock held by non-affiliates of the Registrant was $25,711,000. The aggregate market value has been computed by reference to the last sale price of the stock as quoted on the Pink Sheets quotation system on August 31, 2024. For the purposes of this calculation, voting stock held by officers, directors, and affiliates has been excluded.

On June 6, 2025, the Registrant had 119,344,448 shares of common stock outstanding.

Documents incorporated by reference: None.

**TABLE OF CONTENTS**

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| | | |
|:---|:---|:---|
| **[PART I](#a_001)** |  |  |
|  | [ITEM 1. BUSINESS](#a_002) | 1 |
|  | [ITEM 1A. RISK FACTORS](#a_003) | 12 |
|  | [ITEM 1B. UNRESOLVED STAFF COMMENTS](#a_004) | 18 |
|  | [ITEM 1C. CYBERSECURITY](#a_005) | 18 |
|  | [ITEM 2. PROPERTIES](#a_006) | 19 |
|  | [ITEM 3. LEGAL PROCEEDINGS](#a_007) | 19 |
|  | [ITEM 4. MINE SAFETY DISCLOSURES](#a_008) | 20 |
| **[PART II](#a_009)** |  |  |
|  | [ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES](#a_010) | 21 |
|  | [ITEM 6.\[RESERVED\]](#a_011) | 21 |
|  | [ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](#a_012) | 22 |
|  | [ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](#a_013) | 25 |
|  | [ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA](#a_014) | 25 |
|  | [ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE](#a_015) | 25 |
|  | [ITEM 9A. CONTROLS AND PROCEDURES](#a_016) | 25 |
|  | [ITEM 9B. OTHER INFORMATION](#a_017) | 26 |
|  | [Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](#a_018) | 26 |
| [**PART III**](#a_019) |  |  |
|  | [ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE](#a_020) | 27 |
|  | [ITEM 11. EXECUTIVE COMPENSATION](#a_021) | 30 |
|  | [ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS](#a_022) | 31 |
|  | [ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE](#a_023) | 32 |
|  | [ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES](#a_024) | 33 |
| [**PART IV**](#a_025) |  |  |
|  | [ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES](#a_026) | 34 |
|  | [ITEM 16. FORM 10-K SUMMARY](#a_027) | 34 |
|  | [SIGNATURES](#a_028) | 35 |

---

i

**<u>SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS</u>**

*This Report contains forward-looking statements within the meaning of the federal securities laws. Statements other than statements of historical fact included in this Report, including the statements under the headings "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Business" and elsewhere in this Report regarding future events or prospects are forward-looking statements. The words "approximates," "believes," "forecast," "expects," "anticipates," "estimates," "intends," "plans," "would," "could," "should," "seek," "may," or other similar expressions in this Report, as well as other statements regarding matters that are not historical fact, constitute forward-looking statements. We caution investors that any forward-looking statements presented in this Report are based on the beliefs of, assumptions made by, and information currently available to, us. Such statements are based on assumptions and the actual outcome will be affected by known and unknown risks, trends, uncertainties and factors that are beyond our control or ability to predict. Although we believe that our assumptions are reasonable, they are not guarantees of future performance and some may inevitably prove to be incorrect. As a result, our actual future results may differ from our expectations, and those differences may be material. Accordingly, investors should use caution in relying on forward-looking statements to anticipate future results or trends.*

*Some of the risks and uncertainties that may cause our actual results, performance or achievements to differ materially from those expressed or implied by forward-looking statements include the following:*

 

● *Our ability to generate positive cash flow from operations;* 

● *Our ability to obtain additional financing to fund our operations;* 

● *The impact of economic, political and market conditions on us and our customers;* 

● *The impact of unfavorable results of legal proceedings;* 

● *Our exposure to potential liability arising from possible errors and omissions, breach of fiduciary duty, breach of duty of care, waste of corporate assets and/or similar claims that may be asserted against us;* 

● *Our ability to compete effectively against competitors offering different technologies;* 

● *Our business development and operating development;* 

● *Our expectations of growth in demand for our products; and* 

● *Other risks described under the heading "Risk Factors" in Part I, Item 1A of this Annual Report on Form 10-K* 

 

*We do not intend to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise except to the extent required by law. You should interpret all subsequent written or oral forward-looking statements attributable to us or persons acting on our behalf as being expressly qualified by the cautionary statements in this Report. As a result, you should not place undue reliance on these forward-looking statements.*

 

*References in this Report to "we", "us", "the Company," "Aura" or "Aura Systems" means Aura Systems, Inc. As used herein, reference to "Fiscal 2025" refers to the fiscal year ending February 28, 2025, "Fiscal 2024" refers to the fiscal year ending February 29, 2024, and so forth.*

ii

 

**PART I**

**<u>ITEM 1. BUSINESS</u>**

**Introduction**

Aura Systems, Inc. ("Aura"), is a Delaware corporation founded in 1987. *The Company innovated and commercialized the technology for Axial Flux Induction electric motors and generators.* 

 

"Axial flux motors represent a leap forward in motor technology, offering high efficiency, compact design, and lightweight construction. As industries continue to push for more efficient technologies, the axial flux motor design is a promising solution that combines power, scalability, and superior performance. Its ability to deliver energy savings while minimizing space and weight is likely to propel this motor design into wide use across many sectors, shaping the future of motor-driven systems*."**<sup>1</sup>***

 

Aura's axial flux induction motor technology ("AAFIM") provides an industrial solution that does not use any permanent magnets, no rare earth elements, is smaller and lighter, uses (i) significant less materials (just copper and steel), (ii) provides very high efficiency, (iii) significantly less copper, (iv) highly reliably and (v) does not require scheduled maintenance*.* 

 

The industrial electric motor market is expected to grow from an estimated USD 113.3 billion in 2020 to *<u>USD 169.1 billion by 2026,</u>* at a CAGR of 6.9% during the forecast period<sup>2</sup>.

Electric motors are employed in infrastructure, major structures, and industries all around the world. Each year, *<u>almost 30 million</u>* motors are sold for industrial use alone<sup>3</sup>. Electric motors find application in a variety of equipment throughout industry. Common industrial applications include: (i) compressors, (ii) fans and blowers, (iii) heavy duty equipment, (iv) HVAC systems, (v) pumps and (vi) machine tools (lathes and mills, etc.).

The universal global trend for electrification has created in addition to the industrial demand for motors a very large demand for motors used in electric transportation for vehicles, planes, and boats ("EV"). In such applications, one or more electric motors are used for propulsion. Most electric motors currently used for electric mobility employ high energy permanent magnets<sup>4</sup> due to their high efficiency and small size. The magnetic material is usually sintered neodymium–iron–boron (NdFeB) made or processed in China.

 

It is expected that over *<u>100 million</u>* electric motors will be required per year by 2032 to meet the demand for the growing EV market<sup>5</sup>.

 

San Global Research 2024 stated "Various motor types, including the switched reluctance motor (SRM), interior permanent magnet synchronous motor (IPM), induction motor (IM), and switched flux motor (SFM), have been employed in EV applications. *<u>Among these options, the axial flux induction motor (AFIM) stands out, drawing attention for its distinct advantages over conventional motors when integrated into EV systems</u>*. *The AFIM boasts superior power-to-weight and diameter-to-length ratios, compact construction, high efficiency, optimal utilization of active materials, and enhanced ventilation and cooling.* These unique features position the axial flux induction motor as a promising and strategic choice, contributing to the ongoing evolution and improvement of electric vehicle technology."

 

For Electric Vehicle applications, AAFIM provide efficiencies that are equal to or higher than ones provided by the best high energy permanent magnet solution ("PM"). AAFIM are smaller, have higher reliability, are more robust, have larger operating speed range, are not limited to 100 degrees C operating temperature for the equivalent PM machine. In addition, AAFIM costs are significantly lower than the equivalent PM machines.

<sup>1</sup> Aerospace and Defense \| 4th September 2024

<sup>2</sup> Markets & Markets Electric Motor Market Published Date: November 2020 \| Report Code: EP 3882

<sup>3</sup> Precedence Research October 6, 2021

<sup>4</sup> Will rare earth be eliminated in EV motor-Dr. James Edmondson November 2, 2020

<sup>5</sup> Emerging Electric Motor Technologies for the EV Market September 28, 2021, Luke Gear

The history of electric machines reveals that the earliest machines were, in fact, axial flux machines. However, after the first radial flux machines were demonstrated in the beginning of the 20<sup>th</sup> century, radial flux machines were accepted as the mainstream configuration. The reason for shelving the axial flux machines were multifold and can be summarized as follows: (i) strong axial magnetic attraction force between the stator and the rotor, (ii) fabrication difficulties such as cutting the slots in laminated cores, (iii) high cost involved in manufacturing the laminated stator core, (iv) difficulties in assembling the machine and keeping a uniform air gap and (v) providing a laminated rotor that can withstand the large centripetal forces.

In recent years there has been great interest in axial flux topology for numerous industrial, commercial, and electric mobility motor and power generation applications. However, to date the commercial focus in axial flux motors has been designs using rare earth permanent magnets ("PM").

Nearly all the supply chain for rare earths is concentrated in China and the chemistry associated with processing rare earths is challenging, expensive, and hazardous. Reliance on China for raw material and magnet production, can influence global markets through (i) production decisions and (ii) geo-political decisions by the Chinese government.

The extraction of rare earths "*produce mountains of <u>toxic waste.</u> For every ton of rare earth produced, the mining process yields 13-kg of dust, 9,600-12,000 cubic meters of waste gas, 75 cubic meters of wastewater, and one ton of radioactive residue. This stems from the fact that rare earth element ores <u>have</u> metals that, when mixed with leaching pond chemicals*, *contaminate air, water, and soil. <u>Most worrying is that rare earth ores are often laced with radioactive thorium and uranium, which result in especially detrimental health effects. Overall, for every ton of rare earth, 2,000 tons of toxic waste are produced.<sup>6</sup></u>*

<u>On April 15, 2025, China has restricted the export of several crucial rare earth minerals to the United States</u> in response to President Donald Trump's tariff increases. China has used its rare earths monopoly as a weapon before, notably against Japan in 2010. In September of that year, the Japanese coast guard arrested the captain of a Chinese fishing boat that collided with Japanese ships off the cost of the disputed Senkaku Islands. China retaliated by choking off Japan's supply of rare earth minerals. Japan quickly gave in and released the fishing boat captain, but it still suffered significant economic damage from the rare earths blacklist for years to come.<sup>7</sup>

A significant reason for industry passing on *<u>Axial Flux Induction</u>* solution and focus on a PM solution could potentially be attributed to page 6 in Jacek F Gieras book, where they pointed out that it is "*<u>difficult to manufacture a laminated rotor with a cage winding for an axial flux machine. If the cage windings are replaced with nonmagnetic high conductivity (Cu or AL) homogenous disk or steel disk coated with Cu layer, the performance of the machine drastically deteriorates."</u>*

 

*<u>Aura Systems with its axial flux induction technology solved the issues related to the rotor back in 2002 and has shipped over 11,000 axial flux induction machines in the 5-15 kW range to numerous military and commercial users</u>*. Aura's proprietary rotor does not require any laminates and provides the structural integrity to withstand very large centripetal forces while, at the same time, providing the proper electric and magnetic properties without the usual issues associated with a solid rotor or a steel disk coated with a copper layer.

*<u>Aura has during the last few years optimized its axial flux induction machine technology (no PM) where the performance (efficiency, torque, energy density) is now equal to or greater than the very best of both axial and radial permanent magnet machines. Of course, this is done using only copper and steel with aluminum for housing at a fraction of the cost of equivalent PM machines.</u>*

<sup>6</sup> Not so "green" technology: the complicated legacy of rare earth mining 12.aug.2021 Harvard international review <br> <sup>7</sup> Breitbart news John Hayward April 15, 2025

Aura's Axial Flux Induction technology is the culmination of decades of cutting-edge electromagnetic research and more than $150 million in development by Aura scientists and engineers. Aura's axial flux induction technology used for mobile power generation was first used in a combat zone by U.S. forces in the U.N actions in the Balkans and since then, the U.S. military has used it in combat zones in both Iraq and Afghanistan. To date the Company shipped over 11,000 systems for mobile power applications in the 5-15 kW range of which over 3,000 systems were for various military applications.

Aura's Axial Flux Induction Machine has inherited advantages such as (i) no rare earth or any other kind of permanent magnets, (ii) significantly less copper (60% less) than equivalent traditional radial flux induction motors, (iii) significantly higher energy density, (iv) fewer overall materials, and (v) high efficiency. In addition, being an induction machine, Aura's solution does not have any brushes or commutators and therefore do not have any potential for sparks.

Aura's Axial Flux induction ("AAFIM") Competitive Edge

○ Performance- AAFIM provides the highest power density across all other known motor technologies with energy density of more than 45 kW/liter for machines in the 250-kW range. In addition, Aura's solution provides efficiencies that are higher than any other solutions for commercial and industrial applications. For 250 kW EV applications Aura's designs show efficiency of more than 97%. AAFIM solution also has significantly lower rotor inertia than other solutions. This increases the machine efficiency even further since it requires less input torque to move the rotor.

○ Size and weight-Aura's solution is significantly smaller in volume and has lower weight than any known solution for equivalent power rated machines (even includes PM machines). When compared to traditional radial flux ("RF") induction machines, AAFIM has less than 40% of the weight and more than 40% reduction in volume. The AAFIM pancake design creates a solution that can be integrated with vehicles and boats for seamless exportable power.

○ Cost-AAFIM provides a significant cost advantage over equivalent induction and PM machines. The cost advantage comes from (a) the higher energy density which means less materials and (b) in the case of PM machines significant cost advantage for equivalent machines by just elimination of the permanent magnets. When compared to radial flux induction, Aura's solution uses approximately 60% less copper. Due to the fractional materials used and the simple manufacturing processes Aura's high-performance machines are less expensive to manufacture than other equivalent machines.

○ Other Advantages-Aura's solution is extremely reliable with the only components to wear out are the bearings. AAFIM do not require any scheduled maintenance, and the only materials used are copper and steel for the active components and aluminum for the housing. These materials are readily available everywhere and are not controlled by any country or political group. In addition to the performance, Aura's rotor lends itself to mass manufacturing. Many of Aura's axial flux induction machines have been operating for twenty years and have shown remarkable reliability.

Our recent efforts have resulted in our new 10 kW mobile power generator that which is approximately 20% smaller in diameter and 10% smaller in axial length than the legacy 8.5 kW solution. This new 10 kW has generated interest from the US military. We completed the design and fabricated a prototype of a 250-kW axial flux motor which has approximately the same dimensions as our legacy 8.5 kW mobile power solution and is oil cooled. This new 250 kW motor has a base speed of 5,000 rpm and an operating range of up to 20,000 rpm. We have also completed the design and started fabrication a 250-kW generator that is air cooled and will operate at 3600 rpm. We already have interest for this new 250-kwgenerator from Israel, South Korea, and others. We recently completed the designs for a 5-horsepower motor for swimming pools applications and a 10-kW motor for farm irrigation applications. Both of those motors will be put into production in the next few quarters

In March 2019, stockholders of the Company represented 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. Because of Aura's refusal to recognize the legal effectiveness of the consents, in April 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. 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. See Item 3, Legal Proceedings for more information. Following this ruling by the Court of Chancery, the newly confirmed Board of Directors terminated the employment of Melvin Gagerman, who had served as CEO and CFO of the Company since 2006, and installed Ms. Lavut as President, Mr. Mann as Chief Financial Officer and Dr. Lempert as Secretary of the Company.

**<u>Business Arrangements</u>**

During Fiscal 2018 and Fiscal 2019, the Company's engineering, manufacturing, sales, and marketing activities were reduced while we focused on renegotiating numerous financial obligations. During this time, the Company's agreements with numerous customers, third party vendors, and organizations and entities material to the operation of the Company business were canceled, delayed or terminated. During Fiscal 2018, the Company successfully restructured in excess of $30 million of debt.

Also, during Fiscal 2018, the Company signed a joint venture agreement with a Chinese company to build, service and distribute AuraGen<sup>®</sup> mobile power products in China. Under the Jiangsu Shengfeng joint venture agreement, the Chinese partner owns 51% of the joint venture and the Company owns 49%. The Chinese partner contributed a total of approximately $9.75 million to the venture principally in the form of facilities, equipment, and approximately $500,000 of working capital while the Company contributed $250,000 in cash as well as a limited license. The limited license sold to the joint venture, however, does not permit the venture to manufacture the AuraGen<sup>®</sup> rotor; rather, the joint venture is required to purchase all rotor subassemblies as well as certain software elements directly from the Company. During Fiscal 2018, Jiangsu Shengfeng placed a $1,000,000 order with the Company including a $700,000 advance payment of which the Company has failed to deliver product in accordance with the order received. On November 20, 2019, the Company reached a preliminary agreement with Jiangsu Shengfeng regarding the return of $700,000 previously advanced to the Company. The preliminary agreement reached consists of a non-interest-bearing promissory note and a payment plan pursuant to which the $700,000 was to be paid over an 11-month period beginning March 15, 2020, through February 15, 2021. The preliminary agreement was subject to the JV continuous operation. However, starting in January 2020 the JV was shut down by the Chinese authority due to the COVID-19 virus. In 2023, the JV was dissolved and liquidated.

As of February 29, 2024, the unpaid balance of $700,000 was reported as part of notes payables – related party in the accompanying financial statements. The $700,000 advance payment was from the JV of which Aura owned 49%). During Fiscal 2020, the Company recorded an impairment expense of $250,000 to fully write-off the Jiangsu Shengfeng investment due to the uncertainty of the operation. In 2023 the JV was dissolved and liquidated.

 **<u>Recent Developments</u>**

In fiscal 2025 the Company completed the design and fabrication of an oil cooled 250 kW electric motor prototype using axial flux induction and completed the design for a 250-kW air cooled generator using axial flux induction. In addition, the Company filed 3 new patent applications related to an axial flux induction machine and subassemblies.

**The AuraGen<sup>®</sup>/VIPER Product Overview:**

**Markets Served by the AuraGen<sup>®</sup>/VIPER**

*<u>Induction Motor Applications</u>*

Aura's axial flux induction machine can be used as either an electric motor or generator as described above. Due to the inherit advantages of Aura's axial flux induction machine, such as (i) no rare earth or any other kind of permanent magnets, (ii) significantly less copper (60% less) than equivalent traditional induction motors (iii) higher energy density and (iv) fewer overall materials, we believe Aura's axial flux induction motor can be used across a wide range of industries and applications. Even a small percent increase in motor efficiency translates to a very large market-wide savings of dollars per year. Since Aura's axial flux motor designs are more efficient than equivalent radial flux induction motors, we believe that with the proper financial resources, over time, the Company can capture a reasonable share of the global electric motor market.

Electric motor are the main users of electricity, accounting for approximately 53% of the global demand for electricity. Over 65% of the energy used to support electric motors is used for industrial motor systems.<sup>8</sup> The increase in global electricity consumption, and the use of electrical equipment and machines in different industries and the renewables sector are major factors driving growth in the electric motor market.

*<u>Aura's machines use approximately 60% less copper, are approximately 1/3 the size and weight and are more efficient than the equivalent traditional radial flux ("RF") induction machine.</u>*

 

*<u>When compared to radial and axial flux permanent magnet machines, Aura machines are less expensive to manufacture, do not use any rare earths, do not use any permanent magnets, are not dependent on supply from China, are more robust, have a higher operating speed range, have lower maintenance, have a longer lifetime, and are generally smaller, lighter and higher in efficiency.</u>*

*EV applications*

 

The universal global trend for electrification has created in addition to the industrial demand for motors also a very large demand for motors used in electric transportation for vehicles, planes, and boats ("EV"). In such applications, one or more electric motors are used for propulsion. The power to drive the electric motors is generally a battery system or fuel cell. Both batteries and fuel cells convert some form of fuel to electricity through some chemical process. EVs include, but are not limited to, road and off-road vehicles, surface and underwater vessels, electric aircraft, and electric spacecraft.

In addition to the batteries, the electric motor and supporting power electronics are critical components of EV drivetrain. It is expected that over 100 million electric motors will be required per year by 2032 to meet the demand for the growing EV market<sup>9</sup> (where would all the rare earths come from to support 100 million motors per year?).

The global Electric Vehicle Market size is projected to grow from 4 million units in 2021 to 34.76 million units by 2030.<sup>10</sup> The AC motor (most power by alternating current) is expected to witness the fastest growth in the electric motor market during the forecast period.

There are several key performance metrics for electric motors. Power and torque density enables improved driving dynamics in a smaller and lighter package, with weight and space being at a premium in EVs. Another critical area is efficiency. Improving efficiency means that less energy stored in the battery is wasted when accelerating the vehicle, resulting in improved range from the same battery capacity. Smaller motor system weight will also contribute to increase in range since less weight needs to be moved.

Most electric motors currently used for electric mobility employ high energy permanent magnets.<sup>11</sup> The magnetic material is usually sintered neodymium–iron–boron (NdFeB) made or processed in China. Neodymium is one of the rare earth elements. China has around a third of all rare earth reserves and around 80% of global production.<sup>12</sup>

<sup>8</sup> Identification of Technoeconomic Opportunities with the Use of Premium Efficiency Motors as Alternative for Developing Countries - Julio R. Gómez etc. Published: October 16, 2020

**<sup>9</sup>** Emerging Electric Motor Technologies for the EV Market September 28, 2021, Luke Gear

<sup>10</sup> Market & market Electric Vehicle Market May 2021 Report code AT4907

<sup>11</sup> IDTechEx Dr. James Edmonson Dec 6 2024

<sup>12</sup> Polytechnique Insight January 29, 2025, by Mathieu Xemand

In 1987 the Chinese President Deng Xiaoping famously said, "*the middle East has Oil; China has rare earths*". An Oxford Analytics Expert briefing on July 30, 2020, states that "(i) Permanent Magnets will account for 3⁄4 of rare earth demand by 2030 up from 1⁄4 in 2020 and (ii)Electric vehicles and offshore wind will drive demand and be most vulnerable to ***supply shocks"*.** 

Permanent magnet ("PM") machines can be extremely light in weight and highly efficient. In PM machines the magnetic field B is fixed by the magnets and the only way to change this is with a bucking field. These bucking currents result in an increase in temperature that could affect the magnetization of the permanent magnets.

In PM machines the operating temperature must be kept below 100<sup>o</sup>C because at that temperature the magnets start to lose some of their magnetization and at 180<sup>o</sup>C they become completely demagnetized. However, in EV applications at low speed, one needs to use a lot of current (generating high heat) to get the required torque; similarly, at high speeds one needs a lot of current for the bucking fields to reduce the B field. Thus, PM machines for electric mobility require a very complex cooling system. All the components in the machine are designed for maximum specifications but operationally the machine is limited by temperature requirements of the magnets. The cost of such machines is high due to (i) The permanent magnets, (ii) the complex cooling system and (iii) complex controller.

*<u>Unlike the PM machines, Aura's axial flux induction machines do not use any permanent magnets and therefore the controller can change the B fields since B is proportionate to the voltage divided by the frequency (V/f). Thus, the Aura machine, when operated with a smart inverter, has an advantage over a PM machine. The Aura machine has a smaller volume, equal or better efficiency, more reliable and a large cost advantage. This advantage becomes increasingly important as performance is increased</u>*<u>.</u>

 

*<u>Mobile and Remote Power Applications</u>*

The global generator sales market was $20.3 billion in 2019 and is estimated to reach $27.16 billion by 2027 (Fortune Business Insight). Most industries dealing with construction and infrastructure rely on mobile generators to support modern computers, digital sensors and instruments as well as electrical driven tools. Current automotive alternators cannot supply the existing demanded power for many such applications and thus the common solution is the use of stand-alone gensets (often referred to a "Auxiliary Power Units" or simply "APUs"). These APUs, however, (i) consume large amounts of fuel, (ii) are heavy and bulky and accordingly must often be towed on trailers, and (iii) require constant maintenance. Additionally, traditional APUs are generally not considered to be environmentally friendly power solutions based on their high fuel consumption, loud operating noise levels, and the emissions they secrete into the air. *In comparison, the AuraGen<sup>®</sup> system is small and light enough to generally be integrated directly into existing vehicles, does not require maintenance, nor do they require any set-up or tear-down time. In addition, there is no heavy lifting required and to contact with hot surfaces. The AuraGen<sup>®</sup> operation when integrated in a vehicle or a boat is completely seamless and transparent to the user*.

Beside stand-alone gensets (often referred to "auxiliary power units" or simply "APU" s), all automotive users rely on integrated alternators in their vehicles for such things as navigation systems, electric seating, electric windows, sound/ phone systems and lights. In 2019 alone, 87.9 million passenger vehicles were sold globally<sup>13</sup> (each one used an alternator). The market for automotive alternators is presently dominated mainly by four companies: Denso, Valeo, Mitsubishi Electric, and Hitachi Automotive.

These companies jointly control nearly 80% of the global market. *<u>The compact size and significant increase in efficiency of the AuraGen<sup>®</sup> provides an ideal replacement (fit and form) for high output automotive alternators while offering higher efficiency, longer lifetime and the flexibility of multi types of voltage both AC and DC. Recently, the Company completed the design and development for a 10-kW alternator with a diameter of 10 inches and axial length of less than 6 inches. The new 10 kW alternator will provide the full 10 kW power at alternator speeds of 2,500-13,000 rpm with efficiency higher than 90%.</u>*

The AuraGen<sup>®</sup> solution increase in efficiency over traditional generators, when combined with our load following architecture and the ability to provide both AC and VDC simultaneously.

<sup>13</sup> Motor Intelligence. Automotive alternator market growth trends forecast 2021-2026

**Competition**

The Company is involved in the application of its AuraGen<sup>®</sup> technology to electric motors and mobile power. Therefore, it faces substantial competition from companies offering different technologies*.*

*<u>Electric Motors</u>*

 

There are four (4) basic approaches for electrical machines: (i) the rotor can be electrically excited such that it creates a magnetic field with constant orientation (as in synchronous machines) that usually uses brushes and or commutators; (ii) the shape of the rotor can induce reluctance variations in the stator (as in switched reluctance machines); (iii) the rotor can be permanently magnetized with permanent magnets ("PM ") as in brushless DC machines; and (iv) the rotor field can be induced from the stator due to the rotor's structure as in induction machines. Our axial flux technology is an induction machine.

*<u>AC induction machine (no PM)</u>* is the most common electrical machine in use today. A changing magnetic field in the stator induces a current in the rotor. The current in the rotor produces its own magnetic field, which then interacts with the magnetic field of the stator, causing the rotor to turn. The name induction comes from the fact that current is induced in the rotor by the changing magnetic field of the stator. Radial flux induction machines have been the workhorse of industry due to their robustness, attractive cost, and ease of control; however, they are relatively, heavy and bulky. On the other hand, Aura's axial flux ("AF") induction machines, have all of the advantages of the radial flux machines but with the advantage of higher energy density and higher efficiency resulting in a smaller and lighter machine with equivalent or better performance. *Unlike the PM machines, induction machines do not use any permanent magnets and therefore the controller can change the B fields since B is proportionate to the voltage divided by the frequency (V/f).* 

Although our axial flux induction technology provides significant advantages in both cost (significant less copper, steel and aluminum), size/weight and performance, most of our competitors have far greater financial, technical, and marketing resources than we have. They have larger budgets for research, new product development and marketing, and have long-standing customer relationships.

Key players in the market are (i) Nidec Motor Corporation, (ii) ABB Ltd., (iii) Siemens AG, (iv) WEG Electric Corp, (v) Regal Beloit Corporation, (vi) Wolong, and (vii) Teco Westinghouse.

*<u>Generators</u>*

*There are five basic approaches used in mobile generators.* 

 

*<u>Gensets AKA APU</u>*. Portable generators meet the large market need for auxiliary power. Millions of units per year are sold in North America alone, and millions more are sold across the world to meet market demands for 1 to 20 Kilowatts of portable power. The market for these power levels addresses the commercial, leisure and residential markets, and is essentially divided into: (a) higher power, higher quality and higher price commercial level units; and (b) lower power, lower quality and lower price level units. Gensets provide the strongest competition across the widest marketplace for auxiliary power. Onan, Honda, Generac and Kohler, among others, are well established and respected brand names in the genset market for higher reliability auxiliary power generation. There are over 40 registered genset-manufacturing companies in the United States.

Some of the key suppliers are Caterpillar (US), Cummins (US), Rolls-Royce Holdings (UK), Atlas Copco (Sweden), Mitsubishi Heavy Industries, Ltd. (Japan), Yanmar (Japan), Generac (US), ABB (Switzerland), Siemens Energy (Germany), Weichai Group (China), Kohler Co. (US), Kirloskar Oil Engines Ltd. (India), Denyo (Japan), and Sterling & Wilson (India),

*<u>High Output Alternators</u>.* There are many High Output Alternator manufacturers. Some of the better-known ones are Delco-Remy, Bosh, Nippon Densu, Hitachi, Mitsubishi and Prestolite. All alternators provide their rated power at very high RPM and significantly less power at lower RPM. In addition, alternators are generally only 30% efficient at the low RPM range and increase to 50% efficiency at the high RPM range.

*<u>Inverters.</u>* There are many inverter manufacturers across the globe; the best known one is Xentrex. The pricing of industrial grade sine wave inverters is approximately $400 per kilowatt plus the cost of a high output alternator (estimated at $1,000) and a good throttle controller (estimated in the range of $250-500).

*<u>Permanent-Magnet Alternators.</u>* A number of companies have introduced alternators using exotic rare earth Neodymium (NdFeB) magnets. These alternators tend to have higher power generation capabilities than regular alternators at lower RPM. Unfortunately, PM machines with NdFeB magnets are very sensitive to temperature and, unlike the AuraGen<sup>®</sup>, cannot survive the typical under-the-hood environment (200<sup>o</sup>F+). In order to apply such devices for automotive applications one must add an active cooling system to keep the magnets from demagnetizing at approximately 200<sup>o</sup>F. In addition, most of the rare earth magnets (NeFeB) are manufactured in China and are subject to potential political and economic pressure.

In addition to the temperature challenges of such machines, there are other issues involving active control of the magnetic field. The main disadvantage of PM generators is the difficulty of output voltage regulation to compensate for speed and load variation due to the lack of a simple means of field control.

*<u>Fuel Cells</u>.* Fuel cells are solid-state devices that produce electricity by combining a fuel containing hydrogen with oxygen. They have a wide range of applications and can be used in place of the internal combustion engine and traditional lead-acid and lithium-ion batteries. These systems are generally more expensive. The most widely deployed fuel cells are estimated to cost significantly more per kilowatt than alternative solutions.

*<u>Others</u>*

Evans Electric in Australia has introduced an axial flux machine with a complete conductive rotor. Such a machine was first introduced by Brinner more than 20 years ago and was abandoned because the rotor lacked the required rigidity to withstand the magnetic and centrifugal forces. The Brinner machine is cited in Aura's issued patents.

Numerous companies are introducing axial flux machines; however, they generally use rare earth NeFeB magnets (made in China) and are thus not induction machines but rather permanent magnet machines. Some of the better-known companies are YASA, EVO, Magnax and Phi Power.

Most of our competitors have far greater financial, technical, and marketing resources than we have. They have larger budgets for research, new product development and marketing, and have long-standing customer relationships. We also compete with many larger and more established companies in the hiring and retention of qualified personnel. Our financial condition has limited our ability to market the AuraGen<sup>®</sup>.

The AuraGen<sup>®</sup> uses a different technology and because our product is radically different from traditionally available mobile power solutions, users may require lengthy evaluation periods to gain confidence in the product. OEMs and large fleet users also typically require considerable time to make changes to their planning and production.

**Competitive Advantages of the AuraGen<sup>®</sup> Axial Flux Induction technology**

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*<u>As a motor</u>*-Aura's Axial Flux ("AF") induction motor/generator is increasingly attracting attention from high impact potential users seeking advantages over conventional motors, particularly for Electric Vehicle applications. These advantages include (i) compact construction, (ii) better power to weight ratio, (iii) shorter axial length, (iv) better efficiency, (v) better torque to volume and weight ratio, (vi) very high utilization of active materials (less than 60% of the copper) and (vii) excellent ventilation and cooling. Induction machines (i) do not use any rare earth elements and have no permanent magnets. Due to their flat shape, lower weight and compact construction, Aura's axial flux motors are ideal for pumps, fans, food processors, HVHC, etc. An axial flux machine is also preferred in applications where the rotor can be integrated with the rotating part of mechanical loads.

The AuraGen<sup>®</sup> motor's operational range is between -40 and 340-degrees F; therefore, it is suitable to operate in a harsh environment.

*<u>As an alternator.</u>* Aura's induction machine provides significant advantages in power generation, particularly in mobile applications. Its smaller volume and higher efficiency, when combined with the geometric shape means it can be integrated with existing vehicles and boats. Such integrated solutions do not require set up time. There are no heavy weights to lift (gensets), usable cargo space is optimized and there is no need for separate fuel/containers. Remarkably, there is no scheduled maintenance required.

The AuraGen<sup>®</sup> alternator's operational range is between -40- and 340-degrees F; therefore, it is suitable for operating under the hood of a vehicle where the ambient temperature can easily be above 200 degrees F.

***<u>Earth-Forward, Green Technology</u>***. The AuraGen<sup>®</sup> system is significantly more environmentally friendly than traditional motors and generators. Because of its extreme efficiency and smaller size, the AuraGen<sup>®</sup> system utilizes fewer resources and materials to manufacture (in particular less than 60% of the copper). When used in power generation, the AuraGen<sup>®</sup> uses a vehicle's primary automotive engine, which is already highly regulated for environmental protection. Traditional mobile power solutions, in comparison, use small, less efficient, auxiliary engines that produce significantly higher levels of emissions per unit of power output than the automobile engine.

***<u>Durability; No Scheduled Maintenance</u>***. The AuraGen<sup>®</sup> motor/generator solution does not require any scheduled maintenance. The historical failure rate for Aura's machines over a 20-year period is less than 0.5%. The bearings are rated for 28,000 hours.

Aura's axial flux induction (no PM) can be summarized as:

● *Disruptive since it addresses the entire field of electrical motors and generators by providing a solution that **is smaller, lighter, more efficient, cost less to manufacture and** does not use any permanent magnets **.*** 

 

● *Aura has demonstrated mass production of this technology with more than 11,000 machines.* 

 

● *The economic value proposition is well defined in terms of cost, performance and size.* 

 

● *The Aura solution provides **significant global reduction in the use of raw materials** such as copper, steel, and aluminum.* 

 

● *The higher efficiency of Aura's motor, when used in a manufacturing environment, can **lead to a noticeable reduction in the global consumption of energy**.* 

 

● *When used for mobile power generation, Aura's technology leads to a **significant reduction in global pollution** by being able to reduce and, in many situations, eliminate completely small diesel and gasoline engines used in power generation.* 

 

● *When used for **electric vehicles, the smaller size, weight, and increased efficiency could lead to an increase in range and/or reduced battery weight**.* 

 

● *When used in remote stand-alone diesel power generation such as cell towers, Aura's increased efficiency, lower rotor inertia, voltages flexibility and load-following architecture results in a **significant reduction in fuel usage (and, of course, reduced pollution).*** 

 

● *Aura's significantly (65% less) lower rotor inertia and variable speed capabilities make Aura's solution ideal for small hydro applications that are currently being ignored because of construction cost, low head, and slow flow situations.* 

**Targeted Market**

The Company is re-examining and identifying new key markets to focus on as the Company expands operations.

The global drive for electrification is in search of better, more effective electric motors. The recent realization by many potential users of such motors that permanent magnet motors are depending on NeFeB rare earth magnets from China has created a need for alternative to the PM motors. Our axial flux induction machine is a solution that does not use any magnets and has the required performance characteristics as well as fit and form for numerous applications.

***<u>Electric motors</u>***

*<u>Electric motors</u>* <u>for industrial applications.</u> We have completed the design of 4 kW and 10 kW machines. The designs show significantly increased efficiency as compared to equivalent other designs, and in addition they are a fraction of the size and weight, use approximately 50-60% less copper and cost less to manufacture.

*<u>Electric motors for high end electric cars.</u>* We now have a completed the design and fabrication of a prototype 250-kW axial flux induction (no PM) with energy density of more than 45 kW per liter (the best other known design is approximately 40 kW/liter using rare earth permanent magnets) and efficiency of more than 95%. Our design has an active diameter of approximately 9.45 inches and active axial length of approximately 4.92 inches.

***<u>Mobile power generation</u>***

*<u>Military market.</u>* One focused market for the Company's VIPER (military name for our axial flux induction generator) is military applications. While traditional markets for military vehicles such as the U.S. are choosing to upgrade and maintain existing fleets rather than replace aging vehicles, other regions are looking to purchase new units, which also provides maintenance and upgrade opportunities. The active number of military vehicles was estimated at over 418,000 in 2021. New vehicle procurement is expected to decline in western defense and increase in emerging markets of APAC and the Middle East.

*<u>Automotive alternators.</u>* In 2019, 87.9 million units of passenger cars were sold globally, each one used an alternator. The market for automotive alternators is dominated mainly by four companies: Denso, Valeo, Mitsubishi Electric, and Hitachi Automotive. These companies jointly control nearly 80% of the global market. The compact size and significant increase in efficiency of the AuraGen<sup>®</sup> provides an ideal replacement (fit and form) for high output automotive alternators.

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*<u>Transport Refrigeration ("TRU")</u>*<u>.</u> The main competitors for the all-electric TRU are traditional diesel-based solutions provided by Thermo-king and Carrier. The diesel based comparable systems provided by Thermo-king and Carrier are somewhat less expensive than our AuraGen<sup>®</sup> all-electric solution, however the diesel solutions require frequent maintenance and the utilization of a separate diesel engine that consumes additional fuel every operating hour. In addition, the diesel solution emits harmful emissions that have been recognized by the U.S. Environmental Protection Agency, California's Air Resource Board and others as dangerous pollutants and are increasingly subject to federal and state regulations. A CARB 2015 report "Technology Assessment Transport refrigeration" cites and provides an analysis of our solution that can be applied for significant pollution reduction and fuel savings for truck-based transport refrigeration.

**Facilities, Manufacturing Process and Suppliers**

During Fiscal 2025, 2024 and 2023, the Company occupied approximately 18,000 square feet of space in Lake Forest, California. In early Fiscal 2022 the Company consolidated all its administrative offices and operations into this new modern stand-alone facility. The Lake Forest facility is subject to a lease agreement with a 66-month lease period effective from February 2021, through August 31, 2026. The monthly base lease rate for the Lake Forest Facility is currently $24,239 per month with a 3% annual escalation. We expect to expand operations next year that will require additional space.

As the Company continues to expand its operations, we will need to renew relationships and contracts with our suppliers or locate suitable new suppliers for subassemblies and other components.

**Research and Development**

We believe that ongoing research and development is important to the success of our product in order to utilize the most recent technology, develop additional products and additional uses for existing products, stay current with changes in vehicle manufacture and design and to maintain an advantage over potential competition. Our engineering, research and development costs for Fiscal 2025 were approximately $1.2 million compared to approximately $0.8 million in Fiscal 2024. In Fiscal 2025 we completed the design and built a prototype for a 250-kW electric motor using our axial flux induction technology as well as completing the design for 250 kW electric generator using the axial flux induction technology. In addition, we filed 3 new patent applications for our axial flux induction machines.

**Patents and Intellectual Property**

Our intellectual property portfolio consists of trademarks, proprietary know-how, trade secrets, and patents. Historically the Company obtained 78 patents in electromagnetic and electrooptical technologies. During fiscal 2025 the Company filed 3 new patent applications covering (i) new winding patterns can be made to increase current density for increasing the torque density and the power density and (ii) two patent applications for the development of novel cooling systems which make better heat dissipation is used to reach the highest torque and power density

The basic philosophy followed by Aura is to build layers of defense to protect the Company's IP. This is achieved through the development of fundamental patents and surrounds them with application patents. The detailed fabrication of the rotor is kept as a trade secret since this is a critical component in Aura's proprietary intellectual assets.

The challenges of implementing a patent philosophy are based on cost. Patent maintenance costs are expensive, particularly international patents. In order to maximize a limited budget, our approach is to first file a number of new US patents. This will provide a year before international patents need to be filed.

**Government Regulation**

We are subject to laws and regulations that affect the Company's activities, which include, but are not limited to, the areas of labor, intellectual property and ownership and infringement, tax, import and export requirements, environmental, and health and safety. As we recommence operations, our operations will again be subject to federal, state and local laws and regulations governing the occupational health and safety of our employees and wage regulations. For example, we are subject to the requirements of the federal Occupational Safety and Health Act, as amended, or OSHA, and comparable state laws that protect and regulate employee health and safety. We expect to expend resources to maintain compliance with OSHA requirements and industry best practices.

**Employees**

As of the date of this filing, the Company has a total of twelve (12) full-time employees in research and development, sales, operations and administration. Additionally, the Company engages independent contractors, on an as-needed basis, to support various areas of the business. During Fiscal 2025 we engaged three independent contractors to support engineering developments.

**Significant Customers**

In Fiscal 2025, one significant customer, CBOL, accounted for 55% of revenues. In Fiscal 2024, one significant customer, CBOL, accounted for 55% of revenues, however no customer is considered significant.

**Raw Materials**

The most important raw materials we use in manufacturing our products are steel, copper, and aluminum. Raw materials are purchased both domestically and outside the United States. We have no significant long-term supply contracts. When possible, we maintain a number of sources for our raw materials, which we believe contribute to our ability to obtain competitive pricing. The cost of some of our raw materials and shipping costs are dependent on petroleum cost. Higher material prices, cost of petroleum, and costs of sourced products could have an adverse effect on margins.

We enter into standard purchase agreements with certain foreign and domestic suppliers to source selected products. The terms of these arrangements are customary for the industry and do not contain any long-term contractual obligations on our behalf.

**Available Information**

We file annual, quarterly and current reports and other information with the Securities and Exchange Commission (the "SEC" or the "Commission"). These materials can be inspected and copied at the SEC's Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Copies of these materials may also be obtained by mail at prescribed rates from the S.E.C's Public Reference Room at the above address. Information about the Public Reference Room can be obtained by calling the SEC at 1-800-SEC-0330. The SEC also maintains a website at www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.

On our website, www.aurasystems.com, we provide free of charge our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and any amendments thereto, as soon as reasonably practicable after they have been electronically filed or furnished to the SEC. Information contained on our website is not part of this Annual Report on Form 10-K or our other filings with the SEC.

**<u>ITEM 1A. Risk Factors</u>**

***We have been a party to litigation, a consent solicitation and a proxy contest with shareholders controlling a majority of the Company's stock, which is costly and time-consuming and has had a material adverse effect on our business, results of operations and financial condition and could adversely affect our stock price.***

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In March 2019, stockholders of the Company representing 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. 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. 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. Aura's refusal to recognize the legal effectiveness of the consents and the decision by the Company's former leadership team to utilize corporate resources to vigorously contest the shareholder action has consumed significant financial resources, temporarily stagnated operations, and resulted in substantial costs, all of which had a material adverse effect on our business, operating results and financial condition.

***Going Concern***

The Company's financial statements have been prepared under the assumption that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, during the year ended February 28, 2025, the Company incurred a net loss of $21.1 million, used cash in operations of $3.2 million, and at February 28, 2025, had a stockholders' deficit of $37.6 million. In addition, at February 28, 2025, notes payable and related accrued interest with an aggregate balance of $5.2 million have reached maturity and are past due. These factors raise substantial doubt about the Company's ability to continue as a going concern within one year of the date that the financial statements are issued. In addition, the Company's independent registered public accounting firm, in their report on the Company's February 29, 2024, audited financial statements, raised substantial doubt about the Company's ability to continue as a going concern.

Our ability to continue as a going concern is dependent upon our ability to increase revenues, obtain additional financing, drive further operating efficiencies, reduce expenditures, and ultimately, create profitable operations. In the event that the Company does not generate sufficient cash flows from operations and is unable to obtain funding, the Company will be forced to delay, reduce, or eliminate some or all of its discretionary spending, which could adversely affect the Company's business prospects, ability to meet long-term liquidity needs or ability to continue operations. The Company does not have any sufficient committed sources of capital and does not know whether additional financing will be available when needed on terms that are acceptable, if at all. This going concern statement from our independent public accounting firm may discourage some investors from purchasing our stock or providing alternative capital financing. The failure to satisfy our capital requirements will adversely affect our business, financial condition, results of operations and prospects.

***The effects of a pandemic or widespread outbreak of an illness, such as the COVID-19 pandemic, has had and could continue to have a material adverse impact on our business, results of operations and financial condition.***

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While the impact of the COVID-19 pandemic on our business has largely abated, uncertainties continue from the ongoing effects of the pandemic and an economic slowdown. The effects of government agency actions and the Company's policies and those of third parties to combat future pandemics may negatively impact productivity and the Company's ability to market and sell its products, cause disruptions to its supply chain anon d impair its ability to execute its business development strategy. These and other disruptions in the Company's operations and the global economy could negatively impact the Company's business, operating results and financial condition.

Additional discussion related to the various risks and uncertainties described above is included elsewhere within this "Risk Factors" section of our Form 10-K.

**We derive a substantial portion of our revenues from customers in industries susceptible to trends and factors affecting those industries, including the COVID-19 pandemic.**

Our axial flux induction technology is geared toward industrial, commercial and EV motor users, and in addition, our mobile power solution is geared to end-markets such as commercial vehicles, communications, transportation industries, and consumer and industrial equipment markets. Factors negatively affecting these industries also negatively affect our business, financial condition and results of operations. Any adverse occurrence, including industry slowdown, recession, costly or constraining regulations, excessive inflation, prolonged disruptions in one or more of our customers' production schedules or labor disturbances, that results in significant decline in the volume of sales in these industries, or in an overall downturn in the business and operations of our customers in these industries, could materially adversely affect our business, financial condition and results of operations.

As a result of the COVID-19 pandemic, global vehicle production has decreased, and some manufacturers have completely shut down manufacturing operations in some countries and regions, including the United States and Europe. As a result, we have experienced, and are likely to continue to experience, delays in the production and distribution of our products and the loss of sales. If the global economic effects caused by the COVID-19 pandemic continue or increase, overall customer demand may continue to decrease which could have a further adverse effect on our business, results of operations and financial condition.

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***We will need additional capital in the future to meet our obligations and financing may not be available. During Fiscal 2025 and Fiscal 2024, the Company increased its engineering and manufacturing activities, but it still struggled with meeting its financial requirements. If we cannot obtain additional capital, we will not be able to continue our operations.***

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As a result of our operating losses, we have largely financed our operations through sales of our equity securities. Beginning with Fiscal 2017, the Company significantly reduced its engineering, manufacturing, sales, and marketing activities to focus on renegotiating numerous financial obligations and conserving cash. For Fiscal 2025 and Fiscal 2024, we had approximately $3.2 million negative and $3.0 million negative cash flows from operations, respectively, due primarily to the impact of the COVID-19 pandemic. The Company's engineering and manufacturing activities remained limited due to our inability to increase sales and raise significant amounts of new financing. Our ability to continue as a going concern is directly dependent upon our ability to obtain additional operating capital and generating sufficient operating cash flow. The impacts of the COVID-19 pandemic, increased interest rates and inflation have caused significant uncertainty and volatility in the credit markets and there can be no assurance that lenders or investors will make additional commitments to provide financing to us under current circumstances. As a result of the impacts of the COVID-19 pandemic, we may be required to raise additional capital and our access to and cost of financing will depend on, among other things, global economic conditions, conditions in the global financing markets, the availability of sufficient amounts of financing, and our prospects. If we are unable to obtain additional funding as and when we need it, we will not be able to recommence operations or undertake our planned expansion.

***If we do not receive additional financing when and as needed, we may not be able to continue the research, development and commercialization of our technology and products. In that case, our business and results of operations would be materially and adversely affected.***

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Our capital requirements have been and will continue to be significant. We will require substantial additional funds in excess of our current financial resources for research, development and commercialization of products, to obtain and maintain patents and other intellectual property rights in these technologies and products, and for working capital and other purposes, the timing and amount of which are difficult to ascertain. When and as we need additional funds, such funds may not be available on commercially reasonable terms or at all. If we cannot obtain additional funding when and as needed, our business and results of operation would be materially and adversely affected.

***Our intellectual property rights are valuable, and any inability or failure to protect them could reduce the value of our products, services and brand, which would have a material adverse effect on our business.***

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Our patents, trademarks, and all of our other intellectual property rights are important assets for us. There are events that are outside of our control that pose a threat to our intellectual property rights. For example, effective intellectual property protection may not be available in every country in which our products and services are distributed or made available. Also, the efforts we have taken to protect our proprietary rights may not be sufficient or effective. Due to our lack of financial resources, we may not be able to adequately protect our technology portfolio or apply for new patents to extend our intellectual property portfolio. The expiration of patents in our patent portfolio may also have an adverse effect on our business. Any significant impairment of our intellectual property rights could harm our business and or our ability to compete. Protecting our intellectual property rights is costly and time consuming and we may need to resort to litigation to enforce our patent rights or to determine the scope and validity of third-party intellectual property rights and we may not have the financial resources to pay for such litigation. Some of our competitors may be able to sustain the costs of complex patent litigation more effectively than we can because they have substantially greater resources.

We seek to obtain patent protection for our innovations. It is possible, however, that some of these innovations may not be protectable. In addition, given the costs of obtaining patent protection, we may choose not to protect certain innovations that later turn out to be important. Furthermore, there is always the possibility, despite our efforts, that the scope of the protection gained will be insufficient or that an issued patent may be deemed invalid or unenforceable. Our inability or failure to protect our intellectual property rights could have a material adverse effect on our business by reducing the value of our products, services and brand.

***We occasionally become subject to commercial disputes that could harm our business by distracting our management from the operation of our business, by increasing our expenses and, if we do not prevail, by subjecting us to potential monetary damages and other remedies.***

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From time to time, we are engaged in disputes regarding our commercial transactions. These disputes could result in monetary damages or other remedies that could adversely impact our financial position or operations. Even if we prevail in these disputes, they may distract our management from operating our business and the cost of defending these disputes would reduce our operating results.

***We have been named as a party in various legal proceedings, and we may be named in additional litigation, all of which will require significant management time and attention, result in significant legal expenses and may result in an unfavorable outcome, which could have a material adverse effect on our business, operating results and financial condition.***

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We have been in the past and may in the future become subject to various legal proceedings and claims that arise in or outside the ordinary course of business. Certain current pending proceedings are described under Part I, Item 3. "Legal Proceedings."

The results of these lawsuits and future legal proceedings cannot be predicted with certainty. Also, our insurance coverage may be insufficient or not provide any coverage at all for certain claims, our assets may be insufficient to cover any amounts that exceed our insurance coverage, and we may have to pay damage awards or otherwise may enter into settlement arrangements in connection with such claims. Any such payments or settlement arrangements in current or future litigation could have a material adverse effect on our business, operating results or financial condition. Even if the plaintiffs' claims are not successful, current future litigation could result in substantial costs and significantly and adversely impact our reputation and divert management's attention and resources, which could have a material adverse effect on our business, operating results or financial condition. In addition, such lawsuits may make it more difficult to finance our operations.

 ****

***We have substantial indebtedness and obligations to pay interest.***

We currently have, and will likely continue to have, a substantial amount of indebtedness and obligations to pay interest from various financing and settlement arrangements. Our indebtedness and interest obligations could, among other things, make it more difficult for us to satisfy our debt obligations, require us to use a large portion of our cash flow from operations to repay and service our debt or otherwise create liquidity problems, limit our flexibility to adjust to market conditions, and place us at a competitive disadvantage.

On February 28, 2025, we had total liabilities of $39.0 million, of which $17.6 million was due to a derivative liability related to debt conversion rights to a related party. The current liability portion was $38.4 million, of which $17.6 million was due to a derivative liability related to debt conversion rights to a related party. After adjusting for the derivative liability, the current liabilities are $20.9 million as compared to $15.2 million on February 29, 2024.

We expect to obtain the money to pay our expenses and pay the principal and interest on our indebtedness from cash flow from our operations and from securities offerings. Accordingly, our ability to meet our obligation depends on our future performance and capital-raising activities, which will be affected by financial, business, economic and other factors, many of which are beyond our control. If our cash flow and capital resources prove inadequate to allow us to pay the principal and interest on our debt and meet our other obligations, we could face substantial liquidity problems and might be required to dispose of material assets or operations, restructure or refinance our debt, which we may be unable to do on acceptable terms and forego attractive business opportunities. In addition, the terms of our existing or future debt agreements may restrict us from pursuing any of these alternatives.

***Our business is not diversified. If we cannot increase market acceptance of our products, modify our products and services, or compete with new technologies, we may never be profitable.***

 ****

We currently focus all of our resources on the successful commercialization of our axial flux induction motors and AuraGen<sup>®</sup> mobile power family of products. Because we have elected to focus our business on a single technology line rather than diversifying into other areas, our success will be dependent upon the commercial success of these products. If we are unable to increase market acceptance of our products, if we are unable to modify our products and services on a timely basis so that we lose customers, or if new technologies make our technology obsolete, we may never be profitable.

***Most of our competitors are larger and better financed than we are and have a greater presence in the marketplace. Our business may be adversely affected by industry competition.***

 ****

Both in the U.S. and internationally, the industries in which we operate are extremely competitive. We face substantial competition from companies that have a long history of offering traditional auxiliary power units (portable generators), traditional automotive alternators, and inverters (a device that inverts battery direct current electricity to alternating current). Most of our competitors have substantially greater financial resources, spend considerably larger sums than we spend on research, new product development and marketing, and have long-standing customer relationships. Furthermore, we must compete with many larger and better-established companies in the hiring and retention of qualified personnel. Although we believe we have significant technological advantages over our competitors, realizing and maintaining such advantages will require us to develop customer relationships and will also depend on market acceptance of our products. We may not have the financial resources, technical expertise, or marketing and support capabilities to compete successfully, which would materially and adversely affect our business.

***We may not be able to establish an effective distribution network or strategic OEM relationships; in which case our sales will not increase as expected and our financial condition and results of operations would be adversely affected.***

 ****

We are in the very beginning stages of developing our distribution network and establishing strategic relationships with original equipment manufacturer (OEM) customers. We may not be able to identify appropriate distributors or OEM customers on a timely basis. The distributors with which we partner may not focus adequate resources on selling our products or may otherwise be unsuccessful in selling them. In addition, we cannot assure you that we will be able to establish OEM relationships on favorable terms or at all. The lack of success of distributors or OEM customers in marketing our products would adversely affect our financial condition and results of operations.

***If we are successful in executing our business plan to grow our business, our failure to efficiently manage our growth could have an adverse effect on our business.***

 ****

If we are successful in executing our business plan, we may experience growth in our business that could place a significant strain on our management and other resources. Our ability to manage this growth will require us to successfully assimilate new employees, improve existing management information systems and reorganize our operations. If we fail to manage growth efficiently, our business could be adversely affected.

***We may experience delays in product shipments and increased product costs because we depend on third party manufacturers for certain product components. Delays in product shipment or an inability to replace certain suppliers could have a material adverse effect on our business and results of operations.***

 ****

We currently do not have the capability to manufacture most of the AuraGen<sup>®</sup> components on a commercial scale. Therefore, we rely extensively on contracts with third party manufacturers for such components. The use of third-party manufacturers increases the risk of delay of shipments to our customers and increases the risk of higher costs if our manufacturers are not available when required. Our suppliers and manufacturers may not supply us with a sufficient number of components or components of adequate quality, which would delay production of our product. We do not currently have written agreements with any suppliers. Furthermore, those suppliers who make certain components may not be easily replaced. Any of these disruptions in the supply of components could have a material adverse effect on our business or results of operations. Furthermore, we are monitoring the impact of the COVID-19 pandemic on the operations of the Company, particularly with respect to possible delays and other disruptions to the supply chain.

***Although we generally aim to use standard parts and components for our products, some of our components are currently available only from limited sources.***

 ****

We may experience delays in production of the AuraGen<sup>®</sup> if we fail to identify alternate vendors, or if any parts supply is interrupted or reduced or if there is a significant increase in production costs, each of which could materially adversely and affect our business and operations.

***We will need to renew sources of component supplies to meet increases in demand for the AuraGen<sup>®</sup>. There is no assurance that our suppliers can or will supply the components to us on favorable terms or at all.***

 ****

As we recommence our operations and in order to meet future demand for AuraGen<sup>®</sup> systems, we will need to renew contracts or form new contracts with our prior manufacturers and suppliers or locate other suitable manufacturers and suppliers for subassemblies and other components. Recently, we entered into discussions with several of our prior suppliers and we are in the process of negotiating settlements of old payables and arranging new supply contracts. Although we believe that there are a number of potential manufacturers and suppliers of the components, we cannot guarantee that contracts for components can be obtained on favorable terms or at all. Any material adverse change in terms of the purchase of these components could increase our cost of goods.

***We need to invest in tooling to have a more extensive line of products. If we cannot expand our tooling, it may not be possible for us to expand our operations.***

 ****

We are currently limited in the products that we are able to manufacture because of the limitations of our tooling capabilities. In order to have a broader line of products that address industrial and commercial needs, we must make a significant investment in additional tooling or pursue new alternatives to replace traditional tooling. We do not currently have the funds required to acquire new tooling or to obtain replacements and no assurances can be given that we will have the required funds in the future. If we do not acquire the required funds for tooling or replacement tooling, we may not be able to expand our product line to meet industrial and commercial needs.

***We are subject to government regulation that may restrict our ability to use certain suppliers outside the U.S. or to sell our products into certain countries. If we cannot obtain the required approval from government agencies, then our business may be adversely affected.***

 ****

We depend on third party suppliers for our parts and components... We use copper, steel and aluminum in our product and in the event of government regulations or restrictions of these materials we may experience a shortage of these materials to manufacture our product. Furthermore, U.S. law restricts us from selling products in some potential foreign markets without U.S. government approval. If we cannot obtain the required approvals from government agencies to obtain materials or contract with suppliers or if we are restricted by government regulation from selling our products into certain countries, our business may be adversely affected.

***We rely on highly skilled personnel and, if we are unable to retain or motivate key personnel or hire qualified personnel, we may not be able to grow effectively.***

 ****

Our performance is largely dependent on the talents and efforts of highly skilled individuals. Our future success depends on our continuing ability to identify, hire, develop, motivate, and retain highly skilled personnel for all areas of our organization. We are currently in default under several agreements with various key consultants which may make those parties unwilling to continue to work with the Company. Our continued ability to compete effectively depends on our ability to attract new employees and to retain and motivate our existing employees and consultants. The incentives to attract, retain and motivate employees and consultants provided by our ability to pay competitive salaries and rates as well as offering additional incentives such as stock option grants or by future arrangements may not be as effective as in the past. If we do not succeed in attracting excellent personnel or retaining or motivating existing personnel, we may be unable to grow effectively.

***Our business is subject to the risks of earthquakes and other natural catastrophic events, and to interruptions by man-made problems such as computer viruses, terrorism, or pandemics.***

Our corporate headquarters and our research and development operations are located in the State of California in regions known for seismic activity. A significant natural disaster, such as an earthquake, in this region could have a material adverse effect on our business, financial condition and results of operations. In addition, our servers are vulnerable to computer viruses, break-ins, and similar disruptions from unauthorized tampering with our computer systems. Any such event could have a material adverse effect on our business, financial condition and results of operations.

***Failure to maintain effective internal controls over financial reporting could adversely affect our business and the market price of our Common Stock.***

Pursuant to rules adopted by the SEC under the Sarbanes-Oxley Act of 2002, we are required to assess the effectiveness of our internal controls over financial reporting and provide a management report on our internal controls over financial reporting in all annual reports. This report contains, among other matters, a statement as to whether our internal controls over financial reporting are effective and the disclosure of any material weaknesses in our internal controls over financial reporting identified by management. Section 404 also requires our independent registered public accounting firm to audit the effectiveness of our internal control over financial reporting.

As described in ITEM 9A, Controls and Procedures contained herein in this Annual Report, management has concluded that as of February 28, 2025, its internal controls over financial reporting were effective. While the Company believes it has addressed and remediated material weaknesses identified in 2022, there can be no guarantee that other weaknesses in its financial reporting controls will not be identified in the future. Presently, the Company does not have the financial resources to fully comply with all the requirements of Section 404. If, in the future, we identify one or more material weaknesses in our internal controls over financial reporting during this continuous evaluation process, our management may not be able to assert that such internal controls are effective. Therefore, if we are unable to assert that our internal controls over financial reporting are effective in the future, or if our auditors are unable to attest that our internal controls are effective or they are unable to express an opinion on the effectiveness of our internal controls, we could lose investor confidence in the accuracy and completeness of our financial reports, which would have an adverse effect on our business and the market price of our Common Stock.

***Trading on the OTC Markets is volatile and sporadic, which could depress the market price of our common stock and make it difficult for our stockholders to resell their shares***.

Our common stock is quoted on the Pink Sheets of the OTC Markets. Trading in stock quoted on the OTC Markets is often thin and characterized by wide fluctuations in trading prices, due to many factors, some of which may have little to do with our operations or business prospects. This volatility could depress the market price of our common stock for reasons unrelated to operating performance. Moreover, the OTC Markets is not a stock exchange, and trading of securities on the OTC Markets is often more sporadic than the trading of securities listed on a quotation system like NASDAQ or a stock exchange like the New York Stock Exchange. These factors may result in investors having difficulty reselling any shares of our common stock.

**<u>ITEM 1B. UNRESOLVED STAFF COMMENTS</u>**

None

**<u>ITEM 1C. CYBERSECURITY.</u>**

**Risk Management and Strategy**

The Company's policies and practices are based on frameworks and standards that address risks through a comprehensive, cross-functional approach that assess, identify, monitor, and mitigate material risks from cybersecurity threats as part of the overall enterprise risk management ("ERM") process. This includes the collection and storage of data, and being responsive to incidents as they occur. Further, the Company's processes and technology are utilized to develop, implement, and maintain appropriate measures to safeguard information systems in protecting the integrity, availability, and confidentiality of data. Additionally, the Company engages certain third parties to assist in network monitoring and control testing, among other functions of similar capacity.

The Company's cybersecurity program focuses on the following areas:

● Technological safeguards that are designed to protect the Company's information systems from cybersecurity threats, including the prevention and detection of systems, access controls, and firewalls, which the Company assesses the vulnerability and cybersecurity threat and makes necessary improvements.

● Utilization of third parties as part of the Company's risk-based approach in identifying and overseeing cybersecurity risks.

● The Company maintains an incident plan that addresses the Company's response to a cybersecurity event, which is periodically reviewed and updated.

While the Company is working to adopt the National Institute of Standards and Technology ("NIST") cybersecurity framework, the Company's on-going investment in information systems and utilization of external 3rd parties represents the best means for extensively testing both the design and operational effectiveness of cybersecurity controls, and to ensure continuity and functionality of the Company's operating systems.

As of the date of this report, the Company has not experienced any material cybersecurity events. However, the presence of new or more advanced forms of cybersecurity threats could have a material and adverse impact on the business, results of operations, and financial position. For further discussion relating to this topic, see Item 1A. Risk Factors *"The Company's information technology systems may be negatively affected by cybersecurity threats."*

**Governance**

The Audit Committee of the Board of Director's has the responsibility of overseeing the Company's cybersecurity risks. The Chief Financial Officer provides periodic updates to the Board of Director's regarding actions taken to mitigate the Company's exposure and protection to cybersecurity risks. Management routinely evaluates the Company's security processes, procedures, and systems to determine if enhancements are needed to reduce the possibility of a future cybersecurity event. This includes safeguards implemented by the Company, such as a multi-factor authentication process for remote access to systems; restricted firewall settings; network monitoring, email phishing tests, and enhancing the Company's backup recovery strategy, among others.

The IT Director is responsible for assessing, monitoring, and managing the Company's cybersecurity risks.

The IT Director, along with members of management, inform the Audit Committee on cybersecurity risks by providing periodic updates regarding (i) Status of ongoing cybersecurity initiatives and strategies, (ii) The overall state of the Company's security program and potential exposure to risks, and (iii) Incident reports and learning from any cybersecurity events. Further, the IT Director maintains an open dialog regarding any significant developments in cybersecurity risks, ensuring the Audit Committee's oversight is proactive and responsive.

In addition to periodic updates to the Audit Committee, the IT Director, in his capacity, regularly informs the Chief Executive Officer ("CEO") and the Chief Financial Officer ("CFO") regarding matters related to cybersecurity risks and incidents. This ensures the highest level of management are informed of potential risks associated with cybersecurity that could have a material and adverse effect on the Company.

**<u>ITEM 2. PROPERTIES</u>**

Effective February 28, 2021, the Company vacated its previous Stanton California facility and other temporary storage facilities and consolidated its administrative offices and operations, including warehousing space, within an approximately 18,000 square feet facility in Lake Forest, California under a rental agreement that commenced on February 15, 2021, and covers a 66-month rental period effective from February 2021 through August 31, 2026.

**<u>ITEM 3. LEGAL PROCEEDINGS</u>**

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.

In 2017, the Company's former COO was awarded approximately $238 in accrued salary and related charges by the California labor board. In August 2021, the Company reached a settlement by which the Company agreed to pay approximately $330, representing the principal award plus accrued interest. In fiscal 2024, the Company has paid the full $330 toward the settlement amount.

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. Beginning in January 2023, interest accrues on the unpaid balance at a rate of 6%, compounded annually. 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. The Kopple 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"). As a result 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; (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. The principal payment of $2 million was extended to March 31, 2025, for $100,000. Subsequently the principal payment was extended to the end of June 2025 for an additional $100,000 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. 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.

In June 2022, Melvin Gagerman, the Company's former CEO and CFO whose employment with Aura was permanently terminated in July 2019, brought suit against the Company for repayment of an allegedly unsecured demand promissory note in the principal amount of $82 which he claims was entered into in April 2014 and bears interest at a rate of 10% per annum. Despite the fact that, based on Gagerman's allegations, the note was issued during a period when he was the Company's CEO, CFO, Corporate Secretary and Chairman of Aura's Board of Directors, Gagerman has stated that he does not possess a copy of the alleged promissory note. The Company disputes that any amount is presently owed to Gagerman and has filed a cross-complaint against him for, among things, conversion, violation of California Business& Professions Code §17200, and various breaches of fiduciary duty that the Company believes Gagerman committed against Aura, including without limitation, Gagerman's actions in opposing the valid 2019 stockholder consent action. In October 2024 the Company settled all disputes with Gagerman at zero cost to the Company.

**<u>ITEM 4. MINE SAFETY DISCLOSURES</u>**

Not applicable.

**PART II**

**<u>ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES</u>**

Our shares are quoted on the Pink Sheets operated by OTC Markets, Inc. under the symbol "AUSI". Set forth below are high and low bid prices for our common stock for each quarterly period in the two most recent Fiscal years. Such quotations reflect inter-dealer prices, without retail mark-up, markdown or commissions and may not necessarily represent actual transactions in the common stock. We had approximately 3,425 stockholders of record as of March 24, 2025.

---

| | | |
|:---|:---|:---|
| **Period** | **High** | **Low** |
| Fiscal 2025 |  |  |
| First Quarter ended May 31, 2024 | $0.49 | $0.15 |
| Second Quarter ended August 31, 2024 | $0.44 | $0.18 |
| Third Quarter ended November 30, 2024 | $0.43 | $0.22 |
| Fourth Quarter ended February 28, 2025 | $0.46 | $0.21 |
| Fiscal 2024 |  |  |
| First Quarter ended May 31, 2023 | $0.40 | $0.11 |
| Second Quarter ended August 31, 2023 | $0.22 | $0.13 |
| Third Quarter ended November 30, 2023 | $0.20 | $0.15 |
| Fourth Quarter ended February 29, 2024 | $0.23 | $0.14 |

---

On April 11, 2025, the reported closing sales price for our common stock was $0.2863.

**Dividend Policy**

We have not paid any dividends on our common stock, and we do not anticipate paying any dividends on our common stock in the foreseeable future.

**Sales of Unregistered Securities**

During the year ended February 28, 2025, we issued 13,704,800 shares of common stock, for a total of approximately $3,430,000

During the year ended February 29, 2024, we issued 9,943,302 shares of common stock, for a total of approximately $2,947,000.

Funds raised were for general corporate working capital purposes. All such securities were issued and sold in reliance on the exemption from registration contained in Section 4(2) of the Securities Act of 1933, and the certificates representing such securities contain a restrictive legend reflecting the limitations on future transfer of those securities. The offer and sale of these securities was made without public solicitation or advertising. The investors represented to us that they were knowledgeable and sophisticated and were experienced in business and financial matters so as to be capable of evaluating an investment in our securities and were an "accredited investor" within the meaning of Regulation D promulgated under the Securities Act of 1933. Each of these investors was afforded full access to information regarding our business.

**Repurchases of Equity Securities**

We did not repurchase any shares of our common stock during the fiscal years ended February 28, 2025, and February 29, 2024.

**<u>ITEM 6. [Reserved]</u>**

As a smaller reporting company, we are not required to provide disclosure under this Item 6.

**<u>ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS</u>**

**Forward Looking Statements.**

*This Management's Discussion and Analysis of Financial Condition and Results of Operations includes forward-looking statements. For cautions about relying on such forward-looking statements, please refer to the section entitled "Forward Looking Statements" at the beginning of this Report immediately prior to "Item 1".*

 

**Overview**

Our business is based on the exploitation of our Axial Flux Induction technology for both electric motors and generators. Our power generation solution based on axial flux induction is known as the AuraGen<sup>®</sup> for commercial and industrial applications and the VIPER for military applications. Aura's axial flux induction technology provide: (i) higher motor/generator efficiency, that directly translated to lower cost for operations (ii) lighter and smaller machines that lead to lower manufacturing cost, (iii) higher reliability that results in less down time and maintenance cost, (iv) the only raw materials used for construction are copper and steel without any rare earth or any other types of permanent magnets. This immediately results in global availability without market risks as well as geopolitical risks of dependence on single source, and (v) the use of approximately 60% less of copper than the equivalent radial flux induction machines, results in less needed mining to extract the needed copper with direct positive environmental impact.

Our business model consists of three major components: (i) sales and marketing, iii) design and engineering and (iii) axial flux induction motors and generators manufacturing. Our sales and marketing approaches are composed of direct sales in North America and the use of agents and distributors in other areas. In addition, we are also exploring limited licensing of our technology to very large potential users as well as potential joint ventures with existing industrial motor/generator suppliers. The second component of our business model is focused on the design, engineer and commercialize of new commercial and industrial electric motors based on our axial flux induction for numerous applications such as pumps, compressors, and HVAC. We are also designing electric motors for both 2- and 4-wheel EV application, as well as, expending the product line for electric power generation. The third component of our business model is to set up manufacturing of the axial flux induction products being engineered and design.

We recently completed a 250-kW electric motor prototype based on our axial flux induction for EV applications. This activity is in conjunction with a large European tier 1 automotive supplier interest and inputs. We also completed the design for a 250-kW generator based on our axial flux induction technology. We expect to build this new generator over the next few months. We have also in May 2024 completed the installation of our new smaller 10-kW mobile power generator on a Polaris type ATV platform for US military applications. We started working directly with Polaris to perfect the output from the new generator on their platform. We completed the designs for 5 horsepower axial flux induction motor for swimming pool pump applications, and we also completed the design for a 10 horsepower axial flux induction motor for irrigation pump applications. We are also currently in discussions for usage of our technology for numerous wind turbines applications. During fiscal 2025 we also applied for 3 new patents related to axial flux induction machines.

In fiscal 2024 and 2025 we have significantly increased our engineering capabilities with having hired experts' engineers in thermo dynamics (Ph.D.), electromagnetic motor design (Ph.D.) Power electronics & control (Ph.D.) and mechanical design (M.S.M.E). We have also acquired the latest in advance engineering tools such as Ansys Maxwell finite elements, MATLAB and 3-D solid work. Our engineering, research and development costs for fiscal 2025 were approximately $1.2 million.

**Critical Accounting Policies and Estimates**

Our management's discussion and analysis of our financial conditions and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of financial statements requires management to make estimates and disclosures on the date of the financial statements. In preparing our financial statements, we have made our best estimates and judgments of certain amounts included in the financial statements. We use authoritative pronouncements, historical experience and other assumptions as the basis for making judgments. For these key estimates and assumptions, we made appropriate accounting estimates based on the facts and circumstances available as of the reporting date. To the extent that there are significant differences between these estimates and actual results, our financial statements may be materially affected. Significant estimates include assumptions made for inventory reserve, impairment testing of long-lived assets, the valuation allowance for deferred tax assets, 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. Actual results could differ from those estimates. There were no changes to our critical accounting policies described in the financial statements included in our Annual Report on Form 10-K for the fiscal year ended February 29, 2024, that impacted our condensed financial statements and related notes included herein.

***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. In accordance with ASC 606, we recognize revenue, net of discounts, for our generator sets at time of product delivery to the domestic distributor (i.e. point-in-time), which also corresponds to the passage of legal title to the customer and the satisfaction of our performance obligations to the customer.

***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.

***Derivative Financial Instruments***

The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date.

***Inflation***

Higher inflation, the actions by the Federal Reserve Bank to address inflation, most notably continuing increases in interest rates, and rising energy prices create uncertainty about the future economic environment. The Company expects that the impact of these issues will continue to evolve. The Company believes these factors impacted the Company's business in fiscals 2023 and 2024 and will continue to impact the Company's business in fiscal 2025. The implications of higher government deficits and debt, tighter monetary policy, and higher long-term interest rates may drive a higher cost of capital for the business and an increase in the Company's operating expenses.

**Results of Operations**

**Fiscal 2025 compared to Fiscal 2024**

*Revenues*

 

Net revenue was $50 for Fiscal 2025, compared to $56 for Fiscal 2024. Revenues continue to be negatively impacted due to a generally low level of resources on our legacy products as well as our shift to the development and production of numerous prototypes for our new product line. We cannot project with confidence the timing or amount of revenue that we can expect until the prototypes are completed, which should be in Fiscal 2026.

*Cost of Goods*

 

Cost of goods sold was $29 for Fiscal 2025, compared to $193 for Fiscal 2024. This resulted in a gross profit of $21 compared to a gross loss of $137 for Fiscal 2024. The gross loss and related gross margin for Fiscal 2024 were largely influenced by the low volume of shipments, which reduced our ability to fully absorb fixed operating costs.

*Engineering, Research and Development*

 

Engineering, research and development expenses were $1,249 for Fiscal 2025, compared to $750 for Fiscal 2024. The increase is a result of the Company's augmented engineering activities, including (i) successfully recruiting new additions to the engineering staff; (ii) licensing of modeling and design software tools for the full 12-month period; as well as (iii) additional expenses incurred in the process of designing, fabricating and testing the new version of our electronic control unit ("ECU") for our AuraGen<sup>®</sup>/VIPER products.

*Selling, General and Administrative Expense*

 

Selling, general and administration ("SG&A") expenses for Fiscal 2025 were $3,586 as compared to $1,873 for Fiscal 2024, an increase of $1,713 or 91%. The increase in SG&A was due to increased headcount and pay increases, and $1,342 in stock-based compensation.

*Other Income (Expense) and Interest Expense*

 

Interest expense increased by $345 to $1,810 for Fiscal 2025, as compared to $1,465 for Fiscal 2024. During Fiscal 2025, the Company recorded a gain on debt settlement of $179 and a loss on debt extinguishment of $19,324 (see Notes 7 and 9 of the accompanying financial statements), both of which did not occur in the prior year period. The Company estimated the fair value of the conversion option derivative liability using a Black-Scholes option pricing model and recorded the change in fair value of the derivative liability of $4,629 and $9 at February 28, 2025 and February 29, 2024, respectively.

*Net Loss*

 

We recorded net losses of approximately $21,138 and $4,216 for Fiscal 2025 and 2024, respectively. The increase in our net loss was due to several factors, as noted above, including increased stock-based compensation expense, the recording of a loss on debt extinguishment to a related party, and the change in fair value of our derivative liability.

**Liquidity and Capital Resources**

For the year ended February 28, 2025, we recorded a net loss of $21.1 million. used cash in operations of $3.2 million, and at February 28, 2025, had a stockholders' deficit of $37.6 million. In addition, at February 28, 2025, notes payable and related accrued interest with an aggregate balance of $5.2 million have reached maturity and are past due. These conditions raise substantial doubt regarding our ability to continue as a going concern for a period of at least one year from the date of issuance of these financial statements. In addition, the Company's independent registered public accounting firm, in their report on the Company's February 28, 2025, audited financial statements, raised substantial doubt about the Company's ability to continue as a going concern.

Prior to Fiscal 2020, in order to maintain liquidity, we relied upon external sources of financing, principally equity financing and private indebtedness. We have no bank line of credit and will require additional debt or equity financing to fund ongoing operations. Based on a cash flow analysis performed by management, we estimate that we will need an additional $6 million to maintain existing operations for Fiscal 2026 and increase the volume of shipments to customers. We cannot assure the reader that additional financing will be available nor that the commercial targets will be met in the amounts required to keep the business operating. The issuance of additional shares of equity in connection with such financing could dilute the interests of our existing stockholders, and such dilution could be substantial. If we cannot raise the needed funds, we will also be forced to make further substantial reductions in our operating expenses, which could adversely affect our ability to implement our current business plan and ultimately our viability as a company.

See "Item 3. Legal Proceedings" and "Part IV, Item 15, and Note 9 to the Financial Statements" included elsewhere in this Annual Report on Form 10-K for information regarding the dispute and settlement with Mr. Kopple regarding these transactions.

**<u>ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK</u>**

As a smaller reporting company, we are not required to provide the information required by this Item 7A.

**<u>ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA</u>**

See Index to Financial Statements at page F-1.

**<u>ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE</u>**

For the year ended February 28, 2025, there were no disagreements or any reportable events to disclose.

**<u>ITEM 9A. CONTROLS AND PROCEDURES</u>**

**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, 2025, 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, 2025. 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, 2025, 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.

**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 the second, third, and fourth quarters of 2024, and as of the date of this Report, we continue to work with an outside consultant with experience and expertise in U.S. GAAP and public company SEC accounting and reporting requirements to assist management with its accounting and reporting of complex and/or non-recurring transactions and related disclosures.

**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, 2025, 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.

**<u>ITEM 9B. OTHER INFORMATION</u>**

None

**<u>Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.</u>**

None

**PART III**

**<u>ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE</u>**

**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 refused 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.

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| | | |
|:---|:---|:---|
| **Name** | **Age** | **Title** |
| Gary Douglas | 77 | Director, Member of the Audit Committee |
| Salvador Diaz-Verson, Jr. | 71 | Director, Chairman of the Audit Committee |
| David Mann | 52 | Director, Chairman of the Compensation Committee, Member of the Nominating Committee and Member of the Audit Committee, Acting Chief Financial Officer |
| Cipora Lavut | 69 | President, Chairman of the Board, Member of Nominating Committee and Member of the Compensation Committee |
| Robert Lempert | 80 | 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 cooperate communication and investment banking.

***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 investors 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 298 2025, and February 29, 2024.

*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.

**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 2025, stock compensation for an aggregate of 3,000,000 stock options, with a fair value of $1,342, were awarded to the Company's directors.

During Fiscal 2024, no stock compensation was awarded to any of the Company's directors.

**<u>ITEM 11. EXECUTIVE COMPENSATION</u>**

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, 2025 and February 29, 2024.

**2022 Summary Compensation Table**

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| <br>**Name and Principal Position** | **Fiscal**<br>**Year** | **Salary**<br>**($)** | **Option<br> Awards**<br>**($)** | **Non-Equity<br> Incentive<br> Compensation**<br>**($)** | **All Other<br> Compensation**<br>**($)** | **Total**<br>**($)** |
| Cipora Lavut | 2025 | 140000<sup>(1)</sup> |  |  | 539 | 140539 |
| &nbsp;&nbsp;&nbsp;President | 2024 | 204713<sup>(2)</sup> |  |  |  | 204713 |

---

&nbsp;&nbsp;&nbsp;&nbsp;(1) 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, deferring the balance.

(2) For Fiscal 2024, Ms. Lavut has been accruing an annual salary of $250,000 and has been paid $204,713 in cash over the same period, deferring the balance.

**Outstanding Equity Awards at 2025 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, 2025.

---

| | | | |
|:---|:---|:---|:---|
| **Name and Principal Position** | **Stock<br> Options &<br> Warrants<br> Outstanding** | **Weighted<br> Average<br> Remaining<br> Contractual Life<br> in Years** | **Weighted<br> Average Exercise<br> Price of Options<br> & Warrants<br> Outstanding** |
| Cipora Lavut, President and Board Chair | 750000 | 2.67 | $0.42 |
| Salvador Diaz-Verson, Jr., Director | 750000 | 1.77 | $0.61 |
| Gary Douglas, Director | 500000 | 1.82 | $0.58 |
| David Mann, Director | 400000 | 2.32 | $0.25 |
| Robert Lempert, Director | 360000 | 2.26 | $0.25 |

---

**Option Exercises and Stock Vesting During Fiscal 2025**

No stock options were exercised during Fiscal 2025 by the individuals named in the Summary Compensation Table.

No stock options were granted nor was there any vesting of previously granted stock options during Fiscal 2024 related to the individuals named in the Summary Compensation Table.

**Option Exercises and Stock Vesting During Fiscal 2024**

No stock options were exercised during Fiscal 2024 by the individuals named in the Summary Compensation Table.

No stock options were granted nor was there any vesting of previously granted stock options during Fiscal 2024 related to the individuals named in the Summary Compensation 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.

**<u>ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT</u>**

The following table sets forth, to the extent of our knowledge, certain information regarding our common stock owned as of February 28, 2025 (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:

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| | | |
|:---|:---|:---|
| **Beneficial Ownership Table** | **Beneficial Ownership Table** | |
| **Beneficial Owner (1)** | **Number of<br> Shares of<br> Common<br> Stock** | **Percent of<br> Common<br> Stock** |
| Salvador Diaz-Verson, Jr. (2) | 819750 | \*% |
| Gary Douglas (3) | 500000 | \*% |
| Cipora Lavut (4) | 2639660 | 2.2% |
| Robert Lempert (5) | 507343 | \*% |
| David Mann (6) | 1811931 | 1.5% |
| Gary Campbell | 197453 | \*% |
| All current executive officers and Directors as a group (six) (2) (3) (4) (5) (6) | 6476137 | 5.37% |
| 5% Stockholders |  |  |
| Warren Breslow (7) | 8971219 | 7.45% |
| BetterSea LLC (8) | 8364735 | 6.95% |

---

\* 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 104,591,648 shares of common stock outstanding on February 28, 2025. 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, 2025, 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 750,000 warrants exercisable within 60 days of February 28, 2025.

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

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

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

(6) Includes warrants to purchase 400,000 shares exercisable within 60 days of February 28, 2025, as well as 1,411,931 shares, 979,204 of which Mr. 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 $863,322 convertible note payable to 2,759,516 common shares at a conversion price of $1.40.

(8) Includes common shares only as of February 28, 2025.

**Securities Authorized for Issuance Under Equity Compensation Plans as of February 28, 2025**

**Equity Compensation Plan Information as of February 28, 2025**

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| | | | |
|:---|:---|:---|:---|
| <br>**Plan Category** | **a.**<br>**Number of<br> Securities to be<br> Issued Upon <br> Exercise of<br> Outstanding <br> Options,<br> Warrants<br> and Rights** | **b.**<br>**Weighted <br> Average <br> Exercise<br> Price<br> for Options,<br> Warrants<br> and Rights** | **c.**<br>**Number of<br> Securities<br> For Future<br> Issuances<br> Under Equity <br> Compensation<br> Plans<br> (Excluding Securities<br> Reflected in<br> Column (a.)** |
| Equity compensation plans approved by equity holders | 8250000 | $0.44 | 10904394 |
| Equity compensation plans not approved by equity holders | 1500000 | $0.50 |  |

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&nbsp;&nbsp;&nbsp;&nbsp;(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, 2025 (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.

**<u>ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE</u>**

 

*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.

**<u>ITEM 14. PRINCIPAL ACCOUNTING FEES AND DISCLOSURES</u>**

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 year ended February 28, 2025, and for the year ended February 29, 2024:

---

| | | |
|:---|:---|:---|
| | **Year Ended** | **Year Ended** |
| <br>*(amounts in thousands)* | **February 28,<br> 2025** | **February 29, <br> 2024** |
| Audit Fees | $129 | $89 |
| Audit-related fees |  |  |
| Tax fees |  |  |
| All other fees | - | - |
| Total | $129 | $89 |

---

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 29, 2024, 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, 2025.

**Audit Related Fees**

Weinberg did not provide any professional services to us during Fiscal 2025 or Fiscal 2024 which would constitute "audit related fees".

**Tax Fees**

Weinberg did not provide any professional services to us during Fiscal 2025 or Fiscal 2024 which would constitute "tax fees".

**All Other Fees**

Weinberg did not provide any professional services to us during Fiscal 2025 or Fiscal 2024 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 2024 and Fiscal 2023 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.

**PART IV**

**<u>ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES</u>**

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

**<u>ITEM 16. FORM 10-K SUMMARY</u>**

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)](http://www.sec.gov/Archives/edgar/data/826253/000082625309000036/exhibit312.htm) |
| 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)](http://www.sec.gov/Archives/edgar/data/826253/000121390018002162/f8k021418ex3-1_aurasystems.htm) |
| 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)](http://www.sec.gov/Archives/edgar/data/826253/000082625309000036/ex323.htm) |
| 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)](http://www.sec.gov/Archives/edgar/data/826253/000114420408017096/ex10-4.htm) |
| 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)](http://www.sec.gov/Archives/edgar/data/826253/000114420408017096/ex10-5.htm) |
| 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)](http://www.sec.gov/Archives/edgar/data/826253/000121390017010947/f10q0517ex10-1_aurasystems.htm) |
| 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)](http://www.sec.gov/Archives/edgar/data/826253/000121390017010947/f10q0517ex10-2_aurasystems.htm) |
| 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)](http://www.sec.gov/Archives/edgar/data/826253/000121390017010947/f10q0517ex10-3_aurasystems.htm) |
| 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)](http://www.sec.gov/Archives/edgar/data/826253/000121390017010949/f10q0817ex10-1_aurasystems.htm) |
| 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)](http://www.sec.gov/Archives/edgar/data/826253/000121390018005704/f8k032618a1ex10-1_aura.htm) |
| 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)](http://www.sec.gov/Archives/edgar/data/826253/000149315217000990/ex10-1.htm) |
| 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)](http://www.sec.gov/Archives/edgar/data/826253/000114420411067739/v241718_ex10-67.htm) |
| 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)](http://www.sec.gov/Archives/edgar/data/826253/000121390018007594/ex14_1.htm) |
| 31.1 | [CEO Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002](ea024545001ex31-1_aura.htm) |
| 31.2 | [CFO Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002](ea024545001ex31-2_aura.htm) |
| 32.1 | [Certification pursuant to 18 U.S.C. Section 1350](ea024545001ex32-1_aura.htm) |
| 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.

**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: June 13, 2025

---

| | |
|:---|:---|
| 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 | June 13, 2025 |
| Cipora Lavut |  |  |
| /s/ Gary Campbell | Chief Financial Officer (Principal Financial Officer) | June 13, 2025 |
| Gary Campbell |  |  |
| /s/ David Mann | Director | June 13, 2025 |
| David Mann |  |  |
| /s/ Robert Lempert | Director | June 13, 2025 |
| Robert Lempert |  |  |
| /s/ Gary Douglas | Director | June 13, 2025 |
| Gary Douglas |  |  |
| /s/ Salvador Diaz-Verson, Jr. | Director | June 13, 2025 |
| Salvador Diaz-Verson, Jr. |  |  |

---

**Index to Financial Statements**

---

| | |
|:---|:---|
| [Report of Independent Registered Public Accounting Firm (PCAOB Firm ID: 572)](#a_029) | F-2 |
| Financial Statements of Aura Systems, Inc.: |  |
| [Balance Sheets as of February 28, 2025 and February 29, 2024](#a_030) | F-4 |
| [Statements of Operations - Years ended February 28, 2025 and February 29, 2024](#a_031) | F-5 |
| [Statements of Stockholders' Deficit - Years ended February 28, 2025 and February 29, 2024](#a_032) | F-6 |
| [Statements of Cash Flows - Years ended February 28, 2025 and February 29, 2024](#a_033) | F-7 |
| [Notes to Financial Statements](#a_034) | F-8 to F-24 |

---

**REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

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

**Opinion on the Financial Statements**

We have audited the accompanying balance sheets of Aura Systems, Inc. (the "Company") as of February 28, 2025 and February 29, 2024, the related statements of operations, stockholders' deficit, and cash flows for the years then ended, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of February 28, 2025 and February 29, 2024, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

**Going Concern**

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, during the year ended February 28, 2025, the Company incurred a net loss of $21 million, used cash in operations of $3 million, and at February 28, 2025, had a stockholders' deficit of $37 million. In addition, at February 28, 2025, notes payable and related accrued interest with an aggregate balance of $5 million have reached maturity and are past due. These matters raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1 to the financial 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.

**Critical Audit Matter**

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

*<u>Accounting for debt extinguishment</u>*

As discussed in Note 7, in March 2024, the Company amended its existing debt agreement with KF Business Ventures et al (the "Kopple Note Payable"), resulting in the accounting for the Kopple Note Payable as a debt extinguishment.

We identified the accounting for the amended Kopple Note Payable as a critical audit matter due to the significant judgements and assumptions required by management in assessing the terms of the amended agreement, which impacted the accounting treatment. As a result, a high degree of auditor judgement and effort was required in performing audit procedures to evaluate the accounting treatment.

The primary procedures we performed to address this critical audit matter included:

● We obtained and read the amendments to the Kopple Note Payable and other supporting documents;

● We evaluated the Company's analysis of the applicable accounting literature related to the treatment of the amendment to the Kopple Note Payable;

● We assessed the appropriateness and sufficiency of the disclosures included in the financial statements relating to the debt extinguishment.

We have served as the Company's auditor since 2022.

/s/ Weinberg & Company, P.A.

Los Angeles, California

June 13, 2025

**AURA SYSTEMS, INC.**

**BALANCE SHEETS**

---

| | | |
|:---|:---|:---|
|  | **February 28,<br> 2025** | **February 29,<br> 2024** |
| *(amounts in thousands, except share data)* |  |  |
| **Assets** |  |  |
| Current assets |  |  |
| &nbsp;&nbsp;&nbsp;Cash and cash equivalents | $23 | $124 |
| &nbsp;&nbsp;&nbsp;Inventories | 38 | 20 |
| &nbsp;&nbsp;&nbsp;Prepaid and other current assets | 220 | 175 |
| Total current assets | 281 | 319 |
| Property and equipment, net | 618 | 378 |
| Operating lease right-of-use asset | 418 | 607 |
| Security deposit | 160 | 160 |
| Total assets | $1477 | $1464 |
| **Liabilities and Shareholders' Deficit** |  |  |
| Current liabilities |  |  |
| &nbsp;&nbsp;&nbsp;Accounts payable and accrued expenses | $2544 | $2625 |
| &nbsp;&nbsp;&nbsp;Accrued interest | 2875 | 2598 |
| &nbsp;&nbsp;&nbsp;Customer advances | 447 | 447 |
| &nbsp;&nbsp;&nbsp;Convertible notes payable, current portion-past due | 1513 | 1508 |
| &nbsp;&nbsp;&nbsp;Convertible note payable-related party-including $3,020 and $3,020, respectively past due | 12279 | 3020 |
| &nbsp;&nbsp;&nbsp;Notes payable, current portion | 212 | 119 |
| &nbsp;&nbsp;&nbsp;Notes payable-related party, current portion - including $733 and $782, respectively past due | 733 | 4632 |
| &nbsp;&nbsp;&nbsp;Lease liabilities, current portion | 279 | 238 |
| &nbsp;&nbsp;&nbsp;Derivative liability | 17565 | - |
| Total current liabilities | 38447 | 15187 |
| Notes payable, net of current portion | 440 | 286 |
| Note payable-related party, net of current portion | - | 7088 |
| Lease liabilities, net of current portion | 183 | 423 |
| Total liabilities | 39070 | 22984 |
| Commitments and contingencies | - | - |
| **Shareholders' deficit** |  |  |
| &nbsp;&nbsp;&nbsp;Common stock: $0.0001 par value; 150,000,000 shares authorized; 118,296,448 and 104,591,648 issued and outstanding at February 28, 2025 and February 29, 2024, respectively. | 12 | 10 |
| &nbsp;&nbsp;&nbsp;Additional paid-in capital | 462523 | 457460 |
| &nbsp;&nbsp;&nbsp;Accumulated deficit | (500128) | (478990) |
| Total shareholders' deficit | (37593) | (21520) |
| **Total liabilities and shareholders' deficit** | $1477 | $1464 |

---

See accompanying notes to these financial statements.

**AURA SYSTEMS, INC.**

**STATEMENTS OF OPERATIONS**

---

| | | |
|:---|:---|:---|
|  | **Fiscal Years Ended** | **Fiscal Years Ended** |
|  | **February 28, <br> 2025** | **February 29,** <br> **2024** |
| *(amounts in thousands, except share and per share data)* |  |  |
| Net revenue | $50 | $56 |
| Cost of goods sold | 29 | 193 |
| Gross profit (loss) | 21 | (137) |
| Operating expenses: |  |  |
| &nbsp;&nbsp;&nbsp;Engineering, research and development | 1249 | 750 |
| &nbsp;&nbsp;&nbsp;Selling, general and administration | 3586 | 1873 |
| Total operating expenses | 4835 | 2623 |
| Loss from operations | (4814) | (2760) |
| Other income (expense): |  |  |
| &nbsp;&nbsp;&nbsp;Interest expense, net (including $1,538 and $1,064 to related parties, respectively) | (1810) | (1465) |
| &nbsp;&nbsp;&nbsp;Gain on debt settlement | 179 | - |
| &nbsp;&nbsp;&nbsp;Loss on debt extinguishment – related party | (19324) | - |
| &nbsp;&nbsp;&nbsp;Change in fair value of derivative liability | 4629 | 9 |
| &nbsp;&nbsp;&nbsp;Other income | 2 | - |
| Net loss | $(21138) | $(4216) |
| Basic and diluted loss per share | $(0.19) | $(0.04) |
| Basic and diluted weighted-average shares outstanding | 114842561 | 99379779 |

---

See accompanying notes to these financial statements.

**AURA SYSTEMS, INC.**

**STATEMENTS OF SHAREHOLDERS' DEFICIT**

*(in thousands, except share data)*

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **Common <br> Stock <br> Shares** | **Common <br> Stock <br> Amount** | **Additional <br> Paid-In <br> Capital** | **Accumulated <br> Deficit** | **Total <br> Shareholders' <br> Deficit** |
| **Balance, February 28, 2023** | 94648346 | $9 | $454507 | $(474774) | $(20258) |
| Common shares issued for cash | 9918302 | 1 | 2942 | - | 2943 |
| Common shares issued for services | 25000 | - | 6 | - | 6 |
| Relative fair value of warrants issued with convertible notes payable |  | - | 5 | - | 5 |
| Net loss |  |  |  | (4216) | (4216) |
| **Balance, February 29, 2024** | 104591648 | 10 | 457460 | (478990) | (21520) |
| Fair value of vested stock options |  |  | 1601 |  | 1601 |
| Modification of warrant agreement - related party |  |  | 33 |  | 33 |
| Common shares issued for cash | 13704800 | 2 | 3429 |  | 3431 |
| Net loss |  |  |  | (21138) | (21138) |
| **Balance, February 28, 2025** | 118296448 | $12 | $462523 | $(500128) | $(37593) |

---

See accompanying notes to these financial statements.

**AURA SYSTEMS, INC.**

**STATEMENTS OF CASH FLOWS**

---

| | | |
|:---|:---|:---|
|  | **Fiscal Years Ended** | **Fiscal Years Ended** |
|  | **February 28, <br> 2025** | **February 29,** <br> **2024** |
| *(amounts in thousands)* |  |  |
| Net loss | $(21138) | $(4216) |
| Adjustments to reconcile net loss to cash used in operating activities |  |  |
| &nbsp;&nbsp;&nbsp;Depreciation and amortization | 137 | 105 |
| &nbsp;&nbsp;&nbsp;Amortization of debt discount | 5 | 4 |
| &nbsp;&nbsp;&nbsp;Inventory write-down | 19 | 123 |
| &nbsp;&nbsp;&nbsp;Gain on debt settlement | (179) | - |
| &nbsp;&nbsp;&nbsp;Loss on debt extinguishment – related party | 19324 | - |
| &nbsp;&nbsp;&nbsp;Change in fair value of derivative liability | (4629) | (9) |
| &nbsp;&nbsp;&nbsp;Fair value of vested stock options | 1638 | - |
| &nbsp;&nbsp;&nbsp;Common stock issued for services | - | 6 |
| &nbsp;&nbsp;&nbsp;Changes in operating assets and liabilities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inventory | (37) | 12 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prepaid and other current assets | 132 | (33) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Operating lease right-of-use asset | 236 | 209 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts payable and accrued expenses | (85) | (133) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accrued interest | 1600 | 1150 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Customer advances | - | (7) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Operating lease liability | (246) | (206) |
| Cash used in operating activities | (3223) | (2995) |
| Cash used in investing activities: |  |  |
| &nbsp;&nbsp;&nbsp;Purchase of property and equipment | (103) | (22) |
| Cash used in investing activities | (103) | (22) |
| Cash flows from financing activities: |  |  |
| &nbsp;&nbsp;&nbsp;Proceeds from issuance of common stock | 3431 | 2943 |
| &nbsp;&nbsp;&nbsp;Proceeds from issuance of notes payable | - | 281 |
| &nbsp;&nbsp;&nbsp;Principal payments of notes payable | (206) | (98) |
| Cash provided by financing activities | 3225 | 3126 |
| Net increase (decrease) in cash and cash equivalents | (101) | 109 |
| Cash and cash equivalents-beginning of year | 124 | 15 |
| Cash and cash equivalents-end of year | $23 | $124 |
| Cash paid for: |  |  |
| &nbsp;&nbsp;&nbsp;Interest | $138 | $185 |
| Supplemental schedule of non-cash transactions: |  |  |
| &nbsp;&nbsp;&nbsp;Right of use asset and lease liability | $47 | $- |
| &nbsp;&nbsp;&nbsp;Relative fair value of warrants issued for note payable | $- | $5 |
| &nbsp;&nbsp;&nbsp;Notes payable issued for the purchase of property and equipment | $274 | $155 |
| &nbsp;&nbsp;&nbsp;Notes payable issued for the purchase of annual software license | $179 | $- |
| &nbsp;&nbsp;&nbsp;Reclassification of prepaid expense to property and equipment | $- | $21 |
| &nbsp;&nbsp;&nbsp;Adjustment effective interest rate of note payable | $- | $61 |

---

See accompanying notes to these financial statements.

**AURA SYSTEMS, INC.**

**NOTES TO FINANCIAL STATEMENTS**

**Years ended February 28, 2025, and February 29, 2024**

**(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<sup>®</sup> axial flux mobile induction power systems to the industrial, commercial, and defense mobile power generation markets.

**Going Concern**

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. In accordance with Accounting Standards Codification ("ASC") 205-40, *Going Concern*, the Company's management has evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company's ability to continue as a going concern within one year after the date the accompanying financial statements were issued. During the fiscal year ended February 28, 2025, the Company incurred a net loss of $21.1 million, used cash in operating activities of $3.2 million, and at February 28, 2025, had a stockholders deficit of $37.6 million. In addition, at February 28, 2025, notes payable and related accrued interest with an aggregate balance of $5.2 million have reached maturity and are past due. These factors raise substantial doubts about the Company's ability to continue as a going concern within one year of the date that these financial statements are issued. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

Subsequent to February 28, 2025, the Company issued 1,048,000 shares of common stock in exchange for cash proceeds of $262,000. The Company's ability to continue as a going concern is dependent upon its ability to continue to implement its business plan. During the next twelve months we intend to continue to attempt to increase the Company's sale of our AuraGen<sup>®</sup>/VIPER products both domestically and internationally and to add to our existing management team. In addition, we plan to continue to rebuild the engineering and sales teams, and to the extent appropriate, utilize third party contractors to support the operation. No assurance can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to the Company. Even if the Company is able to obtain additional financing, if needed, it may contain undue restrictions on its operations, in the case of debt financing, or cause substantial dilution for its stockholders, in the case of equity financing. In the event the Company is unable to generate profits and is unable to obtain financing for its working capital requirements, it may have to curtail its business further or cease business altogether.

**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.

**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, 2025, and February 29, 2024, the Company wrote down inventories of $19 and $123, 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, 2025 and February 29, 2024, management determined there were no impairments of the Company's property and equipment.

**Impairment of Long-lived Assets** 

The Company reviews its property and equipment, right-of-use asset, and other long-lived assets, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable. Recoverability is measured by a comparison of the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the assets. Fair value is generally determined using the asset's expected future discounted cash flows or market value, if readily determinable. For the years ended February 28, 2025, and February 29, 2024, the Company had no impairment of long-lived assets.

**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.

**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 at times may be in excess of Federal Deposit Insurance Corporation ("FDIC") insurance limits of up to $250. We have not experienced any losses in such accounts and believe we are not exposed to any significant risk on cash and cash equivalents.

During the year ended February 28, 2025, one customer accounted for 60% and one customer accounted for 10% of revenues. During the year ended February 29, 2024, one customer accounted for 55% and one customer accounted for 12% of revenues.

As of February 28, 2025, four vendors accounted for 42%, 12%, 11% and 9% of accounts payable. As of February 29, 2024, four vendors accounted for 42%, 11%, 11% and 10% of accounts payable.

**Research and Development**

The Company engages in research and development to stay current with changes in vehicle manufacture and design and to maintain an advantage over potential competition. Research and development expenses relate primarily to the development, design, and testing of preproduction prototypes and models and are expensed as incurred. Research and development costs for Fiscal 2025 and 2024 were approximately $1,249 and $750, respectively.

**Share-Based Compensation**

The Company periodically issues stock options and warrants, and shares of common stock to employees and non-employees in non-capital raising transactions for services and for financing costs. Share-based compensation cost is measured at the grant date, based on the estimated fair value of the award, and is recognized as expense over the requisite service period. Recognition of compensation expense for non-employees is in the same period and manner as if the Company had paid cash for services.

**Income Taxes**

The Company uses an asset and liability approach for accounting and reporting for income taxes that allows recognition and measurement of deferred tax assets based upon the likelihood of realization of tax benefits in future years. Under the asset and liability approach, deferred taxes are provided for the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A valuation allowance is provided for deferred tax assets if it is more likely than not these items will either expire before the Company is able to realize their benefits, or that future deductibility is uncertain. The Company's policy is to recognize interest and/or penalties related to income tax matters in income tax expense.

**Derivative Financial Instruments** 

The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date.

The Company uses Level 3 inputs for its valuation methodology for the derivative liabilities as their fair values were determined by using a Binomial pricing model. 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 their classification is appropriate.

**Fair Value of Financial Instruments**

The Company determines the fair values of its financial instruments based on a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The classification of a financial asset or liability within the hierarchy is based upon the lowest level input that is significant to the fair value measurement. Under ASC 820, *Fair Value Measurement and Disclosures* ("ASC 820"), the fair value hierarchy prioritizes the inputs into three levels that may be used to measure 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, 2025 and February 29, 2024:

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **February 28, 2025** | **February 28, 2025** | **February 28, 2025** | **February 28, 2025** |
| *(amounts in thousands)* | **Level 1** | **Level 2** | **Level 3** | **Total** |
| <u>Liabilities</u> |  |  |  |  |
| Derivative liability – convertible note conversion option | $&nbsp;&nbsp;&nbsp;&nbsp; - | $&nbsp;&nbsp;&nbsp;&nbsp; - | $17565 | $17565 |
| Total | $- | $- | $17565 | $17565 |

---

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **February 29, 2024** | **February 29, 2024** | **February 29, 2024** | **February 29, 2024** |
|  | **Level 1** | **Level 2** | **Level 3** | **Total** |
| <u>Liabilities</u> |  |  |  |  |
| Derivative liability | $&nbsp;&nbsp;&nbsp;&nbsp; - | $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;- | $&nbsp;&nbsp;&nbsp;&nbsp; - | $&nbsp;&nbsp;&nbsp;&nbsp; - |
| Total | $- | $- | $- | $- |

---

The Company estimated the fair value of the derivative liability using the Binomial Model.

The following table provides a roll-forward of the derivative liability measured at fair value on a recurring basis using unobservable level 3 inputs for the period ended February 28, 2025, as follows:

---

| | |
|:---|:---|
| *(amounts in thousands)* | **Fair Value of <br> Derivative<br> Warrant<br> Liability** |
| February 29, 2024 | $- |
| Recognition of derivative liability for a convertible note payable conversion option | 22194 |
| Change in fair value of derivative liability | (4629) |
| February 28, 2025 | $17565 |

---

**Earnings (loss) per share**

The Company's earnings (loss) per share amounts have been computed based on the weighted-average number of shares of common stock outstanding for the period. Basic earnings (loss) per share is computed by dividing net earnings (loss) available to common shareholders by the weighted average number of shares of common stock outstanding during the period. Diluted earnings (loss) per share is computed by dividing net earnings (loss) available to common shareholders by the weighted average number of shares of common stock assuming all potential shares had been issued, and the additional shares of common stock were dilutive. Diluted earnings (loss) per share reflects the potential dilution, using the as-if-converted method for convertible debt, and the treasury stock method for options and warrants, which could occur if all potentially dilutive securities were exercised.

For the years ended February 28, 2025, and February 29, 2024, the calculations of basic and diluted loss per share are the same because potential dilutive securities would have had an anti-dilutive effect. The potentially dilutive securities consisted of the following:

---

| | | |
|:---|:---|:---|
|  | **February 28, <br> 2025** | **February 29,** <br> **2024** |
| Warrants | 6511664 | 3521664 |
| Options | 8250000 | 4250000 |
| Convertible notes | 59092024 | 4685445 |
| Total | 73853688 | 12457109 |

---

**Inflation**

The continuing impact of higher inflation, the actions by the Federal Reserve to address inflation, create uncertainty about the future economic environment which will continue to evolve and, we believe, has impacted the Company's business in 2024 and may continue to impact its business in 2025. The implications of higher government deficits and debt, tighter monetary policy, and potentially higher long-term interest rates may drive a higher cost of capital for the business and an increase in the Company's operating expenses.

**Segments** 

Under ASC 280, *Segment Reporting*, operating segments are defined as components of an enterprise where discrete financial information is available that is evaluated regularly by the chief operating decision maker ("CODM"), in deciding how to allocate resources and in assessing performance. The Company's operating segment consists of one component, and the Company's Chief Executive Officer, who is also the CODM, makes decisions and manages the Company's operations as a single operating segment.

**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.

In November 2023, the FASB issued ASU 2023-07, *Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosure*. These amendments expand a public entity's segment disclosures by requiring disclosure of significant segment expenses that are regularly provided to the chief operating decision maker, requiring other new disclosures, and requiring enhanced interim disclosures. ASU 2023-07 requires public entities with a single reportable segment to provide all the disclosures required by this standard and all existing segment disclosures in Topic 280 on an interim and annual basis. ASU 2023-07 is effective for annual periods beginning after December 15, 2023, and interim periods beginning after December 15, 2024, applied retrospectively with early adoption permitted. As of December 31, 2024, the Company has adopted ASU 2023-07. The adoption of this standard did not have a material impact on the Company's consolidated financial statements but has resulted in additional disclosures within the footnotes to our consolidated financial statements (See Note 17).

Other recent accounting pronouncements issued by the FASB, its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company's present or future financial statements.

**NOTE 3 – INVENTORIES** 

Inventories consisted of the following:

---

| | | |
|:---|:---|:---|
|  | **February 28, <br> 2025** | **February 29,<br> 2024** |
| *(amounts in thousands)* |  |  |
| Raw materials | $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7 | $&nbsp;&nbsp;&nbsp;&nbsp;13 |
| Work-in-process | 6 | 6 |
| Finished goods | 25 | 1 |
| Total inventory | $38 | $20 |

---

**NOTE 4 – PREPAID AND OTHER CURRENT ASSETS**

Prepaid and other current assets consisted of the following:

---

| | | |
|:---|:---|:---|
|  | **February 28, <br> 2025** | **February 29, 2024** |
| *(amounts in thousands)* |  |  |
| Prepaid annual software licenses | $173 | $158 |
| Vendor advances | - | 9 |
| Prepaid insurance | 19 | 2 |
| Other prepaid expenses | 28 | 6 |
| Total prepaid and other current assets | $220 | $175 |

---

**NOTE 5 – PROPERTY AND EQUIPMENT, NET**

Property and equipment consisted of the following:

---

| | | |
|:---|:---|:---|
|  | **February 28, <br> 2025** | **February 29,<br> 2024** |
| *(amounts in thousands)* |  |  |
| Leasehold improvements | $57 | $57 |
| Machinery and equipment | 646 | 301 |
| Vehicle | 96 | 96 |
| Computer equipment | 105 | 80 |
| Computer software | 22 | 22 |
| Furniture and fixtures | 20 | 20 |
|  | 946 | 576 |
| Less accumulated depreciation and amortization | (328) | (198) |
|  | $618 | $378 |

---

Depreciation expense for the years ended February 28, 2025, and February 29, 2024 was $137 and $105, respectively.

**NOTE 6 – CONVERTIBLE NOTES PAYABLE**

Convertible notes payable consisted of the following:

---

| | | |
|:---|:---|:---|
|  | **February 28, 2025** | **February 29,<br> 2024** |
| *(amounts in thousands)* |  |  |
| (a) Convertible notes payable 1 – past due | $1403 | $1403 |
| (b) Convertible notes payable 2 – past due | 110 | $106 |
| Unamortized debt discount | - | (1) |
| Net | $1513 | $1508 |

---

&nbsp;&nbsp;&nbsp;&nbsp;(a) In Fiscal 2013 and 2014, the Company issued six convertible notes payable in the aggregate of $4,000. The notes are unsecured, bear interest at 5% per annum and are convertible into shares of common stock at a conversion price of $1.40 per share, as adjusted. The notes were originally due in 2014 to 2017 and were all amended in 2018 to change the maturity date to January 11, 2023. As of February 28, 2025 and February 29, 2024, the outstanding balance of the convertible notes payable amounted to $1,403 and are past due.

&nbsp;&nbsp;&nbsp;&nbsp;(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, 2025 and February 29, 2024, the outstanding balance of the convertible notes payable amounted to $110 and $106, respectively, and are past due.

At February 28, 2025, the total outstanding convertible notes payable of $1,513 and accrued interest of $509 are convertible into 1,977,274 shares of common stock at conversion rates ranging from $0.20 to $1.40 per share.

**NOTE 7 – CONVERTIBLE NOTE PAYABLE-RELATED PARTY** 

Convertible note payable – related party consisted of the following:

---

| | | |
|:---|:---|:---|
|  | **February 28,<br> 2025** | **February 29,<br> 2024** |
| *(amounts in thousands)* |  |  |
| (a) Convertible note payable to former director – past due | $3000 | $3000 |
| (b) Convertible note payable to director – past due | 20 | 20 |
| (c) Convertible note payable – Kopple | 9259 | —  |
| Total | $12279 | $3020 |

---

&nbsp;&nbsp;&nbsp;&nbsp;(a) <u>Convertible note payable-former Director</u> 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 February 2, 2023. The convertible note is convertible into shares of common stock at a conversion price of $1.40 per share, as adjusted. As of February 28, 2025 and February 29, 2024, the outstanding balance of the convertible note amounted to $3,000 and is past due.

&nbsp;&nbsp;&nbsp;&nbsp;(b) <u>Convertible note payable-Director</u> On October 4, 2023, the Company issued a convertible note payable of $20 in exchange for cash to a member of the Company's Board of Directors. The convertible note is unsecured, bears interest at rate of 10% per annum and matured in March 2024. The convertible note payable is convertible to common stock at a conversion price of $0.20 per share. As of February 28, 2025 and February 29, 2024, the outstanding balance of the convertible note amounted to $20 and is past due.

(c) <u>Convertible note payable-Kopple</u> In March 2022, the Company entered into a binding
term sheet agreement ("note payable") with Robert Kopple and associated entities (collectively "Kopple") in the
aggregate of $10,000. Robert Kopple is the former Vice-Chairman of the Company's Board of Directors and is a current shareholder
in the Company. The Kopple note payable was previously reported as a note payable-related party (see Note 9). In March 2024, the Company
and Kopple amended the note payable, which, among other things, added a conversion feature to the note payable. Accordingly, the amended
note payable is now reported as a convertible note payable-related party. The convertible note payable to Kopple is
secured by tangible and intangible assets of the Company, bears interest at a rate of 10% per annum (15% on default) and matures in June
2029. As of February 28, 2025, the outstanding balance of the convertible note payable was $9,259. *<u>March 2024 amendment to the Kopple note payable</u>* The amendment to the Kopple note payable (i) replaced
a requirement to pay the $3,850 past due principal balance with the requirement to pay $2,000 on or before December 15, 2024 (see extension
below); (ii) increased the stated interest rate to 10% (15% on default); (iii) added a fee of $15 monthly until the Company makes a principal
payment of $2,000 by December 2024; (iv) effective August 30, 2024, the Company granted Kopple a 36 month right (but not any obligation)
to convert the note payable into equity of the Company at a conversion price equal to the lower of $1 per share or 50% of the 10 day volume
weighted average price per share of the Company's common stock; (v) requires the Company to pay 20% of all collected revenues within
10 days of the end of each fiscal quarter; (vi) requires the Company to pay Kopple 20% of any amount raised in new capital in the form
of equity, debt or convertible debt above $3,500; (vii) reduces the exercise price of the warrants granted to Kopple in March 2022 from
$0.85 per share to $0.50 per share; and (viii) extends the warrant expiration date of the warrants granted to Kopple from March 8, 2029,
to March 31, 2031. On February 28, 2025, an installment payment of
$2,000, due in December 2024, was extended to March 31, 2025 in exchange for a cash payment of $100,000, which was recorded as interest
expense. On April 28, 2025, , Kopple agreed to extend the installment payment of $2,000 for an additional 90 days to June 30, 2025, in
exchange for another cash payment of $100,000. *<u>Accounting for March 2024 amendment to the Kopple note payable as debt extinguishment</u>* The Company accounted for the amended terms of the Kopple note payable
as a debt extinguishment because the present value of the cash flows under the amended debt terms is greater by more than 10% compared
to the present value of the remaining cash flows under the original existing debt terms. Furthermore, the amendment granted a conversion
option to the note holder and is deemed substantially different from the existing note. As a result, the net carrying amount of the existing
note payable of $12,164 was derecognized and amended convertible note payable was recorded at its fair value of $9,259. The Company recorded
a loss on debt extinguishment of $19,324 as a result of this amendment, which is the difference between (i) the fair value of the amended
convertible note payable of $9,259, combined with the fair value of the conversion option of $22,194 (see Note 12), and the change in
the fair value of the amended warrants of $33, and (ii) the net carrying amount of the existing note payable of $12,162. *<u>Other</u>* At February 28, 2025, Kopple alleges that the Company failed to comply
with certain non-monetary terms including failing to hold a shareholders' meeting by August 1, 2024, and failure to pay 20% of all
collected revenues within 10 days of the end of each fiscal quarter. In addressing the alleged violation of terms, the Company has provided
for interest at the rate of 15% per annum and reported the entire convertible note payable as current.

The Company is also subject to certain affirmative and negative covenants such as periodic submission of financial statements to Kopple and restrictions on future financing and investing activities, as defined in the agreement, including the covenant to not create any indebtedness that is senior in right of payment to the Kopple debt. Management believes such covenants are normal for this type of transaction and that management believes meeting these covenants will not affect the operations of the Company.

At February 28, 2025, the total outstanding convertible notes payable-related party of $12,279 and accrued interest of $2,345 are convertible into 57,114,750 shares of common stock at conversion rates ranging from $0.20 to $1.40 per share.

**NOTE 8 – NOTES PAYABLE**

Notes payable consisted of the following:

---

| | | |
|:---|:---|:---|
| *(amounts in thousands)* | **February 28, <br> 2025** | **February 29,<br> 2024** |
| <u>Secured notes payable</u> |  |  |
| (a) Note payable-EID loan | $150 | $150 |
| (b) Notes payable-vehicle and equipment | 46 | 106 |
| (c) Note payable - software license | 208 | 139 |
| (d) Notes payable – machinery and other equipment | 238 | - |
| <u>Unsecured notes payable</u> |  |  |
| (e) Note payable-other | 10 | 10 |
| Total | $652 | $405 |
| Current | (212) | (119) |
| Non-current | $440 | $286 |

---

<u>(a) Note payable-EID loan</u>

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.

<u>(b) Notes payable-vehicle and equipment</u> 

During Fiscal 2022, the Company issued two notes payable to purchase equipment and a vehicle for $288. The notes are secured by the equipment and vehicle purchased. The first note with the original principal of $210 was paid in full in October 2024. The second note with original principal of $78 is due January 20, 2027, and requires 72 equal monthly payments of approximately $1.5, including interest at 10.9% interest per annum**.**

<u>(c) Note payable-software license</u>

During Fiscal 2024, the Company obtained a loan of $150 from a financing institution to finance the use of a third-party software license by the Company. 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.

During Fiscal 2025, the Company obtained a loan of $179 from a financing institution to finance the use of a third-party software license by the Company. The note payable is secured by tangible and intangible assets of the Company, bears interest at an average rate of 14.41% per annum and will mature in November 2025.

The aggregate total of the note payable-software licenses as of February 28, 2025, amounted to $208.

<u>(d) Notes payable – machinery and other equipment</u>

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, 2025, the outstanding balance of the note payable amounted to $238.

<u>(e) Note payable-other</u>

As of February 28, 2025, and February 29, 2024, the Company has one note payable due to an individual issued in September 2015 that is payable on demand with an interest rate of 10% per annum.

**NOTE 9 – NOTES PAYABLE-RELATED PARTIES** 

Notes payable-related parties consisted of the following:

---

| | | |
|:---|:---|:---|
| *(amounts in thousands)* | **February 28, 2025** | **February 29,<br> 2024** |
| (a) Note payable-Kopple (see Note 7) | $- | $10915 |
| (b) Note payable- Gagerman – past due | - | 82 |
| (c) Note payable-Jiangsu Shengfeng – past due | 733 | 700 |
| Total | 733 | 11697 |
| Non-current | - | (7065) |
| Current | $733 | $4632 |

---

<u>(a) Note payable-Kopple</u>

In fiscals 2013 through 2018, the Company issued notes payable to Robert Kopple and associated entities (collectively "Kopple") in the aggregate of $6,107. Beginning in 2017, Kopple brought suit against the Company for repayment of the notes. On March 14, 2022, the Company reached an agreement with Kopple to resolve all remaining litigation between them, including all amounts owed to Kopple under the notes. Under the terms of the settlement, the Company agreed to issue a new note and pay Kopple an aggregate amount of $10,000 to be paid in installments, of which, $3,000 was due in June 2022, and the remaining $7,000 to be paid over seven years at $1,000 per year. Additionally, the settlement agreement granted Kopple warrants exercisable into 3,331,664 shares of the Company's common stock at a price of $0.85 per share.

In June 2022, the first installment of $3,000 became due, of which only $150 was paid. Subsequently, the note was amended several times to extend the payment date of the remaining balance of $2,850 of the initial payment, and the Company incurred extension and forbearance fees totaling $335 that was recorded as part of interest expense. In January 2023, pursuant to the terms of the amended note payable, the Company started accruing interest on the outstanding note balance at a rate of 6% per annum, compounded annually. As of February 29, 2024, the outstanding principal balance amounted to $10,915.

In March 2024, the Company and Kopple again amended the note payable and the Company accounted for the amended terms of the note payable as a debt extinguishment and the net carrying amount of the existing note payable and accrued interest of $12,164 was derecognized, and the amended note payable is now classified as a convertible note payable-related party (see Note 7).

<u>(b) Note payable-Gagerman</u> 

Melvin Gagerman, the Company's former CEO and CFO whose employment was permanently terminated in July 2019, claimed that in April 2014 the Company issued an unsecured demand promissory note to him in the amount of $82 that bears interest at a rate of 10% per annum. Gagerman claimed that this note has not been repaid. In June 2022, Gagerman brought suit against the Company for repayment of this alleged note. Although the Company disputed Gagerman's claims, under the guidance of ASC 450 – *Contingencies*, the Company had recorded the claimed note payable $82 and corresponding accrued interest**.**

On October 1, 2024, the Company and Gagerman agreed to a settlement. As part of the settlement, Gagerman released any and all claims against the Company, including those related to the note payable of $82 and corresponding accrued interest. As a result, the Company recorded a gain on debt settlement of $179 for the year ended February 28, 2025, representing the derecognition of the note payable balance of $82 and the corresponding accrued interest balance of $97.

<u>(c) Jiangsu Shengfeng Note</u>

On November 20, 2019, the Company owned 49% of a Chinese joint venture named Jiangsu Shengfeng. The Joint venture advanced Aura $700 in prior years for products that the Company failed to deliver to the joint venture. The Company reached an agreement with the joint venture regarding the return of $700 that had been advanced to the Company in prior years provided the joint venture remains as an operating company. As a result, in November 2019, the Company issued a non-interest-bearing promissory note for $700 to the joint venture to be paid over an 11-month period beginning March 15, 2020, through February 15, 2021. The joint venture stopped operations in 2020 as a result of COVID-19 and never resumed or restarted operations. In early fiscal 2024 the joint venture was dissolved and liquidated without filing any demands or claims for payments. As of February 28, 2025 and February 29, 2024, the outstanding balance of this note payable amounted to $733.

**NOTE 10 – ACCRUED INTEREST**

Accrued interest consisted of the following:

---

| | | |
|:---|:---|:---|
|  | **February 28, <br> 2025** | **February 29, <br> 2024** |
| *(amounts in thousands)* |  |  |
| Convertible notes payable (past due) (see Note 6) | $509 | $425 |
| Convertible notes payable - related party – Kopple (see Note 7) | 1329 | —  |
| Convertible notes payable - related party – others) (see Note 7) | 1016 | 863 |
| Notes payable - related party – Kopple (see Note 9) | —  | 1226 |
| Notes payable - related party – others (see Note 9) | —  | 62 |
| Notes payable (see Note 8) | 21 | 22 |
| Total | $2875 | $2598 |

---

**NOTE 11 – LEASES**

In February 2021, the Company consolidated our administrative and production operations, including warehousing, within an approximately 18 square foot facility in Lake Forest, California. The Lake Forest facility lease is for 66-months effective February 2021 through August 31, 2026. The initial monthly base rental rate was approximately $22 per month and escalates 3% each year to approximately $26 per month in 2026. The lease liability was determined by discounting the future lease payments under the lease terms using a 10% per annum discount rate to determine the lease liability.

In April 2024, the Company entered into a 60-month financing lease for a forklift with a cost of $47. The lease has an interest rate of 8%, including a bargain purchase option to acquire the forklift at the end of the lease term for a payment of one dollar.

Operating lease right-of-use ("ROU") assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent the Company's obligation to make lease payments arising from the lease. Generally, the implicit rate of interest in arrangements is not readily determinable and the Company utilizes its incremental borrowing rate in determining the present value of lease payments. The operating lease ROU asset includes any lease payments made and excludes lease incentives.

The components of lease expense and supplemental cash flow information related to leases for the period are as follows:

---

| | | |
|:---|:---|:---|
|  | **Year ended <br> February 28, <br> 2025** | **Year ended<br> February 29, <br> 2024** |
| *(amounts in thousands)* |  |  |
| <u>Lease Cost</u> |  |  |
| Operating lease cost (included in general and administration in the Company's statement of operations) | $352 | $285 |
| <u>Other Information</u> |  |  |
| Cash paid for amounts included in the measurement of lease liabilities for the years ended February 28, 2025 and February 29, 2024, respectively | $285 | $285 |
| Weighted average remaining lease term – operating leases (in years) | 1.7 | 2.5 |
| Average discount rate – operating leases | 10.0% | 10.0% |

---

The supplemental balance sheet information related to leases for the period is as follows:

---

| | |
|:---|:---|
|  | **At<br> February 28,<br> 2025** |
| <u>Operating leases</u> |  |
| Long-term right-of-use assets | $418 |
| Short-term operating lease liabilities | $279 |
| Long-term operating lease liabilities | 183 |
| Total operating lease liabilities | $462 |

---

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

---

| | |
|:---|:---|
| **Year Ending February 28:** | **Operating<br> Lease** |
| 2026 | $311 |
| 2027 | 166 |
| 2028 | 11 |
| 2029 | 11 |
| 2030 | 1 |
| &nbsp;&nbsp;&nbsp;Total lease payments | 500 |
| &nbsp;&nbsp;&nbsp;Less: Imputed interest/present value discount | (38) |
| &nbsp;&nbsp;&nbsp;Present value of lease liabilities | $462 |

---

**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 and recorded the fair value of the derivative liability of $22,194 at March 7, 2024, the date of issuance, and $17,565 at February 28, 2025.

The following tables summarize the derivative liability:

---

| | | |
|:---|:---|:---|
| *(amounts in thousands, except share and per share data)* | **February 28, 2025** | **March 7,<br> 2024 - Issuance** |
| Stock price | $0.34 | $0.15 |
| Risk free interest rate | 4.01% | 4.07% |
| Expected volatility | 173% | 182% |
| Expected life in years | 4.33 | 5.31 |
| Expected dividend yield | 0% | 0% |
| Number of common stock issuable | 54128933 | 151481943 |
| Fair value of derivative liability | $17565 | $22194 |

---

**NOTE 13 – STOCKHOLDERS' DEFICIT** 

**Common Stock**

On February 28, 2025 and February 29, 2024, the Company had 150,000,000 shares of $0.0001 par value common stock authorized for issuance.

During the year ended February 28, 2025, the Company issued 13,501,563 shares of common stock for approximately $3,453 in cash. As part of the offering, the Company also granted certain investors warrants to purchase 3,000,000 shares of common stock. The warrants are fully vested, exercisable at $1.00 per share, and will expire in 3 years.

During the year ended February 29, 2024, the Company issued 9,918,302 shares of common stock for net proceeds of approximately $2,943 in cash and services. In addition, the Company also issued 25,000 shares of common stock for services rendered with a fair value of $6.

On February 28, 2025, there were insufficient authorized and unissued shares for the Company to satisfy all of its commitments to deliver shares. The Company's sequencing policy resulted in the allocation of authorized and unissued shares in the following order at February 28, 2025 (i) Warrants, and (ii) Convertible Notes Payable and Convertible Notes Payable-Related Party. 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).

**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 <br> Shares** | **Exercise<br> Price** | **Weighted <br> Average <br> Intrinsic <br> Value** |
| *(amounts in thousands, except share and per share data)* |  |  |  |
| Total options, February 28, 2023 | 4792857 | $0.48 | $394 |
| Granted | - | - | - |
| Exercised | - | - | - |
| Expired | (542857) | 1.40 | - |
| Total options, February 29, 2024 | 4250000 | $0.37 | $- |
| Granted | 4000000 | 0.50 | - |
| Exercised | - | - | - |
| Expired | - | - | - |
| Total options, February 28, 2025 | 8250000 | $0.43 | $- |
| Exercisable, February 28, 2025 | 8250000 | $0.43 | $- |

---

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.

As of February 28, 2025, the intrinsic value as these stock options amounted to $205. The exercise prices and information related to options under the 2011 Plan outstanding on February 28, 2025, are as follows:

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **Range of<br> Exercise Price** | **Stock Options <br> Outstanding** | **Stock Options <br> Exercisable** | **Weighted <br> Average <br> Remaining<br> Contractual <br> Life** | **Weighted <br> Average <br> Exercise Price <br> of Options<br> Outstanding** | **Weighted<br> Average <br> Exercise Price <br> of Options<br> Exercisable** |
| $0.25 to $.50 | 8250000 | 8250000 | 4.81 | $0.43 | $0.43 |

---

**Warrants**

---

| | | |
|:---|:---|:---|
|  | **Number of<br> Warrants** | **Exercise<br> Price** |
| Outstanding, February 28, 2023 | 3564764 | $0.86 |
| Granted | 60000 | 0.50 |
| Exercised | - | - |
| Expired | (103100) | 1.40 |
| Outstanding, February 29, 2024 | 3521664 | $0.83 |
| Granted | 3000000 | 1.00 |
| Exercised | - | - |
| Expired | (10000) | 1.40 |
| Outstanding, February 28, 2025 | 6511664 | $0.73 |

---

There was no intrinsic value as of February 28, 2025, as the exercise prices of these warrants were greater than the market price of the Company's stock. The exercise prices and information related to the warrants as February 28, 2025, are as follows:

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **Range of<br> Exercise Price** | **Stock Warrants <br> Outstanding** | **Stock Warrants <br> Exercisable** | **Weighted <br> Average<br> Remaining <br> Contractual<br> Life** | **Weighted<br> Average<br> Exercise Price <br> of Warrants<br> Outstanding** | **Weighted<br> Average <br> Exercise Price <br> of Warrants Exercisable** |
| $0.50 | 3511664 | 3511664 | 6.13 | $0.50 | 0.50 |
| $1.00 | 3000000 | 3000000 | 2.43 | $1.00 | $1.00 |

---

**NOTE 14 – INCOME TAXES** 

For the years ended February 28, 2025, and February 29, 2024, the Company had no income tax expense due to recurring net loss.

For the years ended February 28, 2025 and February 29, 2024, a reconciliation of the effective income tax rate to the U.S. statutory rate is as follows:

---

| | | |
|:---|:---|:---|
|  | **Year ended <br> February 28, <br> 2025** | **Year ended<br> February 29, <br> 2024** |
| 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, 2025, and February 29, 2024, the following table summarizes our deferred tax asset:

---

| | | |
|:---|:---|:---|
|  | **February 28, <br> 2025** | **February 29, <br> 2024** |
| *(amounts in thousands)* |  |  |
| Deferred tax asset |  |  |
| &nbsp;&nbsp;&nbsp;Net operating loss carryforwards | $41780 | $39374 |
| Gross deferred tax assets | 41780 | 39374 |
| Valuation allowance | (41780) | (39374) |
| Net deferred tax asset (liability) | $- | $- |

---

The provisions of ASC Topic 740, Accounting for Income Taxes, require an assessment of both positive and negative evidence when determining whether it is more likely than not that deferred tax assets are recoverable. For the years ended February 28, 2025, and February 29, 2024, based on all available objective evidence, including the existence of cumulative losses, the Company determined that it was more likely than not that the net deferred tax assets were not fully realizable. Accordingly, the Company established a full valuation allowance against its net deferred 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, 2025 and February 29, 2024, the valuation allowance increased by $2.4 million and $2.7 million, respectively.

At February 28, 2025, the Company had available Federal and state net operating loss carryforwards ("NOL"s) to reduce future taxable income. For Federal purposes the amounts available were approximately $149.2 million and for state purposes the amounts available were approximately $102.5 million. The Federal carryforwards expire on various dates through 2044 and the state carryforwards expire on various dates through 2044. 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, 2025, and February 29, 2024, no liability for unrecognized tax benefits was required to be recorded or disclosed.

Our continuing practice is to recognize interest and/or penalties related to income tax matters in income tax expense. As of February 28, 2025, and February 29, 2024, we have no accrued interest and penalties related to uncertain tax positions.

We are subject to taxation in the U.S. and California. Our tax years for 2014 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, 2025 and February 29, 2024, Bettersea LLC ("Bettersea") was an 7.1% and 8.8%, respectively, shareholder in the Company. For the years ended February 28, 2025, and February 29, 2024, the Company incurred total fees to Bettersea of $161 and $151, respectively, for consulting services. As of February 28, 2025, and February 29, 2024, a total of approximately $225 and $223, respectively, was due to Bettersea and included in accounts payable and accrued expenses.

As of February 28, 2025, and February 29, 2024, accrued expenses include accrued payroll due to officers and of $272 and $213, respectively.

**NOTE 16 – CONTINGENCIES**

The Company is subject to legal proceedings and claims that have arisen in the ordinary course of business. Our management evaluates our exposure to these claims and proceedings individually and in the aggregate and evaluates potential losses on such litigation if the amount of the loss is estimable and the loss is probable. However, the outcome of legal proceedings and claims brought against the Company is subject to significant uncertainty. Although management considers the likelihood of such an outcome to be remote, if one or more of these legal matters were resolved against the Company for amounts in excess of management's expectations, the Company's financial statements for that reporting period could be materially adversely affected.

In June 2022, Melvin Gagerman, the Company's former CEO and CFO whose employment with Aura was permanently terminated in July 2019, brought suit against the Company for repayment of an allegedly unsecured demand promissory note in the principal amount of $82 which he claims was entered into in April 2014 and bears interest at a rate of 10% per annum. Despite the fact that, based on Gagerman's allegations, the note was issued during a period when he was the Company's CEO, CFO, Corporate Secretary and Chairman of Aura's Board of Directors, Gagerman has stated that he does not possess a copy of the alleged promissory note. The Company disputes that any amount is presently owed to Gagerman and has filed a cross-complaint against him for, among things, conversion, violation of California Business & Professions Code §17200, and various breaches of fiduciary duty that the Company believes Gagerman committed against Aura, including without limitation, Gagerman's actions in opposing the valid 2019 stockholder consent action (see Note 9). On October 1, 2024, all litigation with Gagerman was settled with no cost to the Company.

On March 26, 2019, various stockholders of the Company controlling a combined total of more than 27.5 million shares delivered a signed written consent to the Company removing Ronald Buschur as a member of the Company's Board and electing Cipora Lavut as a director of the Company. 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, 2025** | **Year Ended February 29, 2024** |
| **Net sales** | $50 | $56 |
| Cost of sales | 29 | 193 |
| **Gross profit** | 21 | (137) |
| Less: |  |  |
| Employee compensation and benefits | 987 | 723 |
| Stock-based compensation expense | 1601 | - |
| Consulting and outside provider costs | 288 | 314 |
| Property lease and utility costs | 509 | 443 |
| Depreciation expense | 154 | 104 |
| Program software and licensing expense | 233 | 168 |
| Other operating expenses | 1063 | 871 |
| Total operating expenses | 4835 | 2623 |
| Loss from operations | $(4814) | $(2760) |

---

**NOTE 17 – SUBSEQUENT EVENTS**

Subsequent to February 28, 2025, the Company issued 1,048,000 shares of common stock in exchange for cash proceeds of approximately $262,000.

## Exhibit 31.1

**Exhibit 31.1**

**CERTIFICATION**

I, Cipora Lavut, certify that:

&nbsp;&nbsp;&nbsp;&nbsp;1. I have reviewed this Annual Report on Form 10-K of Aura Systems,
Inc. for the fiscal year ended February 28, 2025;

&nbsp;&nbsp;&nbsp;&nbsp;2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under
which such statements were made, not misleading with respect to the period covered by this report;

&nbsp;&nbsp;&nbsp;&nbsp;3. Based on my knowledge, the financial statements, and other
financial information included in this report, fairly present in all material respects the financial condition, results of operations
and cash flows of the Registrant as of, and for, the periods presented in this report;

&nbsp;&nbsp;&nbsp;&nbsp;4. The Registrant's other certifying officer(s) and I are responsible
for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rules 13a-15(t) and 15d-15(t)) for the Registrant and have:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Designed such disclosure controls and procedures, or caused
such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant,
including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which
this report is being prepared;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Designed such internal control over financial reporting, or
caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) Evaluated the effectiveness of the Registrant's disclosure
controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures,
as of the end of the period covered by this report based on such evaluation; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) Disclosed in this report any change in the Registrant's internal
control over financial reporting that occurred during the Registrant's most recent fiscal quarter (the Registrant's fourth fiscal quarter
in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant's internal
control over financial reporting; and

&nbsp;&nbsp;&nbsp;&nbsp;5. The Registrant's other certifying officer(s) and I have disclosed,
based on our most recent evaluation of internal control over financial reporting, to the Registrant's auditors and the audit committee
of the Registrant's board of directors (or persons performing the equivalent functions):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) All significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability
to record, process, summarize, and report financial information; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Any fraud, whether or not material, that involves management
or other employees who have a significant role in the Registrant's internal control over financial reporting.

Date: June 13, 2025

---

| | |
|:---|:---|
| By: | /s/ Cipora Lavut |
|  | Cipora Lavut |
|  | President |

---

## Exhibit 31.2

**Exhibit 31.2**

**CERTIFICATION**

I, David Mann, certify that:

&nbsp;&nbsp;&nbsp;&nbsp;1. I have reviewed this Annual Report on Form 10-K of Aura Systems, Inc. for the fiscal year ended February 28, 2025;

&nbsp;&nbsp;&nbsp;&nbsp;2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

&nbsp;&nbsp;&nbsp;&nbsp;3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

&nbsp;&nbsp;&nbsp;&nbsp;4. The Registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(t) and 15d-15(t)) for the Registrant and have:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) Evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) Disclosed in this report any change in the Registrant's internal control over financial reporting that occurred during the Registrant's most recent fiscal quarter (the Registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting; and

&nbsp;&nbsp;&nbsp;&nbsp;5. The Registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant's auditors and the audit committee of the Registrant's board of directors (or persons performing the equivalent functions):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize, and report financial information; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over financial reporting.

Date: June 13, 2025

---

| | |
|:---|:---|
| By: | /s/ David Mann |
|  | David Mann |
|  | Chief Financial Officer |

---

## Exhibit 32.1

**Exhibit 32.1**

**CERTIFICATIONS OF PRINCIPAL EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER**

**PURSUANT TO**

**18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO**

**SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002**

I, Cipora Lavut, certify, as of the date hereof, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Annual Report of Aura Systems, Inc. on Form 10-K for the fiscal year ended February 28, 2025 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Form 10-K fairly presents in all material respects the financial condition and results of operations of Aura Systems, Inc. at the dates and for the periods indicated.

Date: June 13, 2025

---

| | |
|:---|:---|
| By: | /s/ Cipora Lavut |
|  | Cipora Lavut |
|  | President |

---

I, David Mann, certify, as of the date hereof, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Annual Report of Aura Systems, Inc. on Form 10-K for the fiscal year ended February 28, 2025 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Form 10-K fairly presents in all material respects the financial condition and results of operations of Apple Inc. at the dates and for the periods indicated.

Date: June 13, 2025

---

| | |
|:---|:---|
| By: | /s/ David Mann |
|  | David Mann |
|  | Chief Financial Officer |

---

A signed original of this written statement required by Section 906 has been provided to Aura Systems, Inc. and will be retained by Aura Systems, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.