NOTE 3 – INVENTORIES (Restated)

Inventories at February 28, 2015 and February 28, 2014 consisted of the following:

	2015			2014

Raw materials	$	1,772,869		$	1,808,556
Finished goods		1,565,190			1,735,019

		3,338,059			3,543,575
Inventory reserve		(3,338,059	)		(3,543,575	)

	$	0		$	0

Inventories consist primarily of components and completed units for the Company’s AuraGen^® product.

Early in our AuraGen^® program, we determined it was most cost-effective to outsource production of components and subassemblies to volume-oriented manufacturers, rather than produce these parts in house. As a result of this decision, and based on then anticipated sales, we purchased, prior to fiscal 2001, a substantial inventory of components at volume prices, most of which was then assembled into finished AuraGen^® units. Since sales did not meet such expectations, we have been selling product from this inventory for several years. Management has analyzed its inventories based on its current business plan, current potential orders for future delivery, and pending proposals with prospective customers and has determined we do not expect to realize all of its inventories within the next year.

As described in Note 2 above while the Company believes the inventory has significant value it has elected to fully reserve the inventory due to the inability of determining the demand and, therefore, fair market value at February 28, 2017 and February 28, 2016.