10-Q

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

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

For the quarterly period ended November 30, 2015

OR

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

For the transition period from                      to                      

AURA SYSTEMS, INC.

(Exact name of Registrant as specified in its charter)

Delaware	95-4106894
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

10541 Ashdale St.,

Stanton, CA 90680

(Address of principal executive offices and zip code)

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

Former name, former address and former fiscal year, if changed since last report:

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

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☐ (Do not check if a smaller reporting company)	Smaller reporting company	☒
		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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes☐  No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of Common Stock, as of the latest practicable date.

Class	Outstanding August 31, 2017
Common Stock, par value $0.0001 per share	126,608,391 shares

AURA SYSTEMS, INC.

INDEX

Index			Page No.
PART I.	FINANCIAL INFORMATION		1
	ITEM 1.	Financial Statements (Unaudited)	1
		Balance Sheets as of  November 30, 2015 and February 28, 2015	1
		Statements of Operations for the Three and Nine Months Ended November 30, 2015 and 2014	2
		Statements of Cash Flows for the Nine months Ended November 30, 2015 and 2014	3
		Notes to Financial Statements	4
	ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13
	ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	18
	ITEM 4.	Controls and Procedures	18
PART II.	OTHER INFORMATION		19
	ITEM 1.	Legal Proceedings.	19
	ITEM 1A.	Risk Factors.	19
	ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	20
	ITEM 3.	Defaults Upon Senior Securities	20
	ITEM 4.	Mine Safety Disclosures	20
	ITEM 5.	Other Information	20
	ITEM 6.	Exhibits	20
	SIGNATURES AND CERTIFICATIONS		21

ITEM 1. FINANCIAL STATEMENTS

AURA SYSTEMS, INC.
BALANCE SHEETS

(Unaudited)

	As of November 30,			As of February 28,
	2015			2015
ASSETS
Current assets:
Cash and cash equivalents	$	3,601		$	34,855
Accounts receivable, net of allowance for doubtful accounts of $50,000 at November 30 and February 28, 2015, respectively		67,570			58,957
Other current assets		37,771			60,597
Total current assets		108,942			154,409
Deposits		90,213			100,138
Property, plant, and equipment, net		78			945
Total assets	$	199,233		$	255,492
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Accounts payable	$	2,150,113		$	1,889,453
Accrued expenses		4,777,207			4,524,919
Customer advances		633,653			464,067
Notes payable		3,809,498			1,942,990
Convertible notes payable, net of discount		2,720,700			2,720,700
Notes payable and accrued interest- related party		26,361,398			23,905,073
Total current liabilities		40,452,569			35,447,202
Convertible note payable, net of discount		1,344,507			1,277,261
Convertible note payable and accrued interest-related party, net of discount		2,444,758			2,096,113
Total liabilities		44,241,834			38,820,576
Commitments and contingencies
Stockholders’ deficit:
Common stock, $0.0001 par value; 150,000,000 shares authorized at November 30 and February 28, 2015; 113,041,432 and 113,041,432 issued and outstanding at November 30 and February 28, 2015, respectively		11,304			11,304
Additional paid-in capital		410,404,692			410,404,692
Accumulated deficit		(454,458,597	)		(448,981,080	)
Total stockholders’ deficit		(44,042,601	)		(38,565,084	)
Total liabilities and stockholders’ deficit	$	199,233		$	255,492

The accompanying notes are an integral part of these financial statements.

1

AURA SYSTEMS, INC.
CONDENSED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED NOVEMBER 30, 2015 AND 2014
(Unaudited)

	Three Months ended November 30,						Nine Months ended November 30,
	2015			2014			2015			2014
Net Revenues	$	37,695		$	80,929		$	245,329		$	1,041,451
Cost of goods sold		56,764			32,393			170,524			461,471
Gross Profit		(19,069	)		48,536			74,805			579,980
Expenses
Engineering, research and development expenses		105,298			103,012			337,520			768,386
Selling, general and administrative expenses		734,616			1,356,034			2,979,438			7,612,963
Total costs and expenses		839,914			1,459,046			3,316,958			8,381,349
Loss from operations		(858,983	)		(1,410,510	)		(3,242,153	)		(7,801,369	)
Other (income) and expense
Interest expense, net		797,740			716,764			2,294,864			2,368,512
Other (income) expense, net		-			-			(59,500	)		(5,580	)
Total other (income) expense		797,740			716,764			2,235,364			2,362,932
Net Loss	$	(1,656,723	)	$	(2,127,274	)	$	(5,477,517	)	$	(10,164,301	)
Total basic and diluted loss per share	$	(0.02	)	$	(0.02	)	$	(0.05	)	$	(0.09	)
Weighted average shares used to compute basic and diluted income (loss) per share*		113,041,432			110,962,175			113,041,432			108,646,703

*Weighted average number of shares used to compute basic and diluted loss per share is the same since the effect of the dilutive securities is anti-dilutive.

See accompanying notes to these unaudited condensed financial statements.

2

AURA SYSTEMS, INC.
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED NOVEMBER 30, 2015 AND 2014
(Unaudited)

	Nine Months Ended November 30,
	2015			2014
Cash flow from operating activities:
Net Loss	$	(5,477,517	)	$	(10,164,301	)
Adjustments to reconcile Net loss to net cash used in operating activities
Depreciation Expense		867			6,933
Amortization of debt discount		192,327			303,779
Stock option and warrant expense		-			3,308,179
Stock issued for services		-			420,000
(Increase) decrease in:
Accounts receivable		(8,613	)		67,865
Other current assets and deposit		32,751			58,151
Increase (decrease) in:
Accounts payable, customer deposit and accrued expenses		3,903,761			2,381,193
Net cash used in operations		(1,356,424	)		(3,618,201	)
Financing activities:
Issuance of common stock		-			2,193,852
Proceeds from notes payable		341,440			443,000
Payments on notes payable		-			(245,000	)
Proceeds from notes payable-related party		983,730			1,200,000
Net cash provided by financing activities:		1,325,170			3,591,852
Net decrease in cash & cash equivalents		(31,254	)		(26,349	)
Cash and cash equivalents at beginning of period		34,855			40,927
Cash and cash equivalents at end of period	$	3,601		$	14,578
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest		-			-
Income taxes		-			-

Unaudited supplemental disclosure of non-cash investing and financing activities:

During the Nine months ended November 30, 2015, $1,525,067 of accrued payroll was converted into demand notes payable bearing an interest rate of 10%.

During the Nine months ended November 30, 2014, we issued 2,800,000 shares of Common Stock for services rendered valued at $420,000.

See accompanying notes to these unaudited condensed financial statements.

3

AURA SYSTEMS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)

NOTE 1 – ACCOUNTING POLICIES

Accounting principles

In the opinion of management, the accompanying balance sheets and related interim statements of income and comprehensive income, and cash flows include all adjustments, consisting only of normal recurring items, necessary for their fair presentation in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Interim results are not necessarily indicative of results for a full year. The information included in this Form 10-Q should be read in conjunction with information included in the Company’s annual report on Form 10-K for the year ended February 28, 2015 filed on September 18, 2017 with the U.S. Securities and Exchange Commission.

Estimates

The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Recently Issued Accounting Pronouncements 

In April 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2015-03, Interest–Imputation of Interest (Subtopic 835-30) (“ASU 2015-03”), which changes the presentation of debt issuance costs in financial statements. ASU 2015-03 requires an entity to present such costs in the balance sheet as a direct deduction from the related debt liability rather than as an asset. Amortization of the costs will continue to be reported as interest expense. It is effective for annual reporting periods beginning after December 15, 2016. Early adoption is permitted. The new guidance will be applied retrospectively to each prior period presented. The Company is currently in the process of evaluating the impact of adoption of ASU 2015-03 on its balance sheets.

In January 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (ASU) 2016-01, which amends the guidance in U.S. GAAP on the classification and measurement of financial instruments. Changes to the current guidance primarily affect the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. In addition, the ASU clarifies guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities. The new standard is effective for fiscal years and interim periods beginning after December 15, 2017, and upon adoption, an entity should apply the amendments by means of a cumulative-effect adjustment to the balance sheet at the beginning of the first reporting period in which the guidance is effective. Early adoption is not permitted except for the provision to record fair value changes for financial liabilities under the fair value option resulting from instrument-specific credit risk in other comprehensive income. The Company is currently evaluating the impact of adopting this guidance.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. Topic 842 affects any entity that enters into a lease, with some specified scope exemptions. The guidance in this Update supersedes Topic 840, Leases. The core principle of Topic 842 is that a lessee should recognize the assets and liabilities that arise from leases. A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. For public companies, the amendments in this Update are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. We are currently evaluating the impact of adopting ASU No. 2016-02 on our financial statements.

In March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net) that clarifies how to apply revenue recognition guidance related to whether an entity is a principal or an agent. ASU 2016-08 clarifies that the analysis must focus on whether the entity has control of the goods or services before they are transferred to the customer and provides additional guidance about how to apply the control principle when services are provided and when goods or services are combined with other goods or services. The effective date for ASU 2016-08 is the same as the effective date of ASU 2014-09 as amended by ASU 2015-14, for annual reporting periods beginning after December 15, 2017, including interim periods within those years. The Company has not yet determined the impact of ASU 2016-08 on its financial statements.

4

In March 2016, the FASB issued ASU No. 2016-09, Compensation – Stock Compensation, or ASU No. 2016-09. The areas for simplification in this Update involve several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. For public entities, the amendments in this Update are effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Early adoption is permitted in any interim or annual period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. An entity that elects early adoption must adopt all of the amendments in the same period. Amendments related to the timing of when excess tax benefits are recognized, minimum statutory withholding requirements, forfeitures, and intrinsic value should be applied using a modified retrospective transition method by means of a cumulative-effect adjustment to equity as of the beginning of the period in which the guidance is adopted. Amendments related to the presentation of employee taxes paid on the statement of cash flows when an employer withholds shares to meet the minimum statutory withholding requirement should be applied retrospectively. Amendments requiring recognition of excess tax benefits and tax deficiencies in the income statement and the practical expedient for estimating expected term should be applied prospectively. An entity may elect to apply the amendments related to the presentation of excess tax benefits on the statement of cash flows using either a prospective transition method or a retrospective transition method. We are currently evaluating the impact of adopting ASU No. 2016-09 on our financial statements.

In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, which provides further guidance on identifying performance obligations and improves the operability and understandability of licensing implementation guidance. The effective date for ASU 2016-10 is the same as the effective date of ASU 2014-09 as amended by ASU 2015-14, for annual reporting periods beginning after December 15, 2017, including interim periods within those years.  In May 2016, the FASB issued ASU 2016-12 “Revenue from Contracts with Customers (Topic 606) - Narrow-Scope Improvements and Practical Expedients,” which amends the guidance on transition, collectability, non-cash consideration, and the presentation of sales and other similar taxes. ASU 2016-12 clarifies that, for a contract to be considered completed at transition, all (or substantially all) of the revenue must have been recognized under legacy GAAP. In addition, ASU 2016-12 clarifies how an entity should evaluate the collectability threshold and when an entity can recognize nonrefundable consideration received as revenue if an arrangement does not meet the standard’s contract criteria. The standard allows for both retrospective and modified retrospective methods of adoption. The Company has not yet determined the impact of ASU 2016-10 on its financial statements.

In June 2016, the FASB issued ASU 2016-13, “Measurement of Credit Losses on Financial Statements,” which requires companies to measure credit losses utilizing a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. ASU 2016-13 is effective for annual reporting periods, and interim periods therein, beginning after December 15, 2019 (fiscal year 2021 for the Company). The Company has not yet determined the potential effects of the adoption of ASU 2016-13 on its Financial Statements.

In August 2016, the FASB issued ASU 2016-15, “Classification of Certain Cash Receipts and Cash Payments,” which aims to eliminate diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows under Topic 230, Statement of Cash Flows, and other Topics. ASU 2016-15 is effective for annual reporting periods, and interim periods therein, beginning after December 15, 2017 (fiscal year 2019 for the Company). The Company has not yet determined the potential effects of the adoption of ASU 2016-15 on its Financial Statements.

Reclassifications

Certain reclassifications have been made to the comparative financial statements to conform to the current period presentation.

5

NOTE 2 – GOING CONCERN

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.  During the nine months ended November 30, 2015 and November 30, the Company incurred losses of $5,477,517 and $10,164,301, respectively and had negative cash flows from operating activities of $1,356,424 and $3,618,201, respectively.

If the Company is unable to generate profits and is unable to continue to obtain financing for its working capital requirements, it may have to curtail its business sharply or cease business altogether.

Substantial additional capital resources will be required to fund continuing expenditures related to our research, development, manufacturing and business development activities. The Company’s continuation as a going concern is dependent upon its ability to generate sufficient cash flow to meet its obligations on a timely basis, to retain its current financing, to obtain additional financing, and ultimately to attain profitability.

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of the Company as a going concern. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that could result from the outcome of this uncertainty.

During the next twelve months we intend to restart operations of our AuraGen/VIPER business both domestically and internationally. At the next shareholders meeting the shareholders will vote for an entire new slate of five board candidates. The new board when elected will hire a new management team. In addition we plan to acquire a new facility of approximately 45,000 square feet for operations, as well as, rebuild the engineering QA and sales teams to support the operation. We anticipate being able to fund these additions in the upcoming fiscal year.

NOTE 3 – INVENTORIES

Inventories, stated at the lower of cost (first in first out), or market consisted of the following:

	November 30, 2015			February 28, 2015
Raw materials	$	1,858,347		$	1,772,869
Finished goods		1,558,554			1,565,190
		3,416,901			3,338,059
Inventory reserve		(3,416,901	)		(3,338,059	)
	$	0		$	0

The Company has not operated, and therefore has not produced product since late 2015. As a result, while the Company believes that a significant portion of the inventory has value, we are unable to substantiate its demand and market value and as a result have elected to reserve it in its entirety as of November 30, 2015 and February 28, 2015.

NOTE 4 – OTHER CURRENT ASSETS

Other assets of $37,771 and $60,597 are primarily comprised of vendor advances of $37,771 and $38,179 as of November 30, 2015 and February 28, 2015.

6

NOTE 5 – PROPERTY, PLANT, AND EQUIPMENT

Property, plant, and equipment consisted of the following:

	November 30, 2015			February 28, 2015
Machinery and equipment	$	964,111		$	964,111
Furniture and fixtures		163,302			163,302
		1,127,413			1,127,413
Less accumulated depreciation		(1,127,335	)		(1,126,468	)
Property, plant and equipment, net	$	78		$	945

Depreciation expense was $868 and $6,933 for the Nine months ended November 30, 2015 and November 30, 2014, respectively.

NOTE 6 – NOTES PAYABLE

Notes payable consisted of the following:

	November 30, 2015		February 28, 2015
Demand notes payable, at 10% and 16%	$	3,809,498	$	1,942,990
Convertible Promissory Note dated August 10, 2012, due August 10, 2017, convertible into shares of our common stock at a price of $0.76 per share. The note carries an interest rate of 7% with interest only payments due on the 10th of each month with the principal payment due on the maturity date.  To-date, the Company has not made any interest payments as set forth in this note.		894,952		848,344
Convertible Promissory Note dated October 2, 2012, due October 2, 2017, convertible into shares of our common stock at a price of $0.76 per share. The note carries an interest rate of 7% with interest only payments due on the 2nd of each month with the principal payment due on the maturity date.  To-date, the Company has not made any interest payments as set forth in this note.		449,555		428,917
Senior secured convertible notes dated May 7, 2013, due May 7, 2014, convertible into shares of our common stock at a price of $0.75 per share. The note was not repaid.		2,395,700		2,395,700
Senior secured convertible notes dated June 20, 2013, due June 20, 2014, convertible into shares of our common stock at a price of $0.50 per share. The note was not repaid.		325,000		325,000
		7,874,705		5,940,951
Less: Current portion	$	6,530,198	$	4,663,690
Long-term portion	$	1,344,507	$	1,277,261

CONVERTIBLE DEBT

On May 7, 2013, the Company transferred 4 notes payable with a total principal value of $1,000,000 together with accrued interest, and consulting fees to a senior secured convertible note with a principal value of $1,087,000 (“New Kenmont Note”) and warrants to Kenmont Capital Partners (“Kenmont”). The New Kenmont Note has a 1-year maturity date and is convertible into shares of common stock at the conversion price of $0.75 per share. The warrants entitle the holder to acquire 1,449,333 shares and have an initial exercise price of $0.75 per share, and have a 7-year term. The Company recorded $342,020 as a discount, which is being amortized over the life of the note. As of the date of filing, the Company has not made any interest payments under the Kenmont Note.

7

On May 7, 2013, the Company transferred 2 note payables with a total principal value of $550,000 together with accrued interest to a senior secured convertible note with a principal value of $558,700 (“New LPD Note”) and warrants to LPD Investments, Ltd. (“LPD”). The New LPD Note has a 1-year maturity date and is convertible into shares of common stock at the conversion price of $0.75 per share. The warrants entitle the holder to acquire 744,933 shares and have an initial exercise price of $0.75 per share, and have a 7-year term. The Company recorded $175,793 as a discount, which is being amortized over the life of the note. As of the date of filing, the Company has not made any interest payments under the New LPD Note.

On May 7, 2013, the Company entered into an agreement with an individual for the sale of a $750,000 of secured convertible note payable and warrants. The note has a 1-year maturity date and is convertible into shares of common stock at the conversion price of $0.75 per share. The warrants entitle the holder to acquire 1,000,000 shares and have an initial exercise price of $0.75 per share, and have a 7-year term. The Company recorded $235,985 as a discount, which is being amortized over the life of the note. As of the date of filing, the note has not been repaid and is currently accruing interest at the rate of 16%.

On June 20, 2013, the Company entered into an agreement with four individuals for the sale of $325,000 of secured convertible notes payable and warrants. These notes have a 1-year maturity date and are convertible into shares of common stock at the conversion price of $0.50 per share. The warrants entitle the holders to acquire 433,334 shares and have an initial exercise price of $0.75 per share, and have a 7-year term. The Company recorded $63,622 as a discount, which is being amortized over the life of these notes. As of the date of filing, these notes have not been repaid and are currently accruing interest at the rate of 16%.

On August 19, 2013, the Company entered into an agreement with a member of its Board of Directors for the sale of $2,500,000 of convertible notes payable (the “Director Note”) and warrants. The Director Note carries a base interest rate of 9.5%, has a 4-year maturity date and is convertible into shares of common stock at the conversion price of $0.50 per share. The warrant entitles the holder to acquire 5,000,000 shares at an initial exercise price of $0.75 per share for a 7-year exercise period. The Company recorded $667,118 as a discount, which is being amortized over the life of the Director Note. On June 20, 2013, $500,000 of this Director Note was converted to a demand note payable.

Future maturities of notes payable at November 30, 2015 are as follows:

Year Ending February 28,
2016	$	-
2017		1,344,507
Total	$	1,344,507

7% Convertible Promissory Notes:

On August 10, 2012 the Company entered into an agreement with an individual for the sale of an unsecured convertible promissory note in the amount of $1,000,000. The note’s balance together with all accrued interest thereon shall be due and payable on August 10, 2017 and the annual interest rate is 7% per annum and is due to be repaid 5 years from the closing date.  The note holder will receive interest on the unpaid principal amount payable monthly in arrears on the tenth day of each calendar month commencing September 10, 2012. Interest shall be computed on the actual number of days elapsed over a 360-day year. The note holder has the right from and after the date of issuance, and until any time until the note is fully paid, to convert any outstanding and unpaid principal portion of the note into shares of the Company’s common stock. The company recorded $310,723 as a debt discount, which is being amortized over the life of the note. As of the date of filing, no payments of interest or principal have been made by the Company on this note.

On October 2, 2012 the Company entered into an agreement with an individual for the sale of an unsecured convertible promissory note in the amount of $500,000. The note’s balance together with all accrued interest thereon shall be due and payable on October 2, 2017 and the annual interest rate is 7% per annum and is due to be repaid 5 years from the closing date.  The note holder will receive interest on the unpaid principal amount payable monthly in arrears on the second day of each calendar month commencing November 2, 2012. Interest shall be computed on the actual number of days elapsed over a 360-day year. The note holder has the right from and after the date of issuance, and until any time until the note is fully paid, to convert any outstanding and unpaid principal portion of the note into shares of the Company’s common stock. The company recorded $137,583 as a debt discount, which is being amortized over the life of the note. As of the date of filing, no payments of interest or principal have been made by the Company on this note.

8

NOTE 7 – ACCRUED EXPENSES

Accrued expenses consisted of the following:

	November 30, 2015		February 28, 2015
Accrued payroll and related expenses	$	2,744,455	$	3,130,414
Accrued rent		219,829		216,547
Accrued interest		1,722,923		1,177,873
Other		90,000		85
Total	$	4,777,207	$	4,524,919

Accrued payroll and related expenses consists of salaries and vacation time accrued but not paid to employees due to our lack of financial resources.

NOTE 8 – SHAREHOLDERS’ EQUITY

Common Stock

No shares of common stock were issued during the Nine months ended November 30, 2015.

During the Nine months ended November 30, 2014, we issued 2,800,000 shares of Common Stock for services rendered valued at $420,000, 17,334,533 shares of common stock upon the exercise of warrants for proceeds of $1,773,453 and we sold 2,852,000 shares of common stock for proceeds of $460,400.

Employee Stock Options

During the Six months ended August 31, 2015, there were no stock options granted to employees.

In September, 2006, our Board of Directors adopted the 2006 Employee Stock Option Plan. Activity in this plan is as follows:

	2006 Plan
	Weighted-Average Exercise Price		Aggregate Intrinsic Value		Number of Options
Outstanding, February 28, 2015		$0.75-$1.00	$	0.00		7,777,000
Cancelled		-		-		-
Granted		-		-		-
Outstanding, November 30, 2015		$0.75-$1.00	$	0.00		7,777,000

9

The exercise prices for the options outstanding at November 30, 2015, and information relating to these options is as follows:

Options Outstanding

Exercisable Options

Range of Exercise Price

Number

Weighted Average Remaining Life

Weighted Average Exercise Price

Weighted Average Remaining Life

Number

Weighted Average Exercise Price

$0.75-$1.00

7,777,000

4.25 years

$

0.79

4.25 years

7,777,000

$

0.79

Warrants

Activity in issued and outstanding warrants is as follows:

	Number of Shares			Exercise Prices
Outstanding, February 28, 2015		37,546,048			$0.10-$1.50
Granted		-			-
Exercised		-			-
Cancelled		(1,210,642	)	$	1.50
Outstanding, November 30, 2015		36,335,406			$0.10-$1.50

There were no warrants issued in the nine months ended November 30, 2015.

The exercise prices for the warrants outstanding at November 30, 2015, and information relating to these warrants is as follows:

Range of Exercise Prices		Stock Warrants Outstanding		Stock Warrants Exercisable		Weighted-Average Remaining Contractual Life	Weighted-Average Exercise Price of Warrants Outstanding		Weighted-Average Exercise Price of Warrants Exercisable		Intrinsic Value
	$0.10-$0.75		18,381,012		18,381,012	68 months	$	0.55	$	0.55	$	0.00
	$0.75		1,082,734		1,082,734	66 months	$	0.75	$	0.75	$	0.00
	$0.75		1,000,000		1,000,000	56 months	$	0.75	$	0.75	$	0.00
	$0.75-$1.00		5,990,275		5,990,275	51 months	$	0.77	$	0.77	$	0.00
	$1.00-$1.25		795,000		795,000	13 months	$	1.05	$	1.05	$	0.00
	$1.00		8,272,187		8,272,187	13 months	$	1.00	$	1.00	$	0.00
	$1.50		105,000		105,000	7 months	$	1.50	$	1.50	$	0.00
	$0.75-1.50		709,198		709,198	4 months	$	1.25	$	1.25	$	0.00
			36,335,406		36,335,406

NOTE 9 – INCOME TAXES

Our effective tax rates were approximately 0.0% for the six months ended November 30, 2015 and 2014. Our effective tax rate was lower than the U.S. federal statutory rate primarily due to the fact that we record a full valuation allowance against our deferred tax assets, which is primarily comprised of net operating losses.

NOTE 10 – SEGMENT INFORMATION

We are a United States based company providing advanced technology products to various industries. The principal markets for our products are North America, Europe, and Asia. All of our operating long-lived assets are located in the United States. We operate in one segment.

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Total net revenues from customer geographical segments are as follows for the nine months ended November 30, 2015 and 2014:

	2015		2014
United States	$	48,956	$	542,737
Canada		2,800		84,717
Europe		210		33,588
Asia		137,384		318,348
Other		55,979		62,061
Total	$	245,329	$	1,041,451

NOTE 11 – SIGNIFICANT CUSTOMERS

Concentration Risk

In the Nine Months ended November 30, 2015, we sold AuraGen related products to three significant customers whose sales comprised 56%, 22% and 16% of net sales, respectively. Net accounts receivable from these customers at November 30, 2015 were $62,091, $0 and $0 respectively. These customers are not related to or affiliated with us. In the Nine months ended November 30, 2014, we sold AuraGen related products to three significant customers whose sales comprised 31%, 19% and 7% of net sales, respectively. Net accounts receivable from these customers at November 30, 2014 were $21,514, $0 and $0 respectively. These customers are not related to or affiliated with us.

NOTE 12 – RELATED PARTIES TRANSACTIONS

At November 30, 2015, the balance reflected in Notes Payable and accrued interest-related party, current, includes $14,811,515 of unsecured notes payable plus accrued interest of $7,309,993 to Mr. Breslow, a member of our Board of Directors, payable on demand, bearing interest at a rate of 10% per annum. The balance of $14,235,960 plus accrued interest of $6,220,790 as of February 28, 2015. During the nine months ended November 30, 2015 and November 30, 2014, interest amounting to $1,089,203 and $1,043,720 respectively, was incurred on these notes. The balance also includes $82,000 of unsecured notes payable plus accrued interest of $21,705 and to our CEO pursuant to a demand note entered into on April 5, 2013 and an unsecured note payable to Mr. Kopple, another member of our Board of Directors in the total amount of $3,623,321 and $3,047,856 plus accrued interest of $512,864 and $302,874 with interest at a rate of 10% per annum as of November 30, 2015 and February 28, 2015, respectively.

At November 30, 2015, the balance reflected in Convertible note payable and accrued interest-related party, long term, includes $1,797,462 of secured convertible notes payable net of discounts of $202,538 plus accrued interest of $647,296 to Mr. Kopple, a member of our Board of Directors.

NOTE 13 – COMMITMENTS

Our facilities consist of approximately 20,000 rented square feet in Stanton, California. The Stanton facility is currently being used for small quantity assembly and testing using components that are produced by various suppliers as well as for general offices, engineering and warehousing. The rent for the Stanton facility is $10,000 per month. The facility is not sufficient for our near term anticipated needs and the Company is actively looking for a new facility. The Company arrangements for the Stanton facility are on a month per month rent.

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NOTE 14 – SUBSEQUENT EVENTS:

On January 24, 2017 the Company entered into a Debt Refinancing Agreement with Mr. Breslow, a Director of the Company. Pursuant to the agreement, both Mr. Breslow and the Company acknowledged that total debt owed to Mr. Breslow was $23,872,614 including $8,890,574 of accrued interest. Mr. Breslow agreed to cancel and forgive all interest due, waive all events of default and sign a new five year convertible note in the amount of $14,930,041 providing for no interest for six months and interest of 5% per annum thereafter payable monthly in arrears. The note also provides various default provisions. The agreement further provides that $11,982,041 of the note will be converted into 7,403,705 shares of common stock concurrent with the stockholders approving a 1 for 7 reverse stock split within one year of entering this agreement and the remaining may be converted at any time thereafter post reverse split. In the absence of the approval within one year, this agreement will become null and void. The Company has elected to continue to accrue interest on this agreement until such time as the 1 for 7 reverse stock split has been approved.

On January 30, 2017, the Company entered into an agreement with five of our secured creditors (the “Secured Creditors”), pursuant to which a Securities Purchase Agreement dated May 6, 2013 (the “2013 Purchase Agreement”) among the Company, the Secured Creditors, and two other parties was amended (the “Amended Agreement”). As part of the 2013 transaction, we entered into a security agreement with the Secured Creditors and two other parties (collectively the “Buyers”) pursuant to which the Buyers were granted a security interest in all of Company’s assets except for its patents and other intellectual properties. The Secured Creditors have the right to amend the 2013 Purchase Agreement on behalf of all Buyers. The Amended Agreement amends the 2013 Purchase Agreement and the original security agreement, replaces the convertible notes with “Amended Notes” and replaces the warrants with “Amended Warrants.” The Amended Notes provide that all accrued and unpaid interest on the original notes through October 31, 2016 be added to the principal amount of the Amended Notes. The Amended Notes bear interest at the rate of 0% until May 1, 2017 and 5% per annum thereafter, subject to reduction to comply with applicable law, and mature in 60 months from the effective date of a 1 for 7 reverse stock split. Upon certain financings, the Company is obligated to make a payment to the holders of the Amended Notes in the amount of 20% of the outstanding Notes. Immediately upon the effectiveness of a 1 for 7 reverse stock split, 80% of the then-unpaid principal of and all of the then accrued but unpaid interest on the Amended Notes is automatically converted. In addition, the Amended Agreement waives any and all events of default under the 2013 Purchase Agreement and related transaction documents existing on or prior to January 30, 2017 and amends the defaults and remedies section of the 2013 Purchase Agreement. Two Buyers, who together represent less than 3% of the Company’s common stock issuable upon conversion of the original notes and exercise of the original warrants, did not sign the amendment and have named the Company and the Company’s Chief Executive Officer among several defendants in a lawsuit demanding repayment of loans totaling $125,000 plus accrued interest and exemplary damages. Management believes that the two plaintiffs have no valid claim against the Company or our Chief Executive Officer. In March 2017, plaintiffs moved for partial summary adjudication against the Company and our Chief Executive Officer; however, the Court denied plaintiffs’ motion. Both the Company and Mr. Gagerman have filed demurrers seeking dismissal of this action, which remain pending at this time.

On January 27, 2017, the Company entered into a joint venture (JV) agreement with a Chinese company to manufacture, market and distribute certain mobile power products based on Aura’s patented technology solely for the Peoples Republic of China territories. The JV will be owned 49% by the Company and 51% by the Chinese company who will also contribute $9,750,000 to the JV. The Company is required to contribute $250,000 and a license to specific technology. In addition, the Chinese company will invest $2,000,000 in Aura at $0.20 per share for a total of 10,000,000 shares of common stock and purchase a minimum of $1,250,000 of product supported by letters of credit for distribution until the JV factory is built, equipped, and staffed. Aura has also committed to supply training and technical personnel to the JV for six months at no cost other than reimbursement for travel, room and board. The agreement was subject to the approval of the Chinese Government which was received in April, 2017.

The Company is presently engaged in a dispute with one of its directors, Robert Kopple, relating to approximately $5.4 million and approximately 22 million warrants which Mr. Kopple claims to be owed to him and his affiliates by the Company. In July 2017, Mr. Kopple filed suit against the Company as well as against current Directors Mr. Gagerman and Mr. Diaz-Verson together with former Directors Mr. Breslow and Mr. Howsmon in connection with these allegations. The Company believes that it has valid defenses in these matters and intends to vigorously defend against these claims.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward Looking Statements

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 heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” regarding future events or prospects are forward-looking statements. The words “approximates,” “believes,” “forecasts,” “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 will 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 II, Item 1A of this Quarterly Report on Form 10-Q and those risks discussed in our other filings with the Securities and Exchange Commission, including those risks discussed under the caption “Risk Factors” in our Annual Report on Form 10-K for the year ended February 28, 2015 (as the same may be updated from time to time in subsequent quarterly reports), which discussion is incorporated herein by this reference.

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.

Overview

Our business is based on the exploitation of our patented mobile power solution known as the AuraGen for commercial and industrial applications and the VIPER for military applications. Our business model consists of three major components: (i) sales and marketing, (ii) engineering, and (iii) customer service and support.

(i) Our sales and marketing approach is composed of direct sales in North America and the use of agents, distributors and joint ventures for sales internationally. In North America, our primary focus is in (a) transport refrigeration, and (b) U.S. Military applications.

(ii) The second component of our business model is focused on the engineering support for the sales activities described above. The engineering support consists of the introduction of new features for our AuraGen/VIPER solution such as higher power, different voltages, three phase options, shore power systems, higher current solutions as well as interface kits for different platforms.

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(iii) The third component of our business model is customer service. In fiscal 2018, we expect to rehire several previously trained field engineers to support our product in North America. In addition, we are working closely with our Chinese Joint Venture partner to train their staff to support our products overseas.

During the first half of fiscal 2016, the Company significantly reduced operations due to lack of financial resources. During the second half of fiscal 2016 the Company’s operations were disrupted when the Company was forced to move from its facilities in Redondo Beach, California to a smaller facility in Stanton, California. Operations during the second half of fiscal 2016 were sporadic. During fiscal 2017, the Company suspended its engineering, manufacturing, sales, and marketing activities to focus on renegotiating numerous financial obligations.

The Company has been successful in restructuring its secured debt and has reached an agreement with its secured creditors whereby all defaults and penalties have been waived and 80% of the secured debt will be converted into shares of the Company’s common stock as soon as the Company holds an annual meeting of stockholders to elect a new board of directors. The balance (the remaining 20%), is to be paid to the secured creditors in cash if the Company raises at least $4.0 million in proceeds through new equity offering. Upon conversion, the converting secured creditors will receive approximately 3.9 million new common shares in exchange for approximately $5.73 million of converting debt.

The Company has also been successful in restructuring approximately $27.5 million of unsecured debt. Various unsecured creditors have agreed to waive all defaults and penalties, to forgive an aggregate of approximately $9.3 million in debt, and convert an aggregate of approximately $15.2 million of unsecured debt into approximately 10.2 million common shares. As of the date of this filing, Robert Kopple, the Company’s Vice Chairman of the Board, is the only significant unsecured note holder that has not agreed to restructure his debt. Mr. Kopple claims to be owed approximately $5.4 million on terms significantly preferable to other similarly-situated unsecured creditors. Mr. Kopple has not accepted the Company’s offer to restructure this debt to-date.

Our financial statements included in this report have been prepared on the assumption that we will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. However, as a result of our losses from operations, there is substantial doubt about our ability to continue as a going concern. Our independent auditors, in their report on the Company’s financial statements for the year ended February 28, 2016 expressed substantial doubt about the Company’s ability to continue as a going concern. The consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amount and classification of liabilities that may result from our possible inability to continue as a going concern.

Our ability to continue as a going concern is dependent upon the successful achievement of profitable operations, and the ability to generate sufficient cash from operations and obtain financing resources to meet our obligations. There is no assurance that such efforts will be successful.

Our current level of sales reflects our efforts to introduce a new product into the marketplace. Until recently, many purchases of the product were for evaluation purposes. Recently we started to receive repeat orders for larger quantities as different organizations are integrating our products into their vehicles. We seek to achieve profitable operations by obtaining market acceptance of the AuraGen^® as a competitive - if not superior - product providing mobile power anywhere anytime. There can be no assurance that this success will be achieved.

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Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated 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. On an on-going basis, we evaluate our estimates, including, but not limited to, those related to revenue recognition. We use authoritative pronouncements, historical experience and other assumptions as the basis for making judgments. Actual results could differ from those estimates. We believe that the following critical accounting policies affect our more significant judgments and estimates in the preparation of our consolidated financial statements.

Revenue Recognition

We are required to make judgments based on historical experience and future expectations, as to the reliability of shipments made to our customers. These judgments are required to assess the propriety of the recognition of revenue based on Staff Accounting Bulletin (“SAB”) No. 101, “Revenue Recognition,” and related guidance. Because sales are currently in limited volume and many sales are for evaluative purposes, we have not booked a general reserve for returns. We will consider an appropriate level of reserve for product returns when our sales increase to commercial levels.

Inventory Valuation and Classification

Inventories consist primarily of components and completed units for our AuraGen® product. Inventories are valued at the lower of cost (first-in, first-out) or market. Provision is made for estimated amounts of current inventories that will ultimately become obsolete due to changes in the product itself or vehicle engine types that go out of production. Management believes that existing inventories can, and will, be sold in the future without significant costs to upgrade it to current models and that the valuation of the inventories accurately reflects the realizable values of these assets. The AuraGen® product being sold currently is not technologically different from those in current use. Existing finished goods inventories can be upgraded to the current model with only a small amount of materials and manpower. We make these assessments based on the following factors: i) existing orders, ii) age of the inventory, iii) historical experience and iv) our expectations as to future sales. If expected sales volumes do not materialize, there would be a material impact on our financial statements.

Valuation of Long-Lived Assets

Long-lived assets, consisting primarily of property and equipment, and patents and trademarks, comprise a portion of our total assets.  Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that their carrying values August not be recoverable. Recoverability of assets is measured by a comparison of the carrying value of an asset to the future net cash flows expected to be generated by those assets. Net cash flows are estimated based on expectations as to the realize-ability of the asset. Factors that could trigger a review include significant changes in the manner of an asset’s use or our overall strategy.

Specific asset categories are treated as follows:

Accounts Receivable: We record an allowance for doubtful accounts based on our expectation of collect-ability of current and past due accounts receivable.

Property, Plant and Equipment: We depreciate our property and equipment over various useful lives ranging from five to ten years. Adjustments are made as warranted when market conditions and values indicate that the current value of an asset is less than its net book value.

When we determine that an asset is impaired, we measure any such impairment by discounting an asset’s realizable value to the present using a discount rate appropriate to the perceived risk in realizing such value. When we determine that an impaired asset has no foreseeable realizable value, we write such asset down to zero.

Results of Operations

Nine months ended November 30, 2015 compared to nine months ended November 30, 2014

Net revenues for the nine months ended November 30, 2015 (the “Nine months FY2016”) decreased $796,122 to $245,329 from $1,041,451 in the nine months ended November 30, 2014 (the “Nine months FY201”), a decrease of 76%. The substantial decrease is primarily due to the fact that the Company does not have the financial resources to purchase parts needed to manufacture its’ products on a regular basis and has had to furlough many employees due to the inability to meet payroll obligations.

Cost of goods decreased $290,947 (63%) to $170,524 in the Nine months FY2016 from $461,471 in the Nine months FY2015. The decrease in cost of goods is a result of the decrease in sales.

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Engineering, research and development expenses decreased $430,866 (56%) to $337,520 in the Nine months FY2016 from $768,386 in the Nine months FY 2015. The decline is primarily attributable to a lack of funds causing the Company to severely curtail operations.

Selling, general and administrative expense decreased $4,633,525 (61%) to $2,979,438 in the Nine months FY2016 from $7,612,963 in the Nine months FY2015. The prior year had non-cash charges of approximately $2,760,000 for warrants issued to replace previously issued and cancelled warrants, and new warrants issued to a board member attached to a note payable. This, combined with the substantial curtailment of activities due to a lack of funding resulted in the current year decrease.

Net interest expense in the Nine months FY2016 decreased $73,648 (3%) to $2,294,864 from $2,368,512 in the Nine months FY2015 as a result of the decrease in the amortization of the debt discount on the financing completed in the third quarter of FY2012, which was fully repaid in the first quarter of the prior fiscal year.

Our net loss for the Nine months FY2016 decreased $4,686,784 to $5,477,517 from $10,164,301 in the Nine months FY2015.

Three months ended November 30, 2015 compared to three months ended November 30, 2014

Net revenues for the three months ended November 30, 2015 (the “Third Quarter FY2016”) decreased $43,234 to $37,695 from $80,929 in the three months ended November 30, 2014 (the “Third Quarter FY2015”), a decrease of 53%. The substantial decrease is primarily due to the fact that the Company does not have the financial resources to purchase parts needed to manufacture its’ products on a regular basis and has had to furlough many employees due to the inability to meet payroll obligations.

Cost of goods increased $24,371 (75%) to $56,764 in the Third Quarter FY2016 from $32,393 in the Third Quarter FY2015.

Engineering, research and development expenses increased $2,286 (2%) to $105,298 in the Third Quarter FY2016 from $103,012 in the Third Quarter FY 2015. Selling, general and administrative expense decreased $621,418 (46%) to $734,616 in the Third Quarter FY2016 from $1,356,034 in the Third Quarter FY2015. The decrease is primarily attributable to the lack of financial resources we have, which has resulted in the furloughing of a large portion of our workforce due to the inability to fund payroll and payroll related expenses, and the general reduction in operating expenses associated with a minimal level of business activity.

Net interest expense in the Third Quarter FY2015 increased $80,976 (11%) to $797,740 from $716,764 in the Third Quarter FY2015 as a result of an increase in the level of debt outstanding.

Our net loss for the Third Quarter FY2016 decreased $470,551 to $1,656,723 from $2,127,274 in the Third Quarter FY2015.

Liquidity and Capital Resources

We had cash of approximately $3,600 and $35,000 as of November 30, 2015, and February 28, 2015, respectively.  We had a working capital deficit at November 30, 2015, and February 28, 2015 of $40,343,627 and $35,292,793, respectively. The working capital deficit includes notes payable and accrued interest to related parties of $26,361,398 and $23,905,073 as of November 30 and February 28, 2015, respectively. As of November 30, 2015, we had accounts receivable, net of allowance for doubtful accounts, of $67,570 compared to $58,957 as of February 28, 2015. 

Net cash used in operations for the Nine months ended November 30, 2015, was $1,356,424, a decrease of $2,261,777 from the comparable period in the prior fiscal year. Net cash provided by financing activities during the Nine months ended November 30, 2015, was $1,325,170, resulting from net proceeds from notes payable.

There were no acquisitions of property and equipment in the Nine months FY 2016 or the Nine months FY 2015.

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Accrued expenses as of November 30, 2015 increased $252,288 to $4,777,207 from $4,524,919 as of February 28, 2015. Approximately $2,450,000 of accrued expenses is salaries accrued but unpaid to certain employees and ex-employees due to a lack of resources, and approximately $501,000 is accrued but unused vacation time earned by employees.

Net proceeds from the issuance of debt totaled $1,325,170 in the Nine months FY 2016, compared with $1,398,000 in the Nine months FY 2015. As of November 30, 2015, the total amount owing a board member is $14,811,515 plus accrued interest of approximately $7,309,992. We also owe another Board member a total of $5,420,783, net of discounts of $202,538 plus accrued interest of approximately $1,160,160. If the Board members were to demand repayment, we do not currently have the resources to make the payments.

The Company had a deficit of $44,042,601 in shareholders’ equity as of November 30, 2015, compared to $38,565,084 as of February 28, 2015.

Since 2002 substantially all of our revenues from operations have been derived from sales of the AuraGen^®. The cash flow generated from our operations to date has not been sufficient to fund our working capital needs, and we cannot predict when operating cash flow will be sufficient to fund working capital needs.

In the past, in order to maintain liquidity we have relied upon external sources of financing, principally equity financing and private indebtedness. We have no bank line of credit and require additional debt or equity financing to fund ongoing operations. The issuance of additional shares of equity in connection with any such financing could dilute the interests of our existing stockholders, and such dilution could be substantial. If we cannot raise needed funds, we would 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.

Capital Transactions

During the quarter ended November 30, 2015, we did not issue any shares of common stock.

During the quarter ended November 30, 2014, we sold 1,352,000 shares of common stock for proceeds of $160,400.

Inventories

Inventories consist primarily of components and completed units of 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. Since sales did not meet such expectations, we have been selling product from this inventory for several years.

Most of our inventory consists of a variety of (i) metallic, mechanical components, and (ii) electrical components including metallic chassis to hold the assembled electrical systems. The vast majority of mechanical components are not aged and most of the electrical components are also not aged. The components that are aged are related to the prime mover/Generator interface that may not be in demand any longer.

In the past we have offered and ship three different basic models of systems; (i) a 5 kW based systems, (ii) an 8.5 kW based system and (iii) a 16 kW based systems (two 8.5 kW systems configured in tandem back-to-back). Each of these systems can be configured with different options such as 110 VAC only, 220 VAC only, 24 VDC only, 12 VDC only and AC/DC combinations of the same or different voltages. In addition, the system can be configured with single phase, split phase or three-phase output.

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A number of the mechanical components are common to all three of the above configurations, while others are very specific. For example, the stators and rotors for the 5 kW systems are different from the 8.5 kW systems, but the housings are the same. Similarly, the electrical components consist of some parts that are geared for a specific configuration while others are generic and can be used for all of the configurations. The electrical chassis are also interchangeable between the 5 kW and 8.5 kW configurations. Due to the nature and mix of the product being sold, frequently, the 5 kW electrical systems are upgraded to 8.5 kW systems by replacing some components.

From the above description one can understand that the inventory consists of numerous components and subassemblies but not finished systems; therefore, each system that is sold and shipped to a customer is built from some components that are in inventory and others that need to be purchased to be able to configure the required system.

8.5 kW systems represent the majority of product previously shipped. These systems are built by using existing inventory subassemblies and parts, including some that can be used for both 5 kW and 8.5 kW systems, and additional parts that are purchased to provide the required configuration. Typically, such systems are built using approximately 20 to 25 percent of existing inventory and approximately 75% of additional parts that are purchased.

However, most of the systems sold to the Korean military consist of 5 kW systems. They have been purchasing approximately 100 systems per year and have indicated to us that they will continue to do so for the next five years. To date we have shipped over 500 such systems (in this case 100% of the rotors and stators are used from existing inventory and over 50% of the electrical parts are also from inventory).

In addition to the above, we have encountered demand for different and unique configurations that require the purchase of additional parts.

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

As a smaller reporting company, we are not required to provide disclosure under this Item 3.

ITEM 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures designed to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934, is recorded, processed, summarized and reported within the specified time periods. For the last 3 fiscal years, these control and procedures broke down due to insufficient capital to maintain such controls and procedures. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934 is accumulated and communicated to its management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. As of the end of the period covered by this report, the Company’s management evaluated, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, the effectiveness of the Company’s disclosure controls and procedures. Based on the evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that these controls and procedures were ineffective for the last 3 fiscal years in ensuring that information requiring disclosure is recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting during our fiscal quarter ended November 30, 2015, which have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

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PART II - OTHER INFORMATION

ITEM 1. Legal Proceedings

We are subject to the legal proceedings and claims discussed below as well as certain other legal proceedings and claims that have not been fully resolved and that have arisen in the ordinary course of business. Our management evaluates our exposure to these claims and proceedings individually and in the aggregate and evaluates potential losses on such litigation if the amount of the loss is estimable and the loss is probable. However, the outcome of legal proceedings and claims brought against the Company is subject to significant uncertainty. Although management considers the likelihood of such an outcome to be remote, if one or more of these legal matters were resolved against the Company for amounts in excess of management’s expectations, the Company’s consolidated 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 2016, the Company was sued by a former employee for a work-related injury. The plaintiff is seeking $45,000. The Company has made the plaintiff a settlement offer which, as of the date of this filing, has not been accepted.

In November 2016, the Company was sued by a former customer for approximately $111,712 relating to an alleged failure by the Company to partially deliver against an advanced payment. In connection with its claims, the plaintiff has asserted that by virtue of the Company’s failure to fully deliver upon the contracted order, the plaintiff has obtained a perpetual worldwide license to utilize the Company’s actuator technology. The Company disputes the plaintiff’s claims and believes that it holds various claims against the plaintiff. In April 2017, the plaintiff’s action was involuntarily dismissed by the court although plaintiff sought to have the dismissal set aside on the grounds of attorney error. In June 2017, the court granted plaintiff’s motion and the Company intends to oppose this action and file a counterclaim.

Subsequent to year end, the Company’s former COO has been awarded approximately $238,000 in accrued salary and related charges by the California labor board. The Company believes that this award does not reflect the amount owed which is significantly lower and is exploring all its options and available remedies and is working toward an offer to settle this matter.

The Company and the Company’s Chief Executive Officer, Melvin Gagerman, are among several defendants named in a lawsuit filed by two secured creditors demanding repayment of loans totaling $125,000 plus accrued interest and exemplary damages. In January 2017, the Company entered into an agreement with all secured creditors other than the two plaintiffs. However, because secured creditors holding in excess of 97% of the issuable stock upon conversion have executed the agreement, the agreement is binding on all of the secured creditors, including the two plaintiffs. That agreement, among other provisions, waives all past events of default. It is the Company’s position that the two plaintiffs are not entitled to any payment or other relief at this time and therefore that they have no valid claim against the Company or Mr. Gagerman. In March 2017, plaintiffs moved for partial summary adjudication against the Company and Mr. Gagerman; however, the Court denied plaintiff’s motion. Thereafter, the Court sustained demurrers by Mr. Gagerman and the Company but granted plaintiffs leave to amend. In response to the plaintiffs’ second amended complaint, both the Company and Mr. Gagerman intend to further demurrer seeking dismissal of this action.

In June 2015, the landlord of the Company’s primary facility in Redondo Beach, California initiated litigation against us seeking to terminate the Company’s lease and require the Company to vacate the premises prior to the scheduled lease end. As a result of that litigation, the Company was forced to vacate its primary facility and relocate to its present facility in Stanton, California. To date, no action seeking damages or any other amount has been filed against the Company by the landlord, nor does the Company believe it has any further liability to the landlord.

The Company is presently engaged in a dispute with one of its directors, Robert Kopple, relating to approximately $5.4 million and approximately 22 million warrants which Mr. Kopple claims to be owed to him and his affiliates by the Company. In July 2017, Mr. Kopple filed suit against the Company as well as against current Directors Mr. Gagerman and Mr. Diaz-Verson together with former Directors Mr. Breslow and Mr. Howsmon in connection with these allegations. The Company believes that it has valid defenses in these matters and intends to vigorously defend against these claims.

ITEM 1A. Risk Factors.

In addition to the other information set forth in this report, you should carefully consider the risk factors disclosed in Item 1A, “Risk Factors,” of the Company’s annual report on Form 10-K for the year ended February 28, 2015.

19

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds

During the quarter ended November 30, 2015, we did not issue any shares of common stock.

All of the sales of unregistered securities are believed to be exempt from registration pursuant to Section 4(2) of the Securities Act of 1933 as these offerings were a private placement to a limited number of qualified investors without public solicitation or advertising.

ITEM 3. Defaults Upon Senior Securities.

We have commitments to pay investors and lenders $38,532,379 comprising principal and accrued interest on various convertible notes, non-convertible notes and loans payable through November 30, 2015. Due to our lack of financial resources, the Company was unable to make various required principal and interest payments under a number of notes payable, and was in potential default on $12,801,364 of such debt as of November 30, 2015.

In 2017, the Company has been successful in restructuring a total of approximately $33.7 million of debt (the “Restructured Debt”) through agreements reached with all of the Company’s secured creditors and the majority of the Company’s unsecured creditors. Pursuant to these restructuring agreements, any and all defaults and penalties with respect to the Restructured Debt have been waived, approximately $9.3 million in accrued interest has been forgiven, and approximately $20.9 million will be converted into approximately 14.1 million shares of the Company’s common stock upon stockholder approval of a 1-for-7 reverse stock split and the election a new board of directors. Of the $12,801,364 of notes payable in potential default as of November, 30, 2015, $6,245,841 was subsequently restructured in 2017 and any potential defaults with respect to this amount have been resolved.

As of the date of this filing, Robert Kopple, the Company’s Vice Chairman of the Board, is the only significant unsecured note holder that has not agreed to restructure his debt. Mr. Kopple claims to be owed approximately $5.4 million plus interest and approximately 22 million warrants on terms significantly preferable to other similarly-situated unsecured creditors. To-date, Mr. Kopple has not accepted the Company’s multiple offers to restructure his debt. The Company is presently engaged in a dispute with Mr. Kopple relating to the debt and securities which Mr. Kopple claims to be owed to him and his affiliates by the Company. See, “Note 6 – Notes Payable”, “Note 12 – Related Parties Transactions”, “Note 14 –Subsequent Events” to the Company’s condensed financial statements and “Liquidity and Capital Resources” in “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” elsewhere in this quarterly report on Form 10-Q for additional information regarding amounts that may be owed under the Company’s notes payable and the recent restructuring of certain Company debt.

ITEM 4. Mine Safety Disclosures

Not applicable.

ITEM 5. Other Information.

None.

ITEM 6.  Exhibits

31.1	Certifications pursuant to Rule 13a-14 under the Securities Exchange Act of 1934.
31.2	Certifications pursuant to Rule 13a-14 under the Securities Exchange Act of 1934.
32.1	Certification of CEO and CFO Pursuant to 18 U.S.C. § 1350, as Adopted Pursuant to § 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance Document
101.SCH	XBRL Schema Document
101.CAL	XBRL Calculation Linkbase Document
101.DEF	XBRL Definition Linkbase
101.LAB	XBRL Label Linkbase Document
101.PRE	XBRL Presentation Linkbase Document

20

SIGNATURES

Pursuant to the requirements 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.
(Registrant)
Date: September 18, 2017
By:	/s/ Melvin Gagerman
Melvin Gagerman Acting Chief Financial Officer (Principal Financial and Accounting Officer and Duly Authorized Officer)

21

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Melvin Gagerman, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Aura Systems, Inc.;
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;
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;
4.	The registrant’s other certifying officer 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(f) and 15d-15(f)) for the registrant and have:

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;
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;
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
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

5. The registrant’s other certifying officer 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):

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
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: September 18, 2017

By:	/s/ Melvin Gagerman
	Melvin Gagerman
	Chief Executive Officer
	(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Melvin Gagerman, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Aura Systems, Inc.;

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;

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;

4. The registrant’s other certifying officer 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(f) and 15d-15(f)) for the registrant and have:

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;

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;

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

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

5. The registrant’s other certifying officer 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):

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

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: September 18, 2017

By:	/s/ Melvin Gagerman
	Melvin Gagerman
	Acting Chief Financial Officer
	(Principal Financial and Accounting Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q for the period ended November 30, 2015 of Aura Systems, Inc. (the “Company”) as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Melvin Gagerman, Chief Executive Officer and Acting Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the periods presented in the Report.

By:	/s/ Melvin Gagerman
	Melvin Gagerman
	Chief Executive Officer and Acting Chief Financial Officer

Date: September 18, 2017

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Document and Entity Information - shares	9 Months Ended
	Nov. 30, 2015	Aug. 31, 2017
Document and Entity Information [Abstract]
Entity Registrant Name	AURA SYSTEMS INC
Entity Central Index Key	0000826253
Amendment Flag	false
Trading Symbol	AUSI
Current Fiscal Year End Date	--02-28
Document Type	10-Q
Document Period End Date	Nov. 30, 2015
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q3
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		126,608,391

XML

Balance Sheets (Unaudited) - USD ($)	Nov. 30, 2015	Feb. 28, 2015
Current assets:
Cash and cash equivalents	$ 3,601	$ 34,855
Accounts receivable, net of allowance for doubtful accounts of $50,000 at November 30 and February 28, 2015, respectively	67,570	58,957
Other current assets	37,771	60,597
Total current assets	108,942	154,409
Deposits	90,213	100,138
Property, plant, and equipment, net	78	945
Total assets	199,233	255,492
Current liabilities:
Accounts payable	2,150,113	1,889,453
Accrued expenses	4,777,207	4,524,919
Customer advances	633,653	464,067
Notes payable	3,809,498	1,942,990
Convertible notes payable, net of discount	2,720,700	2,720,700
Notes payable and accrued interest- related party	26,361,398	23,905,073
Total current liabilities	40,452,569	35,447,202
Convertible note payable, net of discount	1,344,507	1,277,261
Convertible note payable and accrued interest-related party, net of discount	2,444,758	2,096,113
Total liabilities	44,241,834	38,820,576
Commitments and contingencies
Stockholders' deficit:
Common stock, $0.0001 par value; 150,000,000 shares authorized at November 30 and February 28, 2015; 113,041,432 and 113,041,432 issued and outstanding at November 30 and February 28, 2015, respectively	11,304	11,304
Additional paid-in capital	410,404,692	410,404,692
Accumulated deficit	(454,458,597)	(448,981,080)
Total stockholders' deficit	(44,042,601)	(38,565,084)
Total liabilities and stockholders' deficit	$ 199,233	$ 255,492

XML

Balance Sheets (Parenthetical) (Unaudited) - USD ($)	Nov. 30, 2015	Feb. 28, 2015
Statement of Financial Position [Abstract]
Accounts receivable, Allowance for doubtful accounts	$ 50,000	$ 50,000
Common stock, par value	$ 0.0001	$ 0.0001
Common stock, shares authorized	150,000,000	150,000,000
Common stock, shares issued	113,041,432	113,041,432
Common stock, shares outstanding	113,041,432	113,041,432

XML

Condensed Statements of Operations (Unaudited) - USD ($)		3 Months Ended		9 Months Ended
		Nov. 30, 2015	Nov. 30, 2014	Nov. 30, 2015	Nov. 30, 2014
Income Statement [Abstract]
Net Revenues		$ 37,695	$ 80,929	$ 245,329	$ 1,041,451
Cost of goods sold		56,764	32,393	170,524	461,471
Gross Profit		(19,069)	48,536	74,805	579,980
Expenses
Engineering, research and development expenses		105,298	103,012	337,520	768,386
Selling, general and administrative expenses		734,616	1,356,034	2,979,438	7,612,963
Total costs and expenses		839,914	1,459,046	3,316,958	8,381,349
Loss from operations		(858,983)	(1,410,510)	(3,242,153)	(7,801,369)
Other (income) and expense
Interest expense, net		797,740	716,764	2,294,864	2,368,512
Other (income) expense, net				(59,500)	(5,580)
Total other (income) expense		797,740	716,764	2,235,364	2,362,932
Net Loss		$ (1,656,723)	$ (2,127,274)	$ (5,477,517)	$ (10,164,301)
Total basic and diluted loss per share		$ (0.02)	$ (0.02)	$ (0.05)	$ (0.09)
Weighted average shares used to compute basic and diluted income (loss) per share*	[1]	113,041,432	110,962,175	113,041,432	108,646,703

[1] Weighted average number of shares used to compute basic and diluted loss per share is the same since the effect of the dilutive securities is anti-dilutive.

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Condensed Statements of Cash Flows (Unaudited) - USD ($)	9 Months Ended
	Nov. 30, 2015	Nov. 30, 2014
Cash flow from operating activities:
Net Loss	$ (5,477,517)	$ (10,164,301)
Adjustments to reconcile Net loss to net cash used in operating activities
Depreciation Expense	867	6,933
Amortization of debt discount	192,327	303,779
Stock option and warrant expense		3,308,179
Stock issued for services		420,000
(Increase) decrease in:
Accounts receivable	(8,613)	67,865
Other current assets and deposit	32,751	58,151
Increase (decrease) in:
Accounts payable, customer deposit and accrued expenses	3,903,761	2,381,193
Net cash used in operations	(1,356,424)	(3,618,201)
Financing activities:
Issuance of common stock		2,193,852
Proceeds from notes payable	341,440	443,000
Payments on notes payable		(245,000)
Proceeds from notes payable-related party	983,730	1,200,000
Net cash provided by financing activities:	1,325,170	3,591,852
Net decrease in cash & cash equivalents	(31,254)	(26,349)
Cash and cash equivalents at beginning of period	34,855	40,927
Cash and cash equivalents at end of period	3,601	14,578
Cash paid during the period for:
Interest
Income taxes

XML

Condensed Statements of Cash Flows (Parenthetical) (Unaudited) - USD ($)	9 Months Ended
	Nov. 30, 2015	Nov. 30, 2014
Unaudited supplemental disclosure of non-cash investing and financing activities:
Conversion of accrued payroll	$ 1,525,067
Notes payable interest rate	10.00%
Shares issued for services		$ 420,000
Shares issued for services, shares		2,800,000

XML

Accounting Policies

9 Months Ended

Nov. 30, 2015

Accounting Policies [Abstract]

ACCOUNTING POLICIES

NOTE 1 – ACCOUNTING POLICIES

Accounting principles

In the opinion of management, the accompanying balance sheets and related interim statements of income and comprehensive income, and cash flows include all adjustments, consisting only of normal recurring items, necessary for their fair presentation in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Interim results are not necessarily indicative of results for a full year. The information included in this Form 10-Q should be read in conjunction with information included in the Company’s annual report on Form 10-K for the year ended February 28, 2015 filed on September 18, 2017 with the U.S. Securities and Exchange Commission.

Estimates

The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Recently Issued Accounting Pronouncements 

In April 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2015-03, Interest–Imputation of Interest (Subtopic 835-30) (“ASU 2015-03”), which changes the presentation of debt issuance costs in financial statements. ASU 2015-03 requires an entity to present such costs in the balance sheet as a direct deduction from the related debt liability rather than as an asset. Amortization of the costs will continue to be reported as interest expense. It is effective for annual reporting periods beginning after December 15, 2016. Early adoption is permitted. The new guidance will be applied retrospectively to each prior period presented. The Company is currently in the process of evaluating the impact of adoption of ASU 2015-03 on its balance sheets.

In January 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (ASU) 2016-01, which amends the guidance in U.S. GAAP on the classification and measurement of financial instruments. Changes to the current guidance primarily affect the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. In addition, the ASU clarifies guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities. The new standard is effective for fiscal years and interim periods beginning after December 15, 2017, and upon adoption, an entity should apply the amendments by means of a cumulative-effect adjustment to the balance sheet at the beginning of the first reporting period in which the guidance is effective. Early adoption is not permitted except for the provision to record fair value changes for financial liabilities under the fair value option resulting from instrument-specific credit risk in other comprehensive income. The Company is currently evaluating the impact of adopting this guidance.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. Topic 842 affects any entity that enters into a lease, with some specified scope exemptions. The guidance in this Update supersedes Topic 840, Leases. The core principle of Topic 842 is that a lessee should recognize the assets and liabilities that arise from leases. A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. For public companies, the amendments in this Update are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. We are currently evaluating the impact of adopting ASU No. 2016-02 on our financial statements.

In March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net) that clarifies how to apply revenue recognition guidance related to whether an entity is a principal or an agent. ASU 2016-08 clarifies that the analysis must focus on whether the entity has control of the goods or services before they are transferred to the customer and provides additional guidance about how to apply the control principle when services are provided and when goods or services are combined with other goods or services. The effective date for ASU 2016-08 is the same as the effective date of ASU 2014-09 as amended by ASU 2015-14, for annual reporting periods beginning after December 15, 2017, including interim periods within those years. The Company has not yet determined the impact of ASU 2016-08 on its financial statements.

In March 2016, the FASB issued ASU No. 2016-09, Compensation – Stock Compensation, or ASU No. 2016-09. The areas for simplification in this Update involve several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. For public entities, the amendments in this Update are effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Early adoption is permitted in any interim or annual period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. An entity that elects early adoption must adopt all of the amendments in the same period. Amendments related to the timing of when excess tax benefits are recognized, minimum statutory withholding requirements, forfeitures, and intrinsic value should be applied using a modified retrospective transition method by means of a cumulative-effect adjustment to equity as of the beginning of the period in which the guidance is adopted. Amendments related to the presentation of employee taxes paid on the statement of cash flows when an employer withholds shares to meet the minimum statutory withholding requirement should be applied retrospectively. Amendments requiring recognition of excess tax benefits and tax deficiencies in the income statement and the practical expedient for estimating expected term should be applied prospectively. An entity may elect to apply the amendments related to the presentation of excess tax benefits on the statement of cash flows using either a prospective transition method or a retrospective transition method. We are currently evaluating the impact of adopting ASU No. 2016-09 on our financial statements.

In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, which provides further guidance on identifying performance obligations and improves the operability and understandability of licensing implementation guidance. The effective date for ASU 2016-10 is the same as the effective date of ASU 2014-09 as amended by ASU 2015-14, for annual reporting periods beginning after December 15, 2017, including interim periods within those years.  In May 2016, the FASB issued ASU 2016-12 “Revenue from Contracts with Customers (Topic 606) - Narrow-Scope Improvements and Practical Expedients,” which amends the guidance on transition, collectability, non-cash consideration, and the presentation of sales and other similar taxes. ASU 2016-12 clarifies that, for a contract to be considered completed at transition, all (or substantially all) of the revenue must have been recognized under legacy GAAP. In addition, ASU 2016-12 clarifies how an entity should evaluate the collectability threshold and when an entity can recognize nonrefundable consideration received as revenue if an arrangement does not meet the standard’s contract criteria. The standard allows for both retrospective and modified retrospective methods of adoption. The Company has not yet determined the impact of ASU 2016-10 on its financial statements.

In June 2016, the FASB issued ASU 2016-13, “Measurement of Credit Losses on Financial Statements,” which requires companies to measure credit losses utilizing a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. ASU 2016-13 is effective for annual reporting periods, and interim periods therein, beginning after December 15, 2019 (fiscal year 2021 for the Company). The Company has not yet determined the potential effects of the adoption of ASU 2016-13 on its Financial Statements.

In August 2016, the FASB issued ASU 2016-15, “Classification of Certain Cash Receipts and Cash Payments,” which aims to eliminate diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows under Topic 230, Statement of Cash Flows, and other Topics. ASU 2016-15 is effective for annual reporting periods, and interim periods therein, beginning after December 15, 2017 (fiscal year 2019 for the Company). The Company has not yet determined the potential effects of the adoption of ASU 2016-15 on its Financial Statements.

Reclassifications

Certain reclassifications have been made to the comparative financial statements to conform to the current period presentation.

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Going Concern

9 Months Ended

Nov. 30, 2015

Going Concern [Abstract]

GOING CONCERN

NOTE 2 – GOING CONCERN

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.  During the nine months ended November 30, 2015 and November 30, the Company incurred losses of $5,477,517 and $10,164,301, respectively and had negative cash flows from operating activities of $1,356,424 and $3,618,201, respectively.

If the Company is unable to generate profits and is unable to continue to obtain financing for its working capital requirements, it may have to curtail its business sharply or cease business altogether.

Substantial additional capital resources will be required to fund continuing expenditures related to our research, development, manufacturing and business development activities. The Company’s continuation as a going concern is dependent upon its ability to generate sufficient cash flow to meet its obligations on a timely basis, to retain its current financing, to obtain additional financing, and ultimately to attain profitability.

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of the Company as a going concern. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that could result from the outcome of this uncertainty.

During the next twelve months we intend to restart operations of our AuraGen/VIPER business both domestically and internationally. At the next shareholders meeting the shareholders will vote for an entire new slate of five board candidates. The new board when elected will hire a new management team. In addition we plan to acquire a new facility of approximately 45,000 square feet for operations, as well as, rebuild the engineering QA and sales teams to support the operation. We anticipate being able to fund these additions in the upcoming fiscal year.

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Inventories

9 Months Ended

Nov. 30, 2015

Inventories [Abstract]

INVENTORIES

NOTE 3 – INVENTORIES

Inventories, stated at the lower of cost (first in first out), or market consisted of the following:

	November 30, 2015			February 28, 2015
Raw materials	$	1,858,347		$	1,772,869
Finished goods		1,558,554			1,565,190
		3,416,901			3,338,059
Inventory reserve		(3,416,901	)		(3,338,059	)
	$	0		$	0

The Company has not operated, and therefore has not produced product since late 2015. As a result, while the Company believes that a significant portion of the inventory has value, we are unable to substantiate its demand and market value and as a result have elected to reserve it in its entirety as of November 30, 2015 and February 28, 2015.

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Other Current Assets

9 Months Ended

Nov. 30, 2015

Other Current Assets [Abstract]

OTHER CURRENT ASSETS

NOTE 4 – OTHER CURRENT ASSETS

Other assets of $37,771 and $60,597 are primarily comprised of vendor advances of $37,771 and $38,179 as of November 30, 2015 and February 28, 2015.

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Property, Plant, and Equipment

9 Months Ended

Nov. 30, 2015

Property, Plant, and Equipment [Abstract]

PROPERTY, PLANT, AND EQUIPMENT

NOTE 5 – PROPERTY, PLANT, AND EQUIPMENT

Property, plant, and equipment consisted of the following:

	November 30, 2015			February 28, 2015
Machinery and equipment	$	964,111		$	964,111
Furniture and fixtures		163,302			163,302
		1,127,413			1,127,413
Less accumulated depreciation		(1,127,335	)		(1,126,468	)
Property, plant and equipment, net	$	78		$	945

Depreciation expense was $868 and $6,933 for the Nine months ended November 30, 2015 and November 30, 2014, respectively.

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Notes Payable

9 Months Ended

Nov. 30, 2015

Notes Payable [Abstract]

NOTES PAYABLE

NOTE 6 – NOTES PAYABLE

Notes payable consisted of the following:

	November 30, 2015		February 28, 2015
Demand notes payable, at 10% and 16%	$	3,809,498	$	1,942,990
Convertible Promissory Note dated August 10, 2012, due August 10, 2017, convertible into shares of our common stock at a price of $0.76 per share. The note carries an interest rate of 7% with interest only payments due on the 10th of each month with the principal payment due on the maturity date.  To-date, the Company has not made any interest payments as set forth in this note.		894,952		848,344
Convertible Promissory Note dated October 2, 2012, due October 2, 2017, convertible into shares of our common stock at a price of $0.76 per share. The note carries an interest rate of 7% with interest only payments due on the 2nd of each month with the principal payment due on the maturity date.  To-date, the Company has not made any interest payments as set forth in this note.		449,555		428,917
Senior secured convertible notes dated May 7, 2013, due May 7, 2014, convertible into shares of our common stock at a price of $0.75 per share. The note was not repaid.		2,395,700		2,395,700
Senior secured convertible notes dated June 20, 2013, due June 20, 2014, convertible into shares of our common stock at a price of $0.50 per share. The note was not repaid.		325,000		325,000
		7,874,705		5,940,951
Less: Current portion	$	6,530,198	$	4,663,690
Long-term portion	$	1,344,507	$	1,277,261

CONVERTIBLE DEBT

On May 7, 2013, the Company transferred 4 notes payable with a total principal value of $1,000,000 together with accrued interest, and consulting fees to a senior secured convertible note with a principal value of $1,087,000 (“New Kenmont Note”) and warrants to Kenmont Capital Partners (“Kenmont”). The New Kenmont Note has a 1-year maturity date and is convertible into shares of common stock at the conversion price of $0.75 per share. The warrants entitle the holder to acquire 1,449,333 shares and have an initial exercise price of $0.75 per share, and have a 7-year term. The Company recorded $342,020 as a discount, which is being amortized over the life of the note. As of the date of filing, the Company has not made any interest payments under the Kenmont Note.

On May 7, 2013, the Company transferred 2 note payables with a total principal value of $550,000 together with accrued interest to a senior secured convertible note with a principal value of $558,700 (“New LPD Note”) and warrants to LPD Investments, Ltd. (“LPD”). The New LPD Note has a 1-year maturity date and is convertible into shares of common stock at the conversion price of $0.75 per share. The warrants entitle the holder to acquire 744,933 shares and have an initial exercise price of $0.75 per share, and have a 7-year term. The Company recorded $175,793 as a discount, which is being amortized over the life of the note. As of the date of filing, the Company has not made any interest payments under the New LPD Note.

On May 7, 2013, the Company entered into an agreement with an individual for the sale of a $750,000 of secured convertible note payable and warrants. The note has a 1-year maturity date and is convertible into shares of common stock at the conversion price of $0.75 per share. The warrants entitle the holder to acquire 1,000,000 shares and have an initial exercise price of $0.75 per share, and have a 7-year term. The Company recorded $235,985 as a discount, which is being amortized over the life of the note. As of the date of filing, the note has not been repaid and is currently accruing interest at the rate of 16%.

On June 20, 2013, the Company entered into an agreement with four individuals for the sale of $325,000 of secured convertible notes payable and warrants. These notes have a 1-year maturity date and are convertible into shares of common stock at the conversion price of $0.50 per share. The warrants entitle the holders to acquire 433,334 shares and have an initial exercise price of $0.75 per share, and have a 7-year term. The Company recorded $63,622 as a discount, which is being amortized over the life of these notes. As of the date of filing, these notes have not been repaid and are currently accruing interest at the rate of 16%.

On August 19, 2013, the Company entered into an agreement with a member of its Board of Directors for the sale of $2,500,000 of convertible notes payable (the “Director Note”) and warrants. The Director Note carries a base interest rate of 9.5%, has a 4-year maturity date and is convertible into shares of common stock at the conversion price of $0.50 per share. The warrant entitles the holder to acquire 5,000,000 shares at an initial exercise price of $0.75 per share for a 7-year exercise period. The Company recorded $667,118 as a discount, which is being amortized over the life of the Director Note. On June 20, 2013, $500,000 of this Director Note was converted to a demand note payable.

Future maturities of notes payable at November 30, 2015 are as follows:

Year Ending February 28,
2016	$	-
2017		1,344,507
Total	$	1,344,507

7% Convertible Promissory Notes:

On August 10, 2012 the Company entered into an agreement with an individual for the sale of an unsecured convertible promissory note in the amount of $1,000,000. The note’s balance together with all accrued interest thereon shall be due and payable on August 10, 2017 and the annual interest rate is 7% per annum and is due to be repaid 5 years from the closing date.  The note holder will receive interest on the unpaid principal amount payable monthly in arrears on the tenth day of each calendar month commencing September 10, 2012. Interest shall be computed on the actual number of days elapsed over a 360-day year. The note holder has the right from and after the date of issuance, and until any time until the note is fully paid, to convert any outstanding and unpaid principal portion of the note into shares of the Company’s common stock. The company recorded $310,723 as a debt discount, which is being amortized over the life of the note. As of the date of filing, no payments of interest or principal have been made by the Company on this note.

On October 2, 2012 the Company entered into an agreement with an individual for the sale of an unsecured convertible promissory note in the amount of $500,000. The note’s balance together with all accrued interest thereon shall be due and payable on October 2, 2017 and the annual interest rate is 7% per annum and is due to be repaid 5 years from the closing date.  The note holder will receive interest on the unpaid principal amount payable monthly in arrears on the second day of each calendar month commencing November 2, 2012. Interest shall be computed on the actual number of days elapsed over a 360-day year. The note holder has the right from and after the date of issuance, and until any time until the note is fully paid, to convert any outstanding and unpaid principal portion of the note into shares of the Company’s common stock. The company recorded $137,583 as a debt discount, which is being amortized over the life of the note. As of the date of filing, no payments of interest or principal have been made by the Company on this note.

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Accrued Expenses

9 Months Ended

Nov. 30, 2015

Accrued Expenses [Abstract]

ACCRUED EXPENSES

NOTE 7 – ACCRUED EXPENSES

Accrued expenses consisted of the following:

	November 30, 2015		February 28, 2015
Accrued payroll and related expenses	$	2,744,455	$	3,130,414
Accrued rent		219,829		216,547
Accrued interest		1,722,923		1,177,873
Other		90,000		85
Total	$	4,777,207	$	4,524,919

Accrued payroll and related expenses consists of salaries and vacation time accrued but not paid to employees due to our lack of financial resources.

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Shareholders' Equity

9 Months Ended

Nov. 30, 2015

Shareholders' Equity [Abstract]

SHAREHOLDERS' EQUITY

NOTE 8 – SHAREHOLDERS’ EQUITY

Common Stock

No shares of common stock were issued during the Nine months ended November 30, 2015.

During the Nine months ended November 30, 2014, we issued 2,800,000 shares of Common Stock for services rendered valued at $420,000, 17,334,533 shares of common stock upon the exercise of warrants for proceeds of $1,773,453 and we sold 2,852,000 shares of common stock for proceeds of $460,400.

Employee Stock Options

During the Six months ended August 31, 2015, there were no stock options granted to employees.

In September, 2006, our Board of Directors adopted the 2006 Employee Stock Option Plan. Activity in this plan is as follows:

	2006 Plan
	Weighted-Average Exercise Price		Aggregate Intrinsic Value		Number of Options
Outstanding, February 28, 2015		$0.75-$1.00	$	0.00		7,777,000
Cancelled		-		-		-
Granted		-		-		-
Outstanding, November 30, 2015		$0.75-$1.00	$	0.00		7,777,000

The exercise prices for the options outstanding at November 30, 2015, and information relating to these options is as follows:

Options Outstanding

Exercisable Options

Range of Exercise  Price

Number

Weighted Average Remaining Life

Weighted Average Exercise Price

Weighted Average Remaining Life

Number

Weighted Average Exercise Price

$0.75-$1.00

7,777,000

4.25 years

$

0.79

4.25 years

7,777,000

$

0.79

Warrants

Activity in issued and outstanding warrants is as follows:

	Number of Shares			Exercise Prices
Outstanding, February 28, 2015		37,546,048			$0.10-$1.50
Granted		-			-
Exercised		-			-
Cancelled		(1,210,642	)	$	1.50
Outstanding, November 30, 2015		36,335,406			$0.10-$1.50

There were no warrants issued in the nine months ended November 30, 2015.

The exercise prices for the warrants outstanding at November 30, 2015, and information relating to these warrants is as follows:

Range of Exercise Prices		Stock Warrants Outstanding		Stock Warrants Exercisable		Weighted-Average Remaining Contractual Life	Weighted-Average Exercise Price of Warrants Outstanding		Weighted-Average Exercise Price of Warrants Exercisable		Intrinsic Value
	$0.10-$0.75		18,381,012		18,381,012	68 months	$	0.55	$	0.55	$	0.00
	$0.75		1,082,734		1,082,734	66 months	$	0.75	$	0.75	$	0.00
	$0.75		1,000,000		1,000,000	56 months	$	0.75	$	0.75	$	0.00
	$0.75-$1.00		5,990,275		5,990,275	51 months	$	0.77	$	0.77	$	0.00
	$1.00-$1.25		795,000		795,000	13 months	$	1.05	$	1.05	$	0.00
	$1.00		8,272,187		8,272,187	13 months	$	1.00	$	1.00	$	0.00
	$1.50		105,000		105,000	7 months	$	1.50	$	1.50	$	0.00
	$0.75-1.50		709,198		709,198	4 months	$	1.25	$	1.25	$	0.00
			36,335,406		36,335,406

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Income Taxes

9 Months Ended

Nov. 30, 2015

Income Taxes [Abstract]

INCOME TAXES

NOTE 9 – INCOME TAXES

Our effective tax rates were approximately 0.0% for the six months ended November 30, 2015 and 2014. Our effective tax rate was lower than the U.S. federal statutory rate primarily due to the fact that we record a full valuation allowance against our deferred tax assets, which is primarily comprised of net operating losses.

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Segment Information

9 Months Ended

Nov. 30, 2015

Segment Information [Abstract]

SEGMENT INFORMATION

NOTE 10 – SEGMENT INFORMATION

We are a United States based company providing advanced technology products to various industries. The principal markets for our products are North America, Europe, and Asia. All of our operating long-lived assets are located in the United States. We operate in one segment.

Total net revenues from customer geographical segments are as follows for the nine months ended November 30, 2015 and 2014:

	2015		2014
United States	$	48,956	$	542,737
Canada		2,800		84,717
Europe		210		33,588
Asia		137,384		318,348
Other		55,979		62,061
Total	$	245,329	$	1,041,451

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Significant Customers

9 Months Ended

Nov. 30, 2015

Significant Customers [Abstract]

SIGNIFICANT CUSTOMERS

NOTE 11 – SIGNIFICANT CUSTOMERS

Concentration Risk

In the Nine Months ended November 30, 2015, we sold AuraGen related products to three significant customers whose sales comprised 56%, 22% and 16% of net sales, respectively. Net accounts receivable from these customers at November 30, 2015 were $62,091, $0 and $0 respectively. These customers are not related to or affiliated with us. In the Nine months ended November 30, 2014, we sold AuraGen related products to three significant customers whose sales comprised 31%, 19% and 7% of net sales, respectively. Net accounts receivable from these customers at November 30, 2014 were $21,514, $0 and $0 respectively. These customers are not related to or affiliated with us.

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Related Parties Transactions

9 Months Ended

Nov. 30, 2015

Related Parties Transactions [Abstract]

RELATED PARTIES TRANSACTIONS

NOTE 12 – RELATED PARTIES TRANSACTIONS

At November 30, 2015, the balance reflected in Notes Payable and accrued interest-related party, current, includes $14,811,515 of unsecured notes payable plus accrued interest of $7,309,993 to Mr. Breslow, a member of our Board of Directors, payable on demand, bearing interest at a rate of 10% per annum. The balance of $14,235,960 plus accrued interest of $6,220,790 as of February 28, 2015. During the nine months ended November 30, 2015 and November 30, 2014, interest amounting to $1,089,203 and $1,043,720 respectively, was incurred on these notes. The balance also includes $82,000 of unsecured notes payable plus accrued interest of $21,705 and to our CEO pursuant to a demand note entered into on April 5, 2013 and an unsecured note payable to Mr. Kopple, another member of our Board of Directors in the total amount of $3,623,321 and $3,047,856 plus accrued interest of $512,864 and $302,874 with interest at a rate of 10% per annum as of November 30, 2015 and February 28, 2015, respectively.

At November 30, 2015, the balance reflected in Convertible note payable and accrued interest-related party, long term, includes $1,797,462 of secured convertible notes payable net of discounts of $202,538 plus accrued interest of $647,296 to Mr. Kopple, a member of our Board of Directors.

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Commitments

9 Months Ended

Nov. 30, 2015

Commitments [Abstract]

COMMITMENTS

NOTE 13 – COMMITMENTS

Our facilities consist of approximately 20,000 rented square feet in Stanton, California. The Stanton facility is currently being used for small quantity assembly and testing using components that are produced by various suppliers as well as for general offices, engineering and warehousing. The rent for the Stanton facility is $10,000 per month. The facility is not sufficient for our near term anticipated needs and the Company is actively looking for a new facility. The Company arrangements for the Stanton facility are on a month per month rent.

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Subsequent Events

9 Months Ended

Nov. 30, 2015

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

NOTE 14 – SUBSEQUENT EVENTS:

On January 24, 2017 the Company entered into a Debt Refinancing Agreement with Mr. Breslow, a Director of the Company. Pursuant to the agreement, both Mr. Breslow and the Company acknowledged that total debt owed to Mr. Breslow was $23,872,614 including $8,890,574 of accrued interest. Mr. Breslow agreed to cancel and forgive all interest due, waive all events of default and sign a new five year convertible note in the amount of $14,930,041 providing for no interest for six months and interest of 5% per annum thereafter payable monthly in arrears. The note also provides various default provisions. The agreement further provides that $11,982,041 of the note will be converted into 7,403,705 shares of common stock concurrent with the stockholders approving a 1 for 7 reverse stock split within one year of entering this agreement and the remaining may be converted at any time thereafter post reverse split. In the absence of the approval within one year, this agreement will become null and void. The Company has elected to continue to accrue interest on this agreement until such time as the 1 for 7 reverse stock split has been approved.

On January 30, 2017, the Company entered into an agreement with five of our secured creditors (the “Secured Creditors”), pursuant to which a Securities Purchase Agreement dated May 6, 2013 (the “2013 Purchase Agreement”) among the Company, the Secured Creditors, and two other parties was amended (the “Amended Agreement”). As part of the 2013 transaction, we entered into a security agreement with the Secured Creditors and two other parties (collectively the “Buyers”) pursuant to which the Buyers were granted a security interest in all of Company’s assets except for its patents and other intellectual properties. The Secured Creditors have the right to amend the 2013 Purchase Agreement on behalf of all Buyers. The Amended Agreement amends the 2013 Purchase Agreement and the original security agreement, replaces the convertible notes with “Amended Notes” and replaces the warrants with “Amended Warrants.” The Amended Notes provide that all accrued and unpaid interest on the original notes through October 31, 2016 be added to the principal amount of the Amended Notes. The Amended Notes bear interest at the rate of 0% until May 1, 2017 and 5% per annum thereafter, subject to reduction to comply with applicable law, and mature in 60 months from the effective date of a 1 for 7 reverse stock split. Upon certain financings, the Company is obligated to make a payment to the holders of the Amended Notes in the amount of 20% of the outstanding Notes. Immediately upon the effectiveness of a 1 for 7 reverse stock split, 80% of the then-unpaid principal of and all of the then accrued but unpaid interest on the Amended Notes is automatically converted. In addition, the Amended Agreement waives any and all events of default under the 2013 Purchase Agreement and related transaction documents existing on or prior to January 30, 2017 and amends the defaults and remedies section of the 2013 Purchase Agreement. Two Buyers, who together represent less than 3% of the Company’s common stock issuable upon conversion of the original notes and exercise of the original warrants, did not sign the amendment and have named the Company and the Company’s Chief Executive Officer among several defendants in a lawsuit demanding repayment of loans totaling $125,000 plus accrued interest and exemplary damages. Management believes that the two plaintiffs have no valid claim against the Company or our Chief Executive Officer. In March 2017, plaintiffs moved for partial summary adjudication against the Company and our Chief Executive Officer; however, the Court denied plaintiffs’ motion. Both the Company and Mr. Gagerman have filed demurrers seeking dismissal of this action, which remain pending at this time.

On January 27, 2017, the Company entered into a joint venture (JV) agreement with a Chinese company to manufacture, market and distribute certain mobile power products based on Aura’s patented technology solely for the Peoples Republic of China territories. The JV will be owned 49% by the Company and 51% by the Chinese company who will also contribute $9,750,000 to the JV. The Company is required to contribute $250,000 and a license to specific technology. In addition, the Chinese company will invest $2,000,000 in Aura at $0.20 per share for a total of 10,000,000 shares of common stock and purchase a minimum of $1,250,000 of product supported by letters of credit for distribution until the JV factory is built, equipped, and staffed. Aura has also committed to supply training and technical personnel to the JV for six months at no cost other than reimbursement for travel, room and board. The agreement was subject to the approval of the Chinese Government which was received in April, 2017.

The Company is presently engaged in a dispute with one of its directors, Robert Kopple, relating to approximately $5.4 million and approximately 22 million warrants which Mr. Kopple claims to be owed to him and his affiliates by the Company. In July 2017, Mr. Kopple filed suit against the Company as well as against current Directors Mr. Gagerman and Mr. Diaz-Verson together with former Directors Mr. Breslow and Mr. Howsmon in connection with these allegations. The Company believes that it has valid defenses in these matters and intends to vigorously defend against these claims.

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Accounting Policies (Policies)

9 Months Ended

Nov. 30, 2015

Accounting Policies [Abstract]

Estimates

Estimates

The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Recently Issued Accounting Pronouncements

Recently Issued Accounting Pronouncements 

In April 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2015-03, Interest–Imputation of Interest (Subtopic 835-30) (“ASU 2015-03”), which changes the presentation of debt issuance costs in financial statements. ASU 2015-03 requires an entity to present such costs in the balance sheet as a direct deduction from the related debt liability rather than as an asset. Amortization of the costs will continue to be reported as interest expense. It is effective for annual reporting periods beginning after December 15, 2016. Early adoption is permitted. The new guidance will be applied retrospectively to each prior period presented. The Company is currently in the process of evaluating the impact of adoption of ASU 2015-03 on its balance sheets.

In January 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (ASU) 2016-01, which amends the guidance in U.S. GAAP on the classification and measurement of financial instruments. Changes to the current guidance primarily affect the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. In addition, the ASU clarifies guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities. The new standard is effective for fiscal years and interim periods beginning after December 15, 2017, and upon adoption, an entity should apply the amendments by means of a cumulative-effect adjustment to the balance sheet at the beginning of the first reporting period in which the guidance is effective. Early adoption is not permitted except for the provision to record fair value changes for financial liabilities under the fair value option resulting from instrument-specific credit risk in other comprehensive income. The Company is currently evaluating the impact of adopting this guidance. 

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. Topic 842 affects any entity that enters into a lease, with some specified scope exemptions. The guidance in this Update supersedes Topic 840, Leases. The core principle of Topic 842 is that a lessee should recognize the assets and liabilities that arise from leases. A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. For public companies, the amendments in this Update are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. We are currently evaluating the impact of adopting ASU No. 2016-02 on our financial statements. 

In March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net) that clarifies how to apply revenue recognition guidance related to whether an entity is a principal or an agent. ASU 2016-08 clarifies that the analysis must focus on whether the entity has control of the goods or services before they are transferred to the customer and provides additional guidance about how to apply the control principle when services are provided and when goods or services are combined with other goods or services. The effective date for ASU 2016-08 is the same as the effective date of ASU 2014-09 as amended by ASU 2015-14, for annual reporting periods beginning after December 15, 2017, including interim periods within those years. The Company has not yet determined the impact of ASU 2016-08 on its financial statements.

In March 2016, the FASB issued ASU No. 2016-09, Compensation – Stock Compensation, or ASU No. 2016-09. The areas for simplification in this Update involve several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. For public entities, the amendments in this Update are effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Early adoption is permitted in any interim or annual period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. An entity that elects early adoption must adopt all of the amendments in the same period. Amendments related to the timing of when excess tax benefits are recognized, minimum statutory withholding requirements, forfeitures, and intrinsic value should be applied using a modified retrospective transition method by means of a cumulative-effect adjustment to equity as of the beginning of the period in which the guidance is adopted. Amendments related to the presentation of employee taxes paid on the statement of cash flows when an employer withholds shares to meet the minimum statutory withholding requirement should be applied retrospectively. Amendments requiring recognition of excess tax benefits and tax deficiencies in the income statement and the practical expedient for estimating expected term should be applied prospectively. An entity may elect to apply the amendments related to the presentation of excess tax benefits on the statement of cash flows using either a prospective transition method or a retrospective transition method. We are currently evaluating the impact of adopting ASU No. 2016-09 on our financial statements.

In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, which provides further guidance on identifying performance obligations and improves the operability and understandability of licensing implementation guidance. The effective date for ASU 2016-10 is the same as the effective date of ASU 2014-09 as amended by ASU 2015-14, for annual reporting periods beginning after December 15, 2017, including interim periods within those years.  In May 2016, the FASB issued ASU 2016-12 “Revenue from Contracts with Customers (Topic 606) - Narrow-Scope Improvements and Practical Expedients,” which amends the guidance on transition, collectability, non-cash consideration, and the presentation of sales and other similar taxes. ASU 2016-12 clarifies that, for a contract to be considered completed at transition, all (or substantially all) of the revenue must have been recognized under legacy GAAP. In addition, ASU 2016-12 clarifies how an entity should evaluate the collectability threshold and when an entity can recognize nonrefundable consideration received as revenue if an arrangement does not meet the standard’s contract criteria. The standard allows for both retrospective and modified retrospective methods of adoption. The Company has not yet determined the impact of ASU 2016-10 on its financial statements.

In June 2016, the FASB issued ASU 2016-13, “Measurement of Credit Losses on Financial Statements,” which requires companies to measure credit losses utilizing a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. ASU 2016-13 is effective for annual reporting periods, and interim periods therein, beginning after December 15, 2019 (fiscal year 2021 for the Company). The Company has not yet determined the potential effects of the adoption of ASU 2016-13 on its Financial Statements.

In August 2016, the FASB issued ASU 2016-15, “Classification of Certain Cash Receipts and Cash Payments,” which aims to eliminate diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows under Topic 230, Statement of Cash Flows, and other Topics. ASU 2016-15 is effective for annual reporting periods, and interim periods therein, beginning after December 15, 2017 (fiscal year 2019 for the Company). The Company has not yet determined the potential effects of the adoption of ASU 2016-15 on its Financial Statements.

Reclassifications

Reclassifications

Certain reclassifications have been made to the comparative financial statements to conform to the current period presentation.

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Inventories (Tables)

9 Months Ended

Nov. 30, 2015

Inventories [Abstract]

Schedule of inventories

	November 30, 2015			February 28, 2015
Raw materials	$	1,858,347		$	1,772,869
Finished goods		1,558,554			1,565,190
		3,416,901			3,338,059
Inventory reserve		(3,416,901	)		(3,338,059	)
	$	0		$	0

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Property, Plant, and Equipment (Tables)

9 Months Ended

Nov. 30, 2015

Property, Plant, and Equipment [Abstract]

Schedule of property, plant, and equipment

	November 30, 2015			February 28, 2015
Machinery and equipment	$	964,111		$	964,111
Furniture and fixtures		163,302			163,302
		1,127,413			1,127,413
Less accumulated depreciation		(1,127,335	)		(1,126,468	)
Property, plant and equipment, net	$	78		$	945

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Notes Payable (Tables)

9 Months Ended

Nov. 30, 2015

Notes Payable [Abstract]

Schedule of notes payable

	November 30, 2015		February 28, 2015
Demand notes payable, at 10% and 16%	$	3,809,498	$	1,942,990
Convertible Promissory Note dated August 10, 2012, due August 10, 2017, convertible into shares of our common stock at a price of $0.76 per share. The note carries an interest rate of 7% with interest only payments due on the 10th of each month with the principal payment due on the maturity date.  To-date, the Company has not made any interest payments as set forth in this note.		894,952		848,344
Convertible Promissory Note dated October 2, 2012, due October 2, 2017, convertible into shares of our common stock at a price of $0.76 per share. The note carries an interest rate of 7% with interest only payments due on the 2nd of each month with the principal payment due on the maturity date.  To-date, the Company has not made any interest payments as set forth in this note.		449,555		428,917
Senior secured convertible notes dated May 7, 2013, due May 7, 2014, convertible into shares of our common stock at a price of $0.75 per share. The note was not repaid.		2,395,700		2,395,700
Senior secured convertible notes dated June 20, 2013, due June 20, 2014, convertible into shares of our common stock at a price of $0.50 per share. The note was not repaid.		325,000		325,000
		7,874,705		5,940,951
Less: Current portion	$	6,530,198	$	4,663,690
Long-term portion	$	1,344,507	$	1,277,261

Schedule of future maturities of notes payable

Year Ending February 28,
2016	$	-
2017		1,344,507
Total	$	1,344,507

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Accrued Expenses (Tables)

9 Months Ended

Nov. 30, 2015

Accrued Expenses [Abstract]

Schedule of accrued expenses

	November 30, 2015		February 28, 2015
Accrued payroll and related expenses	$	2,744,455	$	3,130,414
Accrued rent		219,829		216,547
Accrued interest		1,722,923		1,177,873
Other		90,000		85
Total	$	4,777,207	$	4,524,919

XML

Shareholders' Equity (Tables)

9 Months Ended

Nov. 30, 2015

Shareholders' Equity [Abstract]

Schedule of 2006 employee stock option plan

	2006 Plan
	Weighted-Average Exercise Price		Aggregate Intrinsic Value		Number of Options
Outstanding, February 28, 2015		$0.75-$1.00	$	0.00		7,777,000
Cancelled		-		-		-
Granted		-		-		-
Outstanding, November 30, 2015		$0.75-$1.00	$	0.00		7,777,000

Schedule of exercise price options outstanding

Options Outstanding

Exercisable Options

Range of Exercise  Price

Number

Weighted Average Remaining Life

Weighted Average Exercise Price

Weighted Average Remaining Life

Number

Weighted Average Exercise Price

$0.75-$1.00

7,777,000

4.25 years

$

0.79

4.25 years

7,777,000

$

0.79

Schedule of activity in issued and outstanding warrants

	Number of Shares			Exercise Prices
Outstanding, February 28, 2015		37,546,048			$0.10-$1.50
Granted		-			-
Exercised		-			-
Cancelled		(1,210,642	)	$	1.50
Outstanding, November 30, 2015		36,335,406			$0.10-$1.50

Schedule of exercise prices warrants outstanding

Range of Exercise Prices		Stock Warrants Outstanding		Stock Warrants Exercisable		Weighted-Average Remaining Contractual Life	Weighted-Average Exercise Price of Warrants Outstanding		Weighted-Average Exercise Price of Warrants Exercisable		Intrinsic Value
	$0.10-$0.75		18,381,012		18,381,012	68 months	$	0.55	$	0.55	$	0.00
	$0.75		1,082,734		1,082,734	66 months	$	0.75	$	0.75	$	0.00
	$0.75		1,000,000		1,000,000	56 months	$	0.75	$	0.75	$	0.00
	$0.75-$1.00		5,990,275		5,990,275	51 months	$	0.77	$	0.77	$	0.00
	$1.00-$1.25		795,000		795,000	13 months	$	1.05	$	1.05	$	0.00
	$1.00		8,272,187		8,272,187	13 months	$	1.00	$	1.00	$	0.00
	$1.50		105,000		105,000	7 months	$	1.50	$	1.50	$	0.00
	$0.75-1.50		709,198		709,198	4 months	$	1.25	$	1.25	$	0.00
			36,335,406		36,335,406

XML

Segment Information (Tables)

9 Months Ended

Nov. 30, 2015

Segment Information [Abstract]

Summary of net revenues from customer geographical segments

	2015		2014
United States	$	48,956	$	542,737
Canada		2,800		84,717
Europe		210		33,588
Asia		137,384		318,348
Other		55,979		62,061
Total	$	245,329	$	1,041,451

XML

Going Concern (Details)	3 Months Ended		9 Months Ended
	Nov. 30, 2015 USD ($) ft²	Nov. 30, 2014 USD ($)	Nov. 30, 2015 USD ($) ft²	Nov. 30, 2014 USD ($)
Going Concern (Textual)
Net Loss	$ (1,656,723)	$ (2,127,274)	$ (5,477,517)	$ (10,164,301)
Cash flows from operating activities			$ (1,356,424)	$ (3,618,201)
Area of land | ft²	45,000		45,000

XML

Inventories (Details) - USD ($)	Nov. 30, 2015	Feb. 28, 2015
Inventories [Abstract]
Raw materials	$ 1,858,347	$ 1,772,869
Finished goods	1,558,554	1,565,190
Inventory, gross	3,416,901	3,338,059
Inventory reserve	(3,416,901)	(3,338,059)
Inventory, net	$ 0	$ 0

XML

Other Current Assets (Details) - USD ($)	Nov. 30, 2015	Feb. 28, 2015
Other Current Assets (Textual)
Other current assets	$ 37,771	$ 60,597
Vendor advances	$ 37,771	$ 38,179

XML

Property, Plant, and Equipment (Details) - USD ($)	Nov. 30, 2015	Feb. 28, 2015
Property, Plant, and Equipment [Abstract]
Machinery and equipment	$ 964,111	$ 964,111
Furniture and fixtures	163,302	163,302
Property, plant and equipment, gross	1,127,413	1,127,413
Less accumulated depreciation	(1,127,335)	(1,126,468)
Property, plant and equipment, net	$ 78	$ 945

XML

Property, Plant, and Equipment (Details Textual) - USD ($)	9 Months Ended
	Nov. 30, 2015	Nov. 30, 2014
Property, Plant, and Equipment (Textual)
Depreciation expense	$ 868	$ 6,933

XML

Notes Payable (Details) - USD ($)	Nov. 30, 2015	Feb. 28, 2015
Debt Instrument [Line Items]
Convertible notes payable	$ 7,874,705	$ 5,940,951
Less: Current portion	6,530,198	4,663,690
Long-term portion	1,344,507	1,277,261
Demand notes payable [Member]
Debt Instrument [Line Items]
Demand notes payable	3,809,498	1,942,990
Convertible Promissory Note dated August 10, 2012 [Member]
Debt Instrument [Line Items]
Convertible notes payable	894,952	848,344
Convertible Promissory Note dated October 2, 2012 [Member]
Debt Instrument [Line Items]
Convertible notes payable	449,555	428,917
Senior secured convertible notes dated May 7, 2013 [Member]
Debt Instrument [Line Items]
Convertible notes payable	2,395,700	2,395,700
Senior secured convertible notes dated June 20, 2013 [Member]
Debt Instrument [Line Items]
Convertible notes payable	$ 325,000	$ 325,000

XML

Notes Payable (Parenthetical) (Details)	9 Months Ended
	Nov. 30, 2015 $ / shares
Debt Instrument [Line Items]
Notes payable interest rate	10.00%
Demand notes payable [Member] | Minimum [Member]
Debt Instrument [Line Items]
Notes payable interest rate	10.00%
Demand notes payable [Member] | Maximum [Member]
Debt Instrument [Line Items]
Notes payable interest rate	16.00%
Convertible Promissory Note dated August 10, 2012 [Member]
Debt Instrument [Line Items]
Notes payable interest rate	7.00%
Due date of notes	Aug. 10, 2017
Conversion price per share of notes payable	$ 0.76
Convertible Promissory Note dated October 2, 2012 [Member]
Debt Instrument [Line Items]
Notes payable interest rate	7.00%
Due date of notes	Oct. 02, 2017
Conversion price per share of notes payable	$ 0.76
Senior secured convertible notes dated May 7, 2013 [Member]
Debt Instrument [Line Items]
Due date of notes	May 07, 2014
Conversion price per share of notes payable	$ 0.75
Senior secured convertible notes dated June 20, 2013 [Member]
Debt Instrument [Line Items]
Due date of notes	Jun. 20, 2014
Conversion price per share of notes payable	$ 0.50

XML

Notes Payable (Details 1)	Nov. 30, 2015 USD ($)
Notes Payable [Abstract]
2016
2017	1,344,507
Total	$ 1,344,507

XML

Notes Payable (Details Textual)						9 Months Ended
	Aug. 19, 2013 USD ($) $ / shares shares	Jun. 20, 2013 USD ($) $ / shares shares	May 07, 2013 USD ($) Notes $ / shares shares	Oct. 02, 2012 USD ($)	Aug. 10, 2012 USD ($)	Nov. 30, 2015 USD ($)	Nov. 30, 2014 USD ($)	Feb. 28, 2015 $ / shares
Notes Payable (Textual)
Amortization of debt discount						$ 192,327	$ 303,779
Exercise price per common share under warrant one (in dollars per share) | $ / shares								$ 0.75
Notes payable interest rate						10.00%
Kenmont Capital Partners [Member] | Senior Secured Convertible Note [Member]
Notes Payable (Textual)
Pre conversion debt principal amount			$ 1,000,000
Debt amount			$ 1,087,000
Conversion price per share of notes payable | $ / shares			$ 0.75
Term of warrant			7 years
Amortization of debt discount			$ 342,020
Exercise price per common share under warrant one (in dollars per share) | $ / shares			$ 0.75
Number of common shares entitlement on exercise of warrant one (in shares) | shares			1,449,333
Number of notes payable to transferred | Notes			4
Notes maturity date, term			1 year
LPD Investments, Ltd. [Member] | Senior Secured Convertible Note [Member]
Notes Payable (Textual)
Pre conversion debt principal amount			$ 550,000
Debt amount			$ 558,700
Conversion price per share of notes payable | $ / shares			$ 0.75
Term of warrant			7 years
Amortization of debt discount			$ 175,793
Exercise price per common share under warrant one (in dollars per share) | $ / shares			$ 0.75
Number of common shares entitlement on exercise of warrant one (in shares) | shares			744,933
Number of notes payable to transferred | Notes			2
Notes maturity date, term			1 year
Warrants [Member] | Senior Secured Convertible Note [Member]
Notes Payable (Textual)
Exercise price per common share under warrant one (in dollars per share) | $ / shares		$ 0.75	$ 0.75
Accruing interest default rate		16.00%	16.00%
Warrants [Member] | Secured convertible notes payable [Member]
Notes Payable (Textual)
Pre conversion debt principal amount		$ 325,000	$ 750,000
Conversion price per share of notes payable | $ / shares		$ 0.50	$ 0.75
Term of warrant		7 years	7 years
Amortization of debt discount		$ 63,622	$ 235,985
Exercise price per common share under warrant one (in dollars per share) | $ / shares		$ 0.75	$ 0.75
Number of common shares entitlement on exercise of warrant one (in shares) | shares		433,334	1,000,000
Notes maturity date, term		1 year	1 year
Warrants [Member] | Robert Kopple [Member] | Senior Secured Convertible Note [Member]
Notes Payable (Textual)
Pre conversion debt principal amount	$ 2,500,000
Conversion price per share of notes payable | $ / shares	$ 0.50
Term of warrant	7 years
Amortization of debt discount	$ 667,118
Exercise price per common share under warrant one (in dollars per share) | $ / shares	$ 0.75
Number of common shares entitlement on exercise of warrant one (in shares) | shares	5,000,000
Notes maturity date, term	4 years
Notes payable interest rate	9.50%
Converted demand note payable		$ 500,000
Unsecured Convertible Promissory Note [Member]
Notes Payable (Textual)
Pre conversion debt principal amount				$ 500,000	$ 1,000,000
Amortization of debt discount				$ 137,583	$ 310,723
Due date of notes				Oct. 02, 2017	Aug. 10, 2017
Notes maturity date, term				5 years	5 years
Notes payable interest rate				7.00%	7.00%
Description of convertible promissory note				Interest on the unpaid principal amount payable monthly in arrears on the second day of each calendar month commencing November 2, 2012. Interest shall be computed on the actual number of days elapsed over a 360-day year.	Interest on the unpaid principal amount payable monthly in arrears on the tenth day of each calendar month commencing September 10, 2012. Interest shall be computed on the actual number of days elapsed over a 360-day year.

XML

Accrued Expenses (Details) - USD ($)	Nov. 30, 2015	Feb. 28, 2015
Accrued Expenses [Abstract]
Accrued payroll and related expenses	$ 2,744,455	$ 3,130,414
Accrued rent	219,829	216,547
Accrued interest	1,722,923	1,177,873
Other	90,000	85
Total	$ 4,777,207	$ 4,524,919

XML

Shareholders' Equity (Details) - 2006 Plan [Member]	9 Months Ended
	Nov. 30, 2015 USD ($) $ / shares shares
Weighted-Average Exercise Price
Weighted - Average Exercise Price, Cancelled
Weighted - Average Exercise Price, Granted
Aggregate Intrinsic Value
Aggregate Intrinsic Value, Outstanding, Beginning | $	$ 0
Aggregate Intrinsic Value, Outstanding, Ending | $	$ 0
Number of Options
Number of Options, Outstanding, Beginning | shares	7,777,000
Number of Options, Cancelled | shares
Number of Options, Granted | shares
Number of Options, Outstanding, Ending | shares	7,777,000
Minimum [Member]
Weighted-Average Exercise Price
Weighted - Average Exercise Price, Outstanding, Beginning	$ 0.75
Weighted - Average Exercise Price, Outstanding, Ending	0.75
Maximum [Member]
Weighted-Average Exercise Price
Weighted - Average Exercise Price, Outstanding, Beginning	1.00
Weighted - Average Exercise Price, Outstanding, Ending	$ 1.00

XML

Shareholders' Equity (Details 1) - 0.75-$1.00 [Member]	9 Months Ended
	Nov. 30, 2015 $ / shares shares
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Options Outstanding, Range of Exercise Price, Minimum	$ 0.75
Options Outstanding, Range of Exercise Price, Maximum	$ 1.00
Options Outstanding, Number | shares	7,777,000
Options Outstanding, Weighted Average Remaining Life	4 years 2 months 30 days
Options Outstanding, Weighted Average Exercise Price	$ 0.79
Exercisable Options, Weighted Average Remaining Life	4 years 2 months 30 days
Exercisable Options, Number | shares	7,777,000
Exercisable Options, Weighted Average Exercise Price	$ 0.79

XML

Shareholders' Equity (Details 2)	9 Months Ended
	Nov. 30, 2015 $ / shares shares
Class of Stock [Line Items]
Number of Shares, Outstanding | shares	36,335,406
Exercise Prices, Outstanding	$ 0.75
Warrants [Member]
Class of Stock [Line Items]
Number of Shares, Outstanding | shares	37,546,048
Number of Shares, Granted | shares
Number of Shares, Exercised | shares
Number of Shares, Cancelled | shares	(1,210,642)
Number of Shares, Outstanding | shares	36,335,406
Exercise Prices, Granted
Exercise Prices, Exercised
Exercise Prices, Cancelled	1.50
Warrants [Member] | Maximum [Member]
Class of Stock [Line Items]
Exercise Prices, Outstanding	1.50
Exercise Prices, Outstanding	1.50
Warrants [Member] | Minimum [Member]
Class of Stock [Line Items]
Exercise Prices, Outstanding	0.10
Exercise Prices, Outstanding	$ 0.10

XML

Shareholders' Equity (Details 3) - $ / shares	9 Months Ended
	Nov. 30, 2015	Feb. 28, 2015
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Stock Warrants Outstanding	36,335,406
Stock Warrants Exercisable	36,335,406
0.10-$0.75 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Stock Warrants Outstanding	18,381,012	18,381,012
Stock Warrants Exercisable	18,381,012
Weighted-Average Remaining Contractual Life	68 months
Weighted-Average Exercise Price of Warrants Outstanding	$ 0.55
Weighted-Average Exercise Price of Warrants Exercisable	0.55
Intrinsic Value	0.00
0.10-$0.75 [Member] | Maximum [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Range of Exercise Prices	0.75
0.10-$0.75 [Member] | Minimum [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Range of Exercise Prices	0.10
0.75 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Range of Exercise Prices	$ 0.75
Stock Warrants Outstanding	1,082,734	1,082,734
Stock Warrants Exercisable	1,082,734
Weighted-Average Remaining Contractual Life	66 months
Weighted-Average Exercise Price of Warrants Outstanding	$ 0.75
Weighted-Average Exercise Price of Warrants Exercisable	0.75
Intrinsic Value	0.00
0.75 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Range of Exercise Prices	$ 0.75
Stock Warrants Outstanding	1,000,000	1,000,000
Stock Warrants Exercisable	1,000,000
Weighted-Average Remaining Contractual Life	56 months
Weighted-Average Exercise Price of Warrants Outstanding	$ 0.75
Weighted-Average Exercise Price of Warrants Exercisable	0.75
Intrinsic Value	$ 0.00
0.75-$1.00 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Stock Warrants Outstanding	5,990,275	5,990,275
Stock Warrants Exercisable	5,990,275
Weighted-Average Remaining Contractual Life	51 months
Weighted-Average Exercise Price of Warrants Outstanding	$ 0.77
Weighted-Average Exercise Price of Warrants Exercisable	0.77
Intrinsic Value	0.00
0.75-$1.00 [Member] | Maximum [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Range of Exercise Prices	1.00
0.75-$1.00 [Member] | Minimum [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Range of Exercise Prices	$ 0.75
1.00-$1.25 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Stock Warrants Outstanding	795,000	795,000
Stock Warrants Exercisable	795,000
Weighted-Average Remaining Contractual Life	13 months
Weighted-Average Exercise Price of Warrants Outstanding	$ 1.05
Weighted-Average Exercise Price of Warrants Exercisable	1.05
Intrinsic Value	0.00
1.00-$1.25 [Member] | Maximum [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Range of Exercise Prices	1.25
1.00-$1.25 [Member] | Minimum [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Range of Exercise Prices	1.00
1.00 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Range of Exercise Prices	$ 1.00
Stock Warrants Outstanding	8,272,187	8,272,187
Stock Warrants Exercisable	8,272,187
Weighted-Average Remaining Contractual Life	13 months
Weighted-Average Exercise Price of Warrants Outstanding	$ 1.00
Weighted-Average Exercise Price of Warrants Exercisable	1.00
Intrinsic Value	0.00
1.50 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Range of Exercise Prices	$ 1.50
Stock Warrants Outstanding	105,000	105,000
Stock Warrants Exercisable	105,000
Weighted-Average Remaining Contractual Life	7 months
Weighted-Average Exercise Price of Warrants Outstanding	$ 1.50
Weighted-Average Exercise Price of Warrants Exercisable	1.50
Intrinsic Value	$ 0.00
0.75-1.50 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Stock Warrants Outstanding	709,198	709,198
Stock Warrants Exercisable	709,198
Weighted-Average Remaining Contractual Life	4 months
Weighted-Average Exercise Price of Warrants Outstanding	$ 1.25
Weighted-Average Exercise Price of Warrants Exercisable	1.25
Intrinsic Value	0.00
0.75-1.50 [Member] | Maximum [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Range of Exercise Prices	1.50
0.75-1.50 [Member] | Minimum [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Range of Exercise Prices	$ 0.75

XML

Shareholders' Equity (Details Textual) - USD ($)	9 Months Ended
	Nov. 30, 2015	Nov. 30, 2014
Shareholders' Equity (Textual)
Shares issued for services, shares		2,800,000
Shares issued for services, value		$ 420,000
Proceeds from common stock, shares		2,852,000
Proceeds from common stock, value		$ 2,193,852
Common Stock [Member]
Shareholders' Equity (Textual)
Shares issued for services, shares		2,800,000
Shares issued for services, value		$ 420,000
Shares issued upon exercise of warrants, shares		17,334,533
Shares issued upon exercise of warrants, value		$ 1,773,453
Proceeds from common stock, value		$ 460,400

XML

Income Taxes (Details)	9 Months Ended
	Nov. 30, 2015	Nov. 30, 2014
Income Taxes [Abstract]
Effective tax rates	0.00%	0.00%

XML

Segment Information (Details) - USD ($)	9 Months Ended
	Nov. 30, 2015	Nov. 30, 2014
Segment Reporting , Revenue Reconciling Item [Line Items]
Total	$ 245,329	$ 1,041,451
United States [Member]
Segment Reporting , Revenue Reconciling Item [Line Items]
Total	48,956	542,737
Canada [Member]
Segment Reporting , Revenue Reconciling Item [Line Items]
Total	2,800	84,717
Europe [Member]
Segment Reporting , Revenue Reconciling Item [Line Items]
Total	210	33,588
Asia [Member]
Segment Reporting , Revenue Reconciling Item [Line Items]
Total	137,384	318,348
Other [Member]
Segment Reporting , Revenue Reconciling Item [Line Items]
Total	$ 55,979	$ 62,061

XML

Segment Information (Details Textual)	9 Months Ended
	Nov. 30, 2015 Segments
Segment Information (Textual)
Number of operating segment	1

XML

Significant Customers (Details)	9 Months Ended
	Nov. 30, 2015 USD ($) customers	Nov. 30, 2014 USD ($) customers	Feb. 28, 2015 USD ($)
Significant Customers (Textual)
Number of significant customers | customers	3	3
Net accounts receivable	$ 67,570		$ 58,957
Customer One [Member]
Significant Customers (Textual)
Net accounts receivable	$ 62,091	$ 21,514
Percentage of sales	56.00%	31.00%
Customer Two [Member]
Significant Customers (Textual)
Net accounts receivable	$ 0	$ 0
Percentage of sales	22.00%	19.00%
Customer Three [Member]
Significant Customers (Textual)
Net accounts receivable	$ 0	$ 0
Percentage of sales	16.00%	7.00%

XML

Related Parties Transactions (Details) - USD ($)	9 Months Ended
	Nov. 30, 2015	Nov. 30, 2014	Feb. 28, 2015
Related Parties Transactions (Textual)
Unsecured notes payable and accrued interest-related party	$ 26,361,398		$ 23,905,073
Notes payable interest rate	10.00%
Interest expense incurred on unsecured notes payable	$ 1,089,203	$ 1,043,720
Convertible note payable and accrued interest-related party, net of discount	$ 2,444,758		2,096,113
Mr. Breslow [Member]
Related Parties Transactions (Textual)
Notes payable interest rate	10.00%
CEO [Member]
Related Parties Transactions (Textual)
Unsecured notes payable and accrued interest-related party	$ 21,705
Related party transaction, date	Apr. 05, 2013
Mr. Kopple [Member]
Related Parties Transactions (Textual)
Unsecured notes payable and accrued interest-related party	$ 647,296
Accrued Interest [Member] | Mr. Breslow [Member]
Related Parties Transactions (Textual)
Unsecured notes payable and accrued interest-related party	7,309,993		6,220,790
Accrued Interest [Member] | Mr. Kopple [Member]
Related Parties Transactions (Textual)
Unsecured notes payable and accrued interest-related party	$ 512,864		$ 302,874
Notes payable interest rate	10.00%		10.00%
Unsecured Debt [Member] | Mr. Breslow [Member]
Related Parties Transactions (Textual)
Unsecured notes payable and accrued interest-related party	$ 14,811,515		$ 14,235,960
Unsecured Debt [Member] | CEO [Member]
Related Parties Transactions (Textual)
Unsecured notes payable and accrued interest-related party	82,000
Unsecured Debt [Member] | Mr. Kopple [Member]
Related Parties Transactions (Textual)
Unsecured notes payable and accrued interest-related party	$ 3,623,321		$ 3,047,856
Convertible Secured Notes [Member]
Related Parties Transactions (Textual)
Notes payable interest rate	7.00%
Convertible Secured Notes [Member] | Mr. Kopple [Member]
Related Parties Transactions (Textual)
Unsecured notes payable and accrued interest-related party	$ 202,538
Convertible note payable and accrued interest-related party, net of discount	$ 1,797,462

XML

Commitments (Details)	9 Months Ended
	Nov. 30, 2015 USD ($) ft²
Commitments (Textual)
Area of facility (in square feet) | ft²	20,000
Rent per month | $	$ 10,000

XML

Subsequent Events (Details) - USD ($)

9 Months Ended

Nov. 30, 2015

Feb. 28, 2015

Subsequent Event [Line Items]

Convertible notes payable

$ 7,874,705

$ 5,940,951

Notes payable interest rate

10.00%

Demanding repayment of loans

$ 125,000

Stock Warrants Outstanding

36,335,406

Robert Kopple [Member]

Subsequent Event [Line Items]

Warrants outstanding value

$ 5,400,000

Stock Warrants Outstanding

22,000,000

January 30,2017 [Member]

Subsequent Event [Line Items]

Reverse stock split, description

The Amended Notes bear interest at the rate of 0% until May 1, 2017 and 5% per annum thereafter, subject to reduction to comply with applicable law, and mature in 60 months from the effective date of a 1 for 7 reverse stock split. Upon certain financings, the Company is obligated to make a payment to the holders of the Amended Notes in the amount of 20% of the outstanding Notes. Immediately upon the effectiveness of a 1 for 7 reverse stock split.

Debt interest

$ 1,606,884

Debt Refinancing Agreement [Member] | January 24, 2017 [Member]

Subsequent Event [Line Items]

Total debt

23,872,614

Accrued interest

8,890,574

Convertible notes payable

$ 14,930,041

New debt agreement, term

5 years

Notes payable interest rate

5.00%

Convertible note, amount

$ 11,982,041

Convertible note, shares

7,403,705

Reverse stock split, description

The stockholders approving a 1 for 7 reverse stock split within one year of entering this agreement and the remaining may be converted at any time thereafter post reverse split. In the absence of the approval within one year, this agreement will become null and void. The Company has elected to continue to accrue interest on this agreement until such time as the 1 for 7 reverse stock split has been approved.

Joint venture (JV) agreement [Member] | January 27, 2017 [Member]

Subsequent Event [Line Items]

Joint venture cost method interest rate, percentage

49.00%

Payments for joint venture agreement

$ 250,000

Chinese company [Member] | January 27, 2017 [Member]

Subsequent Event [Line Items]

Payments for joint venture agreement

$ 9,750,000

Ownership percentage in joint venture

51.00%

Sale of equity method investments interest

$ 2,000,000

Shares issue of price per share

$ 0.20

Sale of common stock

10,000,000

Common stock purchase minimum amount

$ 1,250,000