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 August 31, 2017

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, a 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 ☐	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 October 13, 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 August 31, 2017 and February 28, 2017	1
		Statements of Operations for the Three and Six months Ended August 31, 2017 and 2016	2
		Statements of Cash Flows for the Three and Six months Ended August 31, 2017 and 2016	3
		Notes to Financial Statements	4
	ITEM 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	12
	ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	17
	ITEM 4.	Controls and Procedures	17
PART II. OTHER INFORMATION			18
	ITEM 1.	Legal Proceedings	18
	ITEM 1A.	Risk Factors	18
	ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	18
	ITEM 3.	Defaults Upon Senior Securities	19
	ITEM 4.	Mine Safety Disclosures	19
	ITEM 5.	Other Information	19
	ITEM 6.	Exhibits	19
	SIGNATURES AND CERTIFICATIONS		20

ITEM 1. FINANCIAL STATEMENTS

AURA SYSTEMS, INC.
BALANCE SHEETS

(Unaudited)

	As of August 31,			As of February 28,
	2017			2017
ASSETS
Current assets:
Cash and cash equivalents	$	1,064,297		$	255,869
Other current assets		27,588			2,894
Total current assets		1,091,885			258,763
Deposits		3,500			3,500
Investment in Joint Venture		250,000			-
Total assets	$	1,345,385		$	262,263
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable	$	4,488,784		$	4,943,559
Accrued expenses		6,656,291			5,939,251
Customer advances		641,751			641,751
Investor advance		1,000,000			-
Notes payable		5,327,608			4,776,938
Convertible note payable and accrued interest-related party, net of discount		3,328,956			2,920,172
Convertible notes payable, net of discount		4,220,700			4,177,283
Notes payable and accrued interest- related party		29,873,727			29,669,693
Total current liabilities		55,537,817			53,068,647
Total liabilities		55,537,817			53,068,647
Commitments and contingencies
Stockholders' deficit:
Common stock, $0.0001 par value; 150,000,000 shares authorized at August 31 and February 28, 2017; 126,608,391 and 113,991,432 issued and outstanding at August 31 and February 28, 2017, respectively		12,661			11,399
Additional paid-in capital		412,666,277			410,499,597
Accumulated deficit		(466,871,370	)		(463,317,380	)
Total stockholders' deficit		(54,192,432	)		(52,806,384	)
Total liabilities and stockholders' deficit	$	1,345,385		$	262,263

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

1

AURA SYSTEMS, INC.

STATEMENTS OF OPERATIONS

FOR THE THREE AND SIX MONTHS ENDED AUGUST 31, 2017 AND 2016

(Unaudited)

	Three Months ended August 31,						Six Months ended August 31,
	2017			2016			2017			2016
Net Revenues	$	-		$	-		$	-		$	-
Cost of goods sold		-			-			-			-
Gross Profit		-			-			-			-
Expenses
Engineering, research and development expenses		-			100			-			33,888
Selling, general and administrative expenses		362,807			231,444			930,803			848,421
Total costs and expenses		362,807			231,544			930,803			882,309
Loss from operations		(362,807	)		(231,544	)		(930,803	)		(882,309	)
Other (income) and expense
Interest expense, net		797,823			823,803			1,826,051			1,651,750
Gain on debt settlement		-			-			-			(70,288
Other (income) expense, net		10,000			-			797,136			(1,767	)
Total other (income) expense		807,823			823,803			2,623,187			1,579,695
Net Loss	$	(1,170,630	)	$	(1,055,347	)	$	(3,553,990	)	$	(2,462,004	)
Total basic and diluted loss per share	$	(0.01	)	$	(0.01	)	$	(0.03	)	$	(0.02	)
Weighted average shares used to compute basic and diluted income (loss) per share		125,658,391			113,951,432			123,739,929			113,899,802

*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 financial statements.

2

AURA SYSTEMS, INC.
STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED AUGUST 31, 2017 AND 2016
(Unaudited)

	Six Months Ended August 31,
	2017			2016
Cash flow from operating activities:
Net Loss	$	(3,553,990	)	$	(2,462,004	)
Depreciation Expense		-			-
Amortization of debt discount		43,417			128,220
Gain on debt settlement		-			(70,288	)
FMV of warrants issued for services		177,737			-
Stock issued for services		990,205			-
(Increase) decrease in:
Accounts receivable		-			2,115
Other current assets and deposit		(24,694	)		96,819
Increase (decrease) in:
Accounts payable, customer deposit and accrued expenses		262,265			2,075,512
Net cash used in operations		(2,105,060	)		(229,626	)
Investing Activities:
Investment in Joint Venture		(250,000	)		-
Net cash used in investing activities		(250,000	)		-
Financing activities:
Issuance of common stock		1,000,000			-
Proceeds from notes payable-net		959,454			571,490
Proceeds from notes payable-related party, net		204,034			68,672
Investor Advance		1,000,000			-
Net cash provided by financing activities:		3,163,488			640,162
Net increase (decrease) in cash & cash equivalents		808,428			410,536
Cash and cash equivalents at beginning of period		255,869			22,175
Cash and cash equivalents at end of period	$	1,064,297		$	432,711
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:

None

See accompanying notes to these unaudited 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, 2017 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.

4

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.

5

Reclassifications

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

NOTE 2 – GOING CONCERN

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. During the six months ended August 31, 2017 and August 31, 2016, the Company incurred losses of $3,553,990 and $2,462,004, respectively and had negative cash flows from operating activities of $2,105,060 and $229,626, 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 – NOTES PAYABLE

Notes payable consisted of the following:

	August 31, 2017		February 28, 2017
Demand notes payable, at 10% and 16%	$	3,584,498	$	3,782,238
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.		1,000,000		972,632
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.		500,000		483,951
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
Convertible notes dated April thru June, 2016. The notes carry an interest rate of 5% and might be converted into shares of Company’s common stock if the shareholders approve a 7:1 reverse stock split.		1,743,110		994,700
		9,548,308		8,954,221
Less: Current portion	$	9,548,308	$	8,954,221
Long-term portion	$	-	$	-

6

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 and warrants to Kenmont Capital Partners. This new 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 of common stock, 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 will be amortized over the life of the 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 and warrants to LPD Investments, Ltd. This new 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 of common stock, 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 will be amortized over the life of the note.

On May 7, 2013, the Company entered into an agreement with an individual for the sale of a secured convertible note payable in the original principal amount of $750,000 and warrants. This 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 of common stock, 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 will be amortized over the life of the note.

On June 20, 2013, the Company entered into an agreement with four individuals for the sale of secured convertible notes payable in the original amount of $325,000 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 of common stock, 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 will be amortized over the life of the notes.

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 unsecured convertible notes payable and warrants. These notes carry a base interest rate of 9.5%, have a 4-year maturity date and are convertible into shares of common stock at the conversion price of $0.50 per share. The warrants entitle the holder to acquire 5,000,000 shares of common stock, have an initial exercise price of $0.75 per share and have a 7-year term. The Company recorded $667,118 as a discount, which will be amortized over the life of the note.

All convertible notes payable are due within twelve months or have not been paid when originally due.

7

CONVERTIBLE PROMISSORY NOTES

At February 28, 2013, the three other unsecured convertible promissory notes payable amounted to $1,447,938, net of discounts of $402,063. These convertible notes bear interest at 7% per annum, and are convertible into common stock of the Company at $0.76 per share (as well as variable conversion rates as described below). These notes are due on August 10, 2017, October 2, 2017, and January 4, 2013. On May 7, 2013, the note due on January 4, 2013 was converted into a portion of the note due June 15, 2013, which carries an interest rate of 12%.

During the quarter ended August 31, 2017, the company entered into agreements with various individuals for the aggregate sale of $165,000 of unsecured convertible notes and warrants. Pursuant to the terms of these notes, such notes will be converted in their entirety into shares of common stock of the Company at the conversion price of $0.07 per share upon stockholder approval of a 1-for-7 reverse stock split. The warrants entitle the holders to acquire up to an aggregate of 132,000 shares of common stock and have an initial exercise price of $0.20 per share which will be adjusted to $1.40 per share upon stockholder approval of a 1-for-7 reverse stock split. As of the date of this filing, the Company’s stockholders have not approved the proposed 1-for-7 reserve stock split.

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 original principal amount of $1,000,000. This convertible promissory note is due and payable on August 10, 2017 and bears an interest rate is 7% per annum.  Interest on the unpaid principal amount of this note is payable monthly in arrears, on the tenth day of each calendar month, commencing September 10, 2012. Interest is computed on the actual number of days elapsed over a 360-day year. The Holder has the right to convert any outstanding and unpaid principal portion of this convertible promissory note into shares of common stock. The company recorded $310,723 as a debt discount, which will be amortized over the life of the 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 original principal amount of $500,000. This convertible promissory note is due and payable on October 2, 2017 and bears an interest rate is 7% per annum.  Interest on the unpaid principal amount of this note is payable monthly in arrears on the second day of each calendar month, commencing November 2, 2012. Interest is computed on the actual number of days elapsed over a 360-day year. The Holder has the right to convert any outstanding and unpaid principal portion of this convertible promissory note into shares of common stock. The company recorded $137,583 as a debt discount, which will be amortized over the life of the note.

On January 30, 2017 the Company entered into an agreement entitled First Amendment to Transaction Documents with five of seven of its secured creditors. These creditors hold a security interest in all of the Company’s assets except for its patents and other intellectual properties. The original agreement dated May 7, 2013 provided that if the holders of at least 75% of the stock issuable upon conversion of the convertible notes votes to amend the agreement, then such amendments will be binding on all the secured creditors. The five secured creditors signing the amendment total in excess of 95% of the issuable stock upon conversion and, therefore the agreement is binding on all seven of the secured creditors. The amended agreement provides that all accrued and unpaid interest will be added to the principal amount, the amended notes bear interest at the rate of 0% through the sooner of (i) January 15, 2018 or (ii) the fifth business day following a stockholder meeting and 5% per annum thereafter, subject to reduction to comply with applicable law, and mature in 60 months from the effective date of a proposed 1-for-7 reverse stock split (which may only be effected if approved by the stockholders at the next annual meeting of stockholders). Upon certain financings, within five business days following stockholder approval of a 1-for-7 reverse stock split, the Company is obligated to make a payment to the holders of the amended notes in the amount of 20% of the outstanding secured notes. Upon the effectiveness of a proposed 1-for-7 reverse stock split, the remaining 80% balance of the amended notes is converted into shares of the Company’s common stock. After the effectiveness of a proposed 1-for-7 reverse stock split, the secured note holders may voluntarily convert the unpaid principal and interest thereon into the Company’s common stock at the conversion price of $1.40 per share.

8

On February 21, 2017 the Company entered into debt refinancing agreements with several debt holders relating to aggregate unsecured debt totaling $2,237,456 including interest of $489,466. This refinancing agreement waives any past events of default and provides for new five-year convertible notes which bear no interest through the sooner of (i) January 15, 2018 or (ii) the fifth business day following a stockholder meeting and 5% per annum thereafter. Upon stockholder approval of a 1-for-7 reverse stock split, these notes will be converted into a total of 1,164,555 shares of common stock. The notes also provide various default provisions.

As of the date of filing, the shareholders have not approved any reverse stock split.

NOTE 4 – ACCRUED EXPENSES

Accrued expenses consisted of the following:

	August 31, 2017		February 28, 2017
Accrued payroll and related expenses	$	2,801,386	$	3,099,842
Accrued rent		202,036		202,036
Accrued interest		3,617,869		2,562,375
Other		35,000		75,000
Total	$	6,656,291	$	5,939,252

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 5 – SHAREHOLDERS’ EQUITY

Common Stock

During the six months ended August 31, 2017, we issued 5,000,000 shares of common stock for $1,000,000 in conjunction with our Chinese Joint Venture, we issued 5,116,959 shares of common stock valued at $665,204 as part of a settlement agreement, and we issued 2,500,000 shares of common stock valued at $325,000 in connection with a consulting agreement.

During the six months ended August 31, 2016, we issued 950,000 shares of common stock were issued in settlement for a note payable balance $150,000 plus accrued interest of $15,288.

9

Employee Stock Options

During the Six months ended August 31, 2017, 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, 2017		$0.75-$1.00	$	0.00		7,224,000
Cancelled		-		-		-
Granted		-		-		-
Outstanding, August 31, 2017		$0.75-$1.00	$	0.00		7,224,000

The exercise prices for the options outstanding at August 31, 2017, 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		7,224,000		2.50 years	$	0.79	2.50 years		7,224,000	$	0.79

Warrants

Activity in issued and outstanding warrants is as follows:

	Number of Shares		Exercise Prices
Outstanding, February 28, 2017		27,554,021		$0.10-$1.00
Granted		1,400,000	$	.20
Exercised		-		-
Cancelled		-		-
Outstanding, August 31, 2017		28,954,021		$0.10-$1.00

The exercise prices for the warrants outstanding at August 31, 2017, 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
$0.20		1,400,000		1,400,000		54 months	$	0.20	$	0.20	$	0.00
$0.10-$0.75		19,481,012		19,481,012		43 months	$	0.56	$	0.56	$	0.00
$0.75		1,082,734		1,082,734		42 months	$	0.75	$	0.75	$	0.00
$0.75		1,000,000		1,000,000		32 months	$	0.75	$	0.75	$	0.00
$0.75-$1.00		5,990,275		5,990,275		27 months	$	0.77	$	0.77	$	0.00
		28,954,021		28,954,021

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NOTE 5 – RELATED PARTIES TRANSACTIONS

On January 24, 2017 the Company entered into a Debt Refinancing Agreement with Mr. Warren Breslow, who served as a Director of the Company from 2006 to 2017. Mr. Breslow resigned his position on our board in March 2017. Pursuant to this agreement, both Mr. Breslow and the Company acknowledged that total debt owed to Mr. Breslow and his affiliates was $23,872,614 including $8,890,574 of accrued interest. Mr. Breslow agreed to cancel and forgive all interest due, waive any past events of default and sign a new, five-year unsecured convertible note, in the amount of $14,982,041. This new note bears no interest through the sooner of (i) January 15, 2018 or (ii) the fifth business day following a shareholder meeting, and 5% per annum thereafter. This new note also provides various default provisions. The refinancing agreement further provides that $11,982,041 of Mr. Breslow’s new note will be converted into 7,403,705 shares of common stock upon stockholder approval of a 1-for-7 reverse stock split within eighteen months of entering into that agreement; the remaining balance may thereafter be converted at any time. In the absence of stockholder approval of a 1-for-7 reverse stock split within eighteen months, the refinancing 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. As of the date of filing, the stockholders have not approved the reverse stock split.

At August 31, 2017, the balance in Notes Payable and accrued interest-related party, current, includes $14,982,041 of unsecured notes payable plus accrued interest of $9,638,285 to Mr. Breslow, a member of our Board of Directors, payable on demand, bearing interest at a rate of 10% per annum. The balance was $14,982,041 plus accrued interest of $8,890,574 as of February 28, 2017. During the periods ended August 31, 2017 and August 31, 2016, interest amounting to $747,711 and $747,020 respectively, was incurred on these notes. Related Parties Transactions also includes $82,000 of unsecured notes payable plus accrued interest of $33,233 and $29,141 to our CEO pursuant to a demand note entered into on April 5, 2014 and an unsecured note payable to Mr. Kopple, another member of our Board of Directors in the total amount of $3,587,322 and $3,418,738 plus accrued interest of $2,098,616 and $784,934 pursuant to 10% demand note payable as of February 28, 2017 and February 29, 2016, respectively. At August 31, 2017, the balance in Convertible note payable and accrued interest-related party, long term, includes $2,000,000 of secured convertible notes payable plus accrued interest of $1,070,510 to Mr. Kopple.

NOTE 7 – COMMITMENTS

Leases

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.

Joint Venture

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 is owned 49% by the Company and 51% by the Chinese company. The Company has contributed $250,000 and a license to specific technology and the Chinese company is required to contribute $9,750,000. 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. Additionally, the Chinese company will purchase a minimum of $1,250,000 of product supported by letters of credit for distribution until the joint venture factory is built, equipped, and staffed. In order to assure proper training of joint venture personnel, Aura has also committed to supply instructional personnel 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.

NOTE 8 – SUBSEQUENT EVENTS:

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, 2017 (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.

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(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.

(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 within five business days following stockholder approval of a 1-for-7 reverse stock split provided that certain financings milestones have been reached by the Company. 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, 2017 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

Six months ended August 31, 2017 compared to six months ended August 31, 2016

Net revenues for the six months ended August 31, 2017 (the “Six Months FY2018”) and August 31, 2016 (the “Six Months FY2017”) were $0. The Company has virtually ceased operations due to a lack of funding.

Cost of goods in the Six Months FY2018 and the Six Months FY2017 were $0 as a result of the virtual cessation of operations as noted above.

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Engineering, research and development expenses were $0 in the Six Months FY2018 compared to $33,888 in the Six Months FY 2017. The decline is attributable to a lack of funds resulting in the virtual cessation of operations as noted above.

Selling, general and administrative expense increased $82,382 (10%) to $930,803 in the Six Months FY2018 from $848,421 in the Six Months FY2017.

Net interest expense in the Six Months FY2018 increased $174,304 (10%) to $1,826,051 from $1,651,750 in the Six Months FY2017 primarily as a result of warrants issued for debt guarantees valued at approximately $175,000.

Other expense increased $798,903 in the Six Months FY2018 due to a non-cash settlement with a shareholder whereby the company issued 5,116,959 shares of stock valued at approximately $665,000, IRS penalties and interest assessed of approximately $20,000 due to the late filing and payment of withholding taxes, and approximately $102,000 for settlements with two former employees and a labor board judgment with another employee.

Our net loss for the Six Months FY2018 increased $1,091,986 to $3,553,990 from $2,462,004 in the Six Months FY2017.

Three months ended August 31, 2017 compared to three months ended August 31, 2016

Net revenues for the three months ended August 31, 2017 (the “Second Quarter FY2018”) and the three months ended August 31, 2016 (the “Second Quarter FY2017”) were $0. The Company has virtually ceased operations due to a lack of funding.

Cost of goods in the Second Quarter FY2018 and the Second Quarter FY2017 were $0 as a result of the virtual cessation of operations as noted above.

Engineering, research and development expenses were $0 in the Second Quarter FY2018 compared to $100 in the Second Quarter FY 2017.

Selling, general and administrative expense increased $131,363 (57%) to $362,807 in the Second Quarter FY2018 from $231,444 in the Second Quarter FY2017. The increase is primarily attributable to a non-cash consulting fee of $325,000 satisfied with 2,500,000 shares of common stock and an increase in legal expense of approximately $70,000 partially offset by a decrease in rent expense and other miscellaneous expenses.

Net interest expense in the Second Quarter FY2018 decreased $25,980 (3%) to $797,823 from $823,803 in the Second Quarter FY2017.

Our net loss for the Second Quarter FY2018 increased $115,283 to $1,170,630 from $1,055,347 in the Second Quarter FY2017.

Liquidity and Capital Resources

We had cash of approximately $1,064,000 and $256,000 as of August 31, 2017, and February 28, 2017, respectively.  We had a working capital deficit at August 31, 2017, and February 28, 2017 of $54,445,932 and $52,809,884, respectively. The working capital deficit includes notes payable and accrued interest to related parties of $29,873,727 and $29,669,693 as of August 31 and February 28, 2017, respectively.

Net cash used in operations for the Six months ended August 31, 2017, was $1,562,242, an increase of $1,332,616 from the comparable period in the prior fiscal year. Net cash used in investing activities consists of our investment of $250,000 in our Chinese joint venture. Net cash provided by financing activities during the Six months ended August 31, 2017, was $2,620,670, resulting from net proceeds from notes payable of $620,670, the issuance of common stock for $1,000,000, and an investor advance of $1,000,000.

There were no acquisitions of property and equipment in the Three months FY 2018 or the Three months FY 2017.

Accrued expenses as of August 31, 2017 increased $938,479 to $6,877,730 from $5,939,251 as of February 28, 2017. Approximately $1,335,000 of accrued expenses is salaries accrued but unpaid to certain employees and ex-employees due to a lack of resources, and approximately $518,000 is accrued but unused vacation time earned by employees.

Net proceeds from the issuance of debt totaled $620,670 in the Six months FY 2018, compared with $640,162 in the Six months FY 2017. As of August 31, 2017, the total amount owing a board member is $14,982,040 plus accrued interest of approximately $9,266,516. We also owe another Board member a total of $5,288,081 plus accrued interest of approximately $2,834,867. 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 $54,192,432 in shareholders’ equity as of August 31, 2017, compared to $52,806,384 as of February 28, 2017.

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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 six months ended August 31, 2017, we issued 5,000,000 shares of common stock for $1,000,000 in conjunction with our Chinese Joint Venture, we issued 5,116,959 shares of common stock valued at $665,204 as part of a settlement agreement, and we issued 2,500,000 shares of common stock valued at $325,000 in connection with a consulting agreement.

During the six months ended August 31, 2017, we issued 950,000 shares of common stock to settle a note payable balance of $150,000 plus accrued interest of $15,588.

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.

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.

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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 acting Chief Financial Officer, the effectiveness of the Company’s disclosure controls and procedures. Based on the evaluation, the Company’s Chief Executive Officer and acting 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 August 31, 2017, 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, 2017.

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

During the quarter ended August 31, 2017, we did not issue any shares of common stock. During the quarter ended August 31, 2017, the company entered into agreements with various individuals for the aggregate sale of $165,000 of unsecured convertible notes and warrants. Pursuant to the terms of these notes, such notes will be converted in their entirety into shares of common stock of the Company at the conversion price of $0.07 per share upon stockholder approval of a 1-for-7 reverse stock split. The warrants entitle the holders to acquire up to an aggregate of 132,000 shares of common stock and have an initial exercise price of $0.20 per share which will be adjusted to $1.40 per share upon stockholder approval of a 1-for-7 reverse stock split. As of the date of this filing, the Company’s stockholders have not approved the proposed 1-for-7 reserve stock split.

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.

18

ITEM 3. Defaults Upon Senior Securities.

We have commitments to pay investors and lenders $40,553,920 comprising principal and accrued interest on various convertible notes, non-convertible notes and loans payable through August 31, 2017. 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 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. Prior to the restricting of the Restructured Debt, the Company was in potential default on $13,535,679 of debt. However, as of the date of filing, all notes payable other than $7,289,838 have been restructured and any potential defaults with respect to this restructured 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 3 – Notes Payable”, “Note 5 – Related Parties Transactions”, “Note 8 –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

10.1	First Amendment to Unsecured Convertible Promissory Note dated June 15, 2017 by and between the Survivor's Trust Under the Warren L. Breslow Trust and the Registrant
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

19

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: October 25, 2017
By:	/s/ Melvin Gagerman
	Melvin Gagerman
	Acting Chief Financial Officer
	(Principal Financial and Accounting Officer
	and Duly Authorized Officer)

20

EX-10.1

Exhibit 10.1

FIRST AMENDMENT TO UNSECURED CONVERTIBLE PROMISSORY NOTE

This FIRST AMENDMENT TO UNSECURED CONVERTIBLE PROMISSORY NOTE (this “Amendment”), is effective as of the 15th day of June 2017_; (the “Effective Date”) and entered into by and among Aura Systems, Inc., a Delaware corporation (the “Company”), and the Survivor’s Trust Under the Warren L. BreSlow Trust (the “Holder”), with reference to that certain Unsecured Convertible Promissory Note dated January 24, 2017 (as amended, the “Original Note”) issued in connection with that certain Debt Refinancing Agreement also dated January 24, 2017 (as amended, the “Original Refinancing Agreement”) by and among the Company and the Holder. Capitalized terms not defined herein that are defined in the Original Note and/or the Original Refinancing Agreement shall have the meaning ascribed to them therein.

WHEREAS, on or about January 24, 2017 the Company and the Holder entered into that certain Original Note; and

WHEREAS, the parties desire to further amend the Original Note as set forth herein; and.

WHEREAS, pursuant to Section 13.2 of the Original Note, amendments thereto may be made byan instrument in writing signed by the Company and the Holder.

NOW, THEREFORE, in consideration of the premises and the mutual agreements and covenants hereinafter set forth, and intending to be legally bound, the Company and the Holder hereby agree that the Original Note is, as of and at the Effective Date, amended as follows:

1.           Amendments to Section 2.1. Section 2.1 of the Original Note is hereby amended to read in its entirety as follows:

2.1.       Base Interest During the period commencing upon the Issuance Date and continuing through the sooner of (i) January 15, 2018 or (ii) the fifth (5th) Business Day following a Shareholder Meeting (as defined in the Refinancing Agreement) (the “Initial Interest Period”) the Company shall pay interest on the unpaid New Principal balance of, and accrued and unpaid interest on, this Note at a rate per annum equal to zero percent (0.00%) (the “Interest Rate”). Upon expiration of the Initial Interest Period, the Interest Rate will automatically increase to five percent (5.00%) per annum.

[signature page to follow]

IN WITNESS WHEREOF, the Holder and the Company have each caused this First Amendment to be duly executed as of the Effective Date set forth above.

COMPANY:

AURA SYSTEMS, INC.

By:	/s/ Melvin Gagerman
	Melvin Gagerman
	Chief Executive Officer
HOLDER:
SURVIVOR’S TRUST UNDER THE WARREN L. BRESLOW TRUST.
By:	/s/ Warren L. Breslow
	Warren L. Breslow, Trustee

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: October 25, 2017	By:	/s/ Melvin Gagerman
		Melvin Gagerman
		Chief 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: October 25, 2017	By:	/s/ Melvin Gagerman
		Melvin Gagerman
		Acting Chief Financial 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 August 31, 2017 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,
	Acting Chief Financial Officer

Date: October 25, 2017

XML

Document and Entity Information - shares	6 Months Ended
	Aug. 31, 2017	Oct. 13, 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	Aug. 31, 2017
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	Q2
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		126,608,391

XML

Balance Sheets (Unaudited) - USD ($)	Aug. 31, 2017	Feb. 28, 2017
Current assets:
Cash and cash equivalents	$ 1,064,297	$ 255,869
Other current assets	27,588	2,894
Total current assets	1,091,885	258,763
Deposits	3,500	3,500
Investment in Joint Venture	250,000
Total assets	1,345,385	262,263
Current liabilities:
Accounts payable	4,488,784	4,943,559
Accrued expenses	6,656,291	5,939,251
Customer advances	641,751	641,751
Investor advance	1,000,000
Notes payable	5,327,608	4,776,938
Convertible note payable and accrued interest-related party, net of discount	3,328,956	2,920,172
Convertible notes payable, net of discount	4,220,700	4,177,283
Notes payable and accrued interest- related party	29,873,727	29,669,693
Total current liabilities	55,537,817	53,068,647
Total liabilities	55,537,817	53,068,647
Commitments and contingencies
Stockholders' deficit:
Common stock, $0.0001 par value; 150,000,000 shares authorized at August 31 and February 28, 2017; 126,608,391 and 113,991,432 issued and outstanding at August 31 and February 28, 2017, respectively	12,661	11,399
Additional paid-in capital	412,666,277	410,499,597
Accumulated deficit	(466,871,370)	(463,317,380)
Total stockholders' deficit	(54,192,432)	(52,806,384)
Total liabilities and stockholders' deficit	$ 1,345,385	$ 262,263

XML

Balance Sheets (Parenthetical) (Unaudited) - $ / shares	Aug. 31, 2017	Feb. 28, 2017
Statement of Financial Position [Abstract]
Common stock, par value	$ 0.0001	$ 0.0001
Common stock, shares authorized	150,000,000	150,000,000
Common stock, shares issued	126,608,391	113,991,432
Common stock, shares outstanding	126,608,391	113,991,432

XML

Statements of Operations (Unaudited) - USD ($)		3 Months Ended		6 Months Ended
		Aug. 31, 2017	Aug. 31, 2016	Aug. 31, 2017	Aug. 31, 2016
Income Statement [Abstract]
Net Revenues
Cost of goods sold
Gross Profit
Expenses
Engineering, research and development expenses			100		33,888
Selling, general and administrative expenses		362,807	231,444	930,803	848,421
Total costs and expenses		362,807	231,544	930,803	882,309
Loss from operations		(362,807)	(231,544)	(930,803)	(882,309)
Other (income) and expense
Interest expense, net		797,823	823,803	1,826,051	1,651,750
Gain on debt settlement					(70,288)
Other (income) expense, net		10,000		797,136	(1,767)
Total other (income) expense		807,823	823,803	2,623,187	1,579,695
Net Loss		$ (1,170,630)	$ (1,055,347)	$ (3,553,990)	$ (2,462,004)
Total basic and diluted loss per share		$ (0.01)	$ (0.01)	$ (0.03)	$ (0.02)
Weighted average shares used to compute basic and diluted income (loss) per share	[1]	125,658,391	113,951,432	123,739,929	113,899,802

[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.

XML

Statements of Cash Flows (Unaudited) - USD ($)	6 Months Ended
	Aug. 31, 2017	Aug. 31, 2016
Cash flow from operating activities:
Net Loss	$ (3,553,990)	$ (2,462,004)
Depreciation Expense
Amortization of debt discount	43,417	128,220
Gain on debt settlement		(70,288)
FMV of warrants issued for services	177,737
Stock issued for services	990,205
(Increase) decrease in:
Accounts receivable		2,115
Other current assets and deposit	(24,694)	96,819
Increase (decrease) in:
Accounts payable, customer deposit and accrued expenses	262,265	2,075,512
Net cash used in operations	(2,105,060)	(229,626)
Investing Activities:
Investment in Joint Venture	(250,000)
Net cash used in investing activities	(250,000)
Financing activities:
Issuance of common stock	1,000,000
Proceeds from notes payable-net	959,454	571,490
Proceeds from notes payable-related party, net	204,034	68,672
Investor Advance	1,000,000
Net cash provided by financing activities:	3,163,488	640,162
Net increase (decrease) in cash & cash equivalents	808,428	410,536
Cash and cash equivalents at beginning of period	255,869	22,175
Cash and cash equivalents at end of period	1,064,297	432,711
Cash paid during the period for:
Interest
Income taxes

XML

Accounting Policies

6 Months Ended

Aug. 31, 2017

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, 2017 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.

XML

Going Concern

6 Months Ended

Aug. 31, 2017

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 six months ended August 31, 2017 and August 31, 2016, the Company incurred losses of $3,553,990 and $2,462,004, respectively and had negative cash flows from operating activities of $2,105,060 and $229,626, 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.

XML

Notes Payable

6 Months Ended

Aug. 31, 2017

Notes Payable [Abstract]

NOTES PAYABLE

NOTE 3 – NOTES PAYABLE

Notes payable consisted of the following:

	August 31, 2017		February 28, 2017
Demand notes payable, at 10% and 16%	$	3,584,498	$	3,782,238
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.		1,000,000		972,632
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.		500,000		483,951
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
Convertible notes dated April thru June, 2016. The notes carry an interest rate of 5% and might be converted into shares of Company’s common stock if the shareholders approve a 7:1 reverse stock split.		1,743,110		994,700
		9,548,308		8,954,221
Less: Current portion	$	9,548,308	$	8,954,221
Long-term portion	$	-	$	-

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 and warrants to Kenmont Capital Partners. This new 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 of common stock, 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 will be amortized over the life of the 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 and warrants to LPD Investments, Ltd. This new 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 of common stock, 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 will be amortized over the life of the note.

On May 7, 2013, the Company entered into an agreement with an individual for the sale of a secured convertible note payable in the original principal amount of $750,000 and warrants. This 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 of common stock, 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 will be amortized over the life of the note.

On June 20, 2013, the Company entered into an agreement with four individuals for the sale of secured convertible notes payable in the original amount of $325,000 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 of common stock, 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 will be amortized over the life of the notes.

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 unsecured convertible notes payable and warrants. These notes carry a base interest rate of 9.5%, have a 4-year maturity date and are convertible into shares of common stock at the conversion price of $0.50 per share. The warrants entitle the holder to acquire 5,000,000 shares of common stock, have an initial exercise price of $0.75 per share and have a 7-year term. The Company recorded $667,118 as a discount, which will be amortized over the life of the note.

All convertible notes payable are due within twelve months or have not been paid when originally due.

CONVERTIBLE PROMISSORY NOTES

At February 28, 2013, the three other unsecured convertible promissory notes payable amounted to $1,447,938, net of discounts of $402,063. These convertible notes bear interest at 7% per annum, and are convertible into common stock of the Company at $0.76 per share (as well as variable conversion rates as described below). These notes are due on August 10, 2017, October 2, 2017, and January 4, 2013. On May 7, 2013, the note due on January 4, 2013 was converted into a portion of the note due June 15, 2013, which carries an interest rate of 12%.

During the quarter ended August 31, 2017, the company entered into agreements with various individuals for the aggregate sale of $165,000 of unsecured convertible notes and warrants. Pursuant to the terms of these notes, such notes will be converted in their entirety into shares of common stock of the Company at the conversion price of $0.07 per share upon stockholder approval of a 1-for-7 reverse stock split. The warrants entitle the holders to acquire up to an aggregate of 132,000 shares of common stock and have an initial exercise price of $0.20 per share which will be adjusted to $1.40 per share upon stockholder approval of a 1-for-7 reverse stock split. As of the date of this filing, the Company’s stockholders have not approved the proposed 1-for-7 reserve stock split.

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 original principal amount of $1,000,000. This convertible promissory note is due and payable on August 10, 2017 and bears an interest rate is 7% per annum.  Interest on the unpaid principal amount of this note is payable monthly in arrears, on the tenth day of each calendar month, commencing September 10, 2012. Interest is computed on the actual number of days elapsed over a 360-day year. The Holder has the right to convert any outstanding and unpaid principal portion of this convertible promissory note into shares of common stock. The company recorded $310,723 as a debt discount, which will be amortized over the life of the 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 original principal amount of $500,000. This convertible promissory note is due and payable on October 2, 2017 and bears an interest rate is 7% per annum.  Interest on the unpaid principal amount of this note is payable monthly in arrears on the second day of each calendar month, commencing November 2, 2012. Interest is computed on the actual number of days elapsed over a 360-day year. The Holder has the right to convert any outstanding and unpaid principal portion of this convertible promissory note into shares of common stock. The company recorded $137,583 as a debt discount, which will be amortized over the life of the note.

On January 30, 2017 the Company entered into an agreement entitled First Amendment to Transaction Documents with five of seven of its secured creditors. These creditors hold a security interest in all of the Company’s assets except for its patents and other intellectual properties. The original agreement dated May 7, 2013 provided that if the holders of at least 75% of the stock issuable upon conversion of the convertible notes votes to amend the agreement, then such amendments will be binding on all the secured creditors. The five secured creditors signing the amendment total in excess of 95% of the issuable stock upon conversion and, therefore the agreement is binding on all seven of the secured creditors. The amended agreement provides that all accrued and unpaid interest will be added to the principal amount, the amended notes bear interest at the rate of 0% through the sooner of (i) January 15, 2018 or (ii) the fifth business day following a stockholder meeting and 5% per annum thereafter, subject to reduction to comply with applicable law, and mature in 60 months from the effective date of a proposed 1-for-7 reverse stock split (which may only be effected if approved by the stockholders at the next annual meeting of stockholders). Upon certain financings, within five business days following stockholder approval of a 1-for-7 reverse stock split, the Company is obligated to make a payment to the holders of the amended notes in the amount of 20% of the outstanding secured notes. Upon the effectiveness of a proposed 1-for-7 reverse stock split, the remaining 80% balance of the amended notes is converted into shares of the Company’s common stock. After the effectiveness of a proposed 1-for-7 reverse stock split, the secured note holders may voluntarily convert the unpaid principal and interest thereon into the Company’s common stock at the conversion price of $1.40 per share.

On February 21, 2017 the Company entered into debt refinancing agreements with several debt holders relating to aggregate unsecured debt totaling $2,237,456 including interest of $489,466. This refinancing agreement waives any past events of default and provides for new five-year convertible notes which bear no interest through the sooner of (i) January 15, 2018 or (ii) the fifth business day following a stockholder meeting and 5% per annum thereafter. Upon stockholder approval of a 1-for-7 reverse stock split, these notes will be converted into a total of 1,164,555 shares of common stock. The notes also provide various default provisions.

As of the date of filing, the shareholders have not approved any reverse stock split.

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Accrued Expenses

6 Months Ended

Aug. 31, 2017

Accrued Expenses [Abstract]

ACCRUED EXPENSES

NOTE 4 – ACCRUED EXPENSES

Accrued expenses consisted of the following:

	August 31, 2017		February 28, 2017
Accrued payroll and related expenses	$	2,801,386	$	3,099,842
Accrued rent		202,036		202,036
Accrued interest		3,617,869		2,562,375
Other		35,000		75,000
Total	$	6,656,291	$	5,939,252

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

6 Months Ended

Aug. 31, 2017

Shareholders' Equity [Abstract]

SHAREHOLDERS' EQUITY

NOTE 5 – SHAREHOLDERS’ EQUITY

Common Stock

During the six months ended August 31, 2017, we issued 5,000,000 shares of common stock for $1,000,000 in conjunction with our Chinese Joint Venture, we issued 5,116,959 shares of common stock valued at $665,204 as part of a settlement agreement, and we issued 2,500,000 shares of common stock valued at $325,000 in connection with a consulting agreement.

During the six months ended August 31, 2016, we issued 950,000 shares of common stock were issued in settlement for a note payable balance $150,000 plus accrued interest of $15,288.

Employee Stock Options

During the Six months ended August 31, 2017, 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, 2017		$0.75-$1.00	$	0.00		7,224,000
Cancelled		-		-		-
Granted		-		-		-
Outstanding, August 31, 2017		$0.75-$1.00	$	0.00		7,224,000

The exercise prices for the options outstanding at August 31, 2017, 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		7,224,000		2.50 years	$	0.79	2.50 years		7,224,000	$	0.79

Warrants

Activity in issued and outstanding warrants is as follows:

	Number of Shares		Exercise Prices
Outstanding, February 28, 2017		27,554,021		$0.10-$1.00
Granted		1,400,000	$	.20
Exercised		-		-
Cancelled		-		-
Outstanding, August 31, 2017		28,954,021		$0.10-$1.00

The exercise prices for the warrants outstanding at August 31, 2017, 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
$0.20		1,400,000		1,400,000		54 months	$	0.20	$	0.20	$	0.00
$0.10-$0.75		19,481,012		19,481,012		43 months	$	0.56	$	0.56	$	0.00
$0.75		1,082,734		1,082,734		42 months	$	0.75	$	0.75	$	0.00
$0.75		1,000,000		1,000,000		32 months	$	0.75	$	0.75	$	0.00
$0.75-$1.00		5,990,275		5,990,275		27 months	$	0.77	$	0.77	$	0.00
		28,954,021		28,954,021

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Related Parties Transactions

6 Months Ended

Aug. 31, 2017

Related Parties Transactions [Abstract]

RELATED PARTIES TRANSACTIONS

NOTE 5 – RELATED PARTIES TRANSACTIONS

On January 24, 2017 the Company entered into a Debt Refinancing Agreement with Mr. Warren Breslow, who served as a Director of the Company from 2006 to 2017. Mr. Breslow resigned his position on our board in March 2017. Pursuant to this agreement, both Mr. Breslow and the Company acknowledged that total debt owed to Mr. Breslow and his affiliates was $23,872,614 including $8,890,574 of accrued interest. Mr. Breslow agreed to cancel and forgive all interest due, waive any past events of default and sign a new, five-year unsecured convertible note, in the amount of $14,982,041. This new note bears no interest through the sooner of (i) January 15, 2018 or (ii) the fifth business day following a shareholder meeting, and 5% per annum thereafter. This new note also provides various default provisions. The refinancing agreement further provides that $11,982,041 of Mr. Breslow’s new note will be converted into 7,403,705 shares of common stock upon stockholder approval of a 1-for-7 reverse stock split within eighteen months of entering into that agreement; the remaining balance may thereafter be converted at any time. In the absence of stockholder approval of a 1-for-7 reverse stock split within eighteen months, the refinancing 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. As of the date of filing, the stockholders have not approved the reverse stock split.

At August 31, 2017, the balance in Notes Payable and accrued interest-related party, current, includes $14,982,041 of unsecured notes payable plus accrued interest of $9,638,285 to Mr. Breslow, a member of our Board of Directors, payable on demand, bearing interest at a rate of 10% per annum. The balance was $14,982,041 plus accrued interest of $8,890,574 as of February 28, 2017. During the periods ended August 31, 2017 and August 31, 2016, interest amounting to $747,711 and $747,020 respectively, was incurred on these notes. Related Parties Transactions also includes $82,000 of unsecured notes payable plus accrued interest of $33,233 and $29,141 to our CEO pursuant to a demand note entered into on April 5, 2014 and an unsecured note payable to Mr. Kopple, another member of our Board of Directors in the total amount of $3,587,322 and $3,418,738 plus accrued interest of $2,098,616 and $784,934 pursuant to 10% demand note payable as of February 28, 2017 and February 29, 2016, respectively. At August 31, 2017, the balance in Convertible note payable and accrued interest-related party, long term, includes $2,000,000 of secured convertible notes payable plus accrued interest of $1,070,510 to Mr. Kopple.

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Commitments

6 Months Ended

Aug. 31, 2017

Commitments [Abstract]

COMMITMENTS

NOTE 7 – COMMITMENTS

Leases

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.

Joint Venture

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 is owned 49% by the Company and 51% by the Chinese company. The Company has contributed $250,000 and a license to specific technology and the Chinese company is required to contribute $9,750,000. 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. Additionally, the Chinese company will purchase a minimum of $1,250,000 of product supported by letters of credit for distribution until the joint venture factory is built, equipped, and staffed. In order to assure proper training of joint venture personnel, Aura has also committed to supply instructional personnel 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.

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Subsequent Events

6 Months Ended

Aug. 31, 2017

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

NOTE 8 – SUBSEQUENT EVENTS:

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)

6 Months Ended

Aug. 31, 2017

Accounting Policies [Abstract]

Accounting principles

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, 2017 filed on September 18, 2017 with the U.S. Securities and Exchange Commission.

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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Notes Payable (Tables)

6 Months Ended

Aug. 31, 2017

Notes Payable [Abstract]

Schedule of notes payable

	August 31, 2017		February 28, 2017
Demand notes payable, at 10% and 16%	$	3,584,498	$	3,782,238
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.		1,000,000		972,632
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.		500,000		483,951
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
Convertible notes dated April thru June, 2016. The notes carry an interest rate of 5% and might be converted into shares of Company’s common stock if the shareholders approve a 7:1 reverse stock split.		1,743,110		994,700
		9,548,308		8,954,221
Less: Current portion	$	9,548,308	$	8,954,221
Long-term portion	$	-	$	-

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Accrued Expenses (Tables)

6 Months Ended

Aug. 31, 2017

Accrued Expenses [Abstract]

Schedule of accrued expenses

	August 31, 2017		February 28, 2017
Accrued payroll and related expenses	$	2,801,386	$	3,099,842
Accrued rent		202,036		202,036
Accrued interest		3,617,869		2,562,375
Other		35,000		75,000
Total	$	6,656,291	$	5,939,252

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Shareholders' Equity (Tables)

6 Months Ended

Aug. 31, 2017

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, 2017		$0.75-$1.00	$	0.00		7,224,000
Cancelled		-		-		-
Granted		-		-		-
Outstanding, August 31, 2017		$0.75-$1.00	$	0.00		7,224,000

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		7,224,000		2.50 years	$	0.79	2.50 years		7,224,000	$	0.79

Schedule of activity in issued and outstanding warrants

	Number of Shares		Exercise Prices
Outstanding, February 28, 2017		27,554,021		$0.10-$1.00
Granted		1,400,000	$	.20
Exercised		-		-
Cancelled		-		-
Outstanding, August 31, 2017		28,954,021		$0.10-$1.00

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
$0.20		1,400,000		1,400,000		54 months	$	0.20	$	0.20	$	0.00
$0.10-$0.75		19,481,012		19,481,012		43 months	$	0.56	$	0.56	$	0.00
$0.75		1,082,734		1,082,734		42 months	$	0.75	$	0.75	$	0.00
$0.75		1,000,000		1,000,000		32 months	$	0.75	$	0.75	$	0.00
$0.75-$1.00		5,990,275		5,990,275		27 months	$	0.77	$	0.77	$	0.00
		28,954,021		28,954,021

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Going Concern (Details)	3 Months Ended		6 Months Ended
	Aug. 31, 2017 USD ($) ft²	Aug. 31, 2016 USD ($)	Aug. 31, 2017 USD ($) ft²	Aug. 31, 2016 USD ($)
Going Concern (Textual)
Net Loss	$ (1,170,630)	$ (1,055,347)	$ (3,553,990)	$ (2,462,004)
Cash flows from operating activities			$ (2,105,060)	$ (229,626)
Area of land | ft²	45,000		45,000

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Notes Payable (Details) - USD ($)	Aug. 31, 2017	Feb. 28, 2017
Debt Instrument [Line Items]
Convertible notes payable	$ 9,548,308	$ 8,954,221
Less: Current portion	9,548,308	8,954,221
Long-term portion
Demand notes payable [Member]
Debt Instrument [Line Items]
Demand notes payable	3,584,498	3,782,238
Convertible Promissory Note dated August 10, 2012 [Member]
Debt Instrument [Line Items]
Demand notes payable	1,000,000	972,632
Convertible Promissory Note dated October 2, 2012 [Member]
Debt Instrument [Line Items]
Demand notes payable	500,000	483,951
Senior secured convertible notes dated May 7, 2013 [Member]
Debt Instrument [Line Items]
Demand notes payable	2,395,700	2,395,700
Senior secured convertible notes dated June 20, 2013 [Member]
Debt Instrument [Line Items]
Demand notes payable	325,000	325,000
Convertible notes dated April thru June, 2016 [Member]
Debt Instrument [Line Items]
Demand notes payable	$ 1,743,110	$ 994,700

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Notes Payable (Parenthetical) (Details)	6 Months Ended
	Aug. 31, 2017 $ / shares
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
Convertible notes dated April thru June, 2016 [Member]
Debt Instrument [Line Items]
Notes payable interest rate	5.00%
Due date of notes	Jun. 30, 2016
Reverse stock split	7:1 reverse stock split.

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Notes Payable (Details Textual)								1 Months Ended	3 Months Ended	6 Months Ended
	Feb. 21, 2017 USD ($) shares	Aug. 19, 2013 USD ($) $ / shares shares	Jun. 20, 2013 USD ($) $ / shares shares	May 07, 2013 USD ($) Notes $ / shares shares	Feb. 28, 2013 USD ($) $ / shares	Oct. 02, 2012 USD ($)	Aug. 10, 2012 USD ($)	Jan. 30, 2017	Aug. 31, 2017 USD ($)	Aug. 31, 2017 USD ($)	Aug. 31, 2016 USD ($)
Notes Payable (Textual)
Amortization of debt discount										$ 43,417	$ 128,220
Kenmont Capital Partners [Member] | Convertible Secured Notes [Member]
Notes Payable (Textual)
Pre conversion debt principal amount				$ 1,000,000
Debt principal 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] | Convertible Secured Notes [Member]
Notes Payable (Textual)
Pre conversion debt principal amount				$ 550,000
Debt principal 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
Holder [Member]
Notes Payable (Textual)
Description of convertible promissory note								The holders of at least 75% of the stock issuable upon conversion of the convertible notes votes to amend the agreement, then such amendments will be binding on all the secured creditors. The five secured creditors signing the amendment total in excess of 95% of the issuable stock upon conversion and, therefore the agreement is binding on all seven of the secured creditors. The amended agreement provides that all accrued and unpaid interest will be added to the principal amount, the amended notes bear interest at the rate of 0% through the sooner of (i) January 15, 2018 or (ii) the fifth business day following a stockholder meeting and 5% per annum thereafter, subject to reduction to comply with applicable law, and mature in 60 months from the effective date of a proposed 1-for-7 reverse stock split (which may only be effected if approved by the stockholders at the next annual meeting of stockholders). Upon certain financings, within five business days following stockholder approval of a 1-for-7 reverse stock split, the Company is obligated to make a payment to the holders of the amended notes in the amount of 20% of the outstanding secured notes. Upon the effectiveness of a proposed 1-for-7 reverse stock split, the remaining 80% balance of the amended notes is converted into shares of the Company's common stock. After the effectiveness of a proposed 1-for-7 reverse stock split, the secured note holders may voluntarily convert the unpaid principal and interest thereon into the Company's common stock at the conversion price of $1.40 per share.
Holder [Member] | Unsecured Debt [Member]
Notes Payable (Textual)
Notes maturity date, term	5 years
Notes payable interest rate	5.00%
Description of convertible promissory note	Upon stockholder approval of a 1-for-7 reverse stock split
Aggregate unsecured debt	$ 2,237,456
Interest of debt	$ 489,466
Converted shares of common stock | shares	1,164,555
Holder [Member] | Convertible Secured Notes [Member]
Notes Payable (Textual)
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
Holder [Member] | Board of Directors [Member] | Unsecured Convertible Notes and Warrants [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%
Unsecured Convertible Promissory Note [Member]
Notes Payable (Textual)
Pre conversion debt principal amount						$ 500,000	$ 1,000,000
Debt principal amount					$ 1,447,938				$ 165,000	$ 165,000
Conversion price per share of notes payable | $ / shares					$ 0.76
Amortization of debt discount					$ 402,063	$ 137,583	$ 310,723
Due date of notes					Aug. 10, 2017	Oct. 02, 2017	Aug. 10, 2017
Notes payable interest rate					7.00%	7.00%	7.00%
Description of convertible promissory note				The note due on January 4, 2013 was converted into a portion of the note due June 15, 2013, which carries an interest rate of 12%.		Interest on the unpaid principal amount of this note is payable monthly in arrears on the second day of each calendar month, commencing November 2, 2012. Interest is computed on the actual number of days elapsed over a 360-day year.	Interest on the unpaid principal amount of this note is payable monthly in arrears, on the tenth day of each calendar month, commencing September 10, 2012. Interest is computed on the actual number of days elapsed over a 360-day year.		Pursuant to the terms of these notes, such notes will be converted in their entirety into shares of common stock of the Company at the conversion price of $0.07 per share upon stockholder approval of a 1-for-7 reverse stock split. The warrants entitle the holders to acquire up to an aggregate of 132,000 shares of common stock and have an initial exercise price of $0.20 per share which will be adjusted to $1.40 per share upon stockholder approval of a 1-for-7 reverse stock split. As of the date of this filing, the Company's stockholders have not approved the proposed 1-for-7 reserve stock split.
Unsecured Convertible Promissory Note One [Member]
Notes Payable (Textual)
Debt principal amount					$ 1,447,938
Conversion price per share of notes payable | $ / shares					$ 0.76
Amortization of debt discount					$ 402,063
Due date of notes					Oct. 02, 2017
Notes payable interest rate					7.00%
Unsecured Convertible Promissory Note Two [Member]
Notes Payable (Textual)
Debt principal amount					$ 1,447,938
Conversion price per share of notes payable | $ / shares					$ 0.76
Amortization of debt discount					$ 402,063
Due date of notes					Jan. 04, 2013
Notes payable interest rate					7.00%

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Accrued Expenses (Details) - USD ($)	Aug. 31, 2017	Feb. 28, 2017
Accrued Expenses [Abstract]
Accrued payroll and related expenses	$ 2,801,386	$ 3,099,842
Accrued rent	202,036	202,036
Accrued interest	3,617,869	2,562,375
Other	35,000	75,000
Total	$ 6,656,291	$ 5,939,251

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Shareholders' Equity (Details) - 2006 Plan [Member]	6 Months Ended
	Aug. 31, 2017 USD ($) $ / shares shares
Weighted - Average Exercise Price
Weighted - Average Exercise Price, Cancelled
Weighted - Average Exercise Price, Granted
Aggregate Intrinsic Value
Aggregate Intrinsic Value, Outstanding | $	$ 0.00
Aggregate Intrinsic Value, Cancelled | $
Aggregate Intrinsic Value, Granted | $
Aggregate Intrinsic Value, Outstanding | $	$ 0.00
Number of Options
Number of Options, Outstanding | shares	7,224,000
Number of Options, Cancelled | shares
Number of Options, Granted | shares
Number of Options, Outstanding | shares	7,224,000
Minimum [Member]
Weighted - Average Exercise Price
Weighted - Average Exercise Price, Outstanding	$ 0.75
Weighted - Average Exercise Price, Outstanding	0.75
Maximum [Member]
Weighted - Average Exercise Price
Weighted - Average Exercise Price, Outstanding	1.00
Weighted - Average Exercise Price, Outstanding	$ 1.00

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Shareholders' Equity (Details 1) - 0.75-$1.00 [Member]	6 Months Ended
	Aug. 31, 2017 $ / 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	7,224,000
Options Outstanding, Weighted Average Remaining Life	2 years 6 months
Options Outstanding, Weighted Average Exercise Price	$ 0.79
Exercisable Options, Weighted Average Remaining Life	2 years 6 months
Exercisable Options, Number | shares	7,224,000
Exercisable Options, Weighted Average Exercise Price	$ 0.79

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Shareholders' Equity (Details 2)	6 Months Ended
	Aug. 31, 2017 $ / shares shares
Class of Stock [Line Items]
Number of Shares, Outstanding | shares	28,954,021
Warrants [Member]
Class of Stock [Line Items]
Number of Shares, Outstanding | shares	27,554,021
Number of Shares, Granted | shares	1,400,000
Number of Shares, Exercised | shares
Number of Shares, Cancelled | shares
Number of Shares, Outstanding | shares	28,954,021
Exercise Prices, Granted	$ 0.20
Exercise Prices, Exercised
Exercise Prices, Cancelled
Warrants [Member] | Maximum [Member]
Class of Stock [Line Items]
Exercise Prices, Outstanding	1.00
Exercise Prices, Outstanding	1.00
Warrants [Member] | Minimum [Member]
Class of Stock [Line Items]
Exercise Prices, Outstanding	0.10
Exercise Prices, Outstanding	$ 0.10

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Shareholders' Equity (Details 3)	6 Months Ended
	Aug. 31, 2017 $ / shares shares
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Stock Warrants Outstanding | shares	28,954,021
Stock Warrants Exercisable | shares	28,954,021
0.20 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Range of Exercise Prices	$ 0.20
Stock Warrants Outstanding | shares	1,400,000
Stock Warrants Exercisable | shares	1,400,000
Weighted-Average Remaining Contractual Life	54 months
Weighted-Average Exercise Price of Warrants Outstanding	$ 0.20
Weighted-Average Exercise Price of Warrants Exercisable	0.20
Intrinsic Value	$ 0.00
0.10-$0.75 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Stock Warrants Outstanding | shares	19,481,012
Stock Warrants Exercisable | shares	19,481,012
Weighted-Average Remaining Contractual Life	43 months
Weighted-Average Exercise Price of Warrants Outstanding	$ 0.56
Weighted-Average Exercise Price of Warrants Exercisable	0.56
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 | shares	1,082,734
Stock Warrants Exercisable | shares	1,082,734
Weighted-Average Remaining Contractual Life	42 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 | shares	1,000,000
Stock Warrants Exercisable | shares	1,000,000
Weighted-Average Remaining Contractual Life	32 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 | shares	5,990,275
Stock Warrants Exercisable | shares	5,990,275
Weighted-Average Remaining Contractual Life	27 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

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Shareholders' Equity (Details Textual) - USD ($)	6 Months Ended
	Aug. 31, 2017	Aug. 31, 2016
Shareholders' Equity (Textual)
Common stock shares issued, Shares		950,000
Settlement of note payable		$ 150,000
Accrued interest		$ 15,288
Common Stock [Member] | Settlement Agreement [Member]
Shareholders' Equity (Textual)
Common stock shares issued	$ 665,204
Common stock shares issued, Shares	5,116,959
Common Stock [Member] | Consulting Agreement [Member]
Shareholders' Equity (Textual)
Common stock shares issued	$ 325,000
Common stock shares issued, Shares	2,500,000
Common Stock [Member] | Chinese Joint Venture [Member]
Shareholders' Equity (Textual)
Common stock shares issued	$ 1,000,000
Common stock shares issued, Shares	5,000,000

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Related Parties Transactions (Details) - USD ($)	1 Months Ended	6 Months Ended
	Jan. 24, 2017	Aug. 31, 2017	Aug. 31, 2016	Feb. 28, 2017	Feb. 29, 2016
Related Parties Transactions (Textual)
Unsecured notes payable and accrued interest- related party		$ 29,873,727		$ 29,669,693
Interest expense incurred on unsecured notes payable		$ 747,711	$ 747,020
Convertible Secured Notes [Member]
Related Parties Transactions (Textual)
Interest rate		7.00%
Mr.Breslow [Member]
Related Parties Transactions (Textual)
Unsecured notes payable and accrued interest- related party	$ 14,982,041
Debt principal amount	23,872,614
Convertible note payable and accrued interest-related party, net of discount	$ 8,890,574
New debt agreement, term	5 years
Convertible note, amount	$ 11,982,041
Convertible note, shares	7,403,705
Reverse stock split, description	Stockholder approval of a 1-for-7 reverse stock split within eighteen months of entering into that agreement; the remaining balance may thereafter be converted at any time. In the absence of stockholder approval of a 1-for-7 reverse stock split within eighteen months, the refinancing 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. As of the date of filing, the stockholders have not approved the reverse stock split.
Interest rate	5.00%	10.00%
Mr.Breslow [Member] | Unsecured Debt [Member]
Related Parties Transactions (Textual)
Unsecured notes payable and accrued interest- related party		$ 14,982,041		14,982,041
Mr.Breslow [Member] | Accrued interest [Member]
Related Parties Transactions (Textual)
Unsecured notes payable and accrued interest- related party		9,638,285		$ 8,890,574
CEO [Member]
Related Parties Transactions (Textual)
Unsecured notes payable and accrued interest- related party		$ 29,141
Related party transaction, date		Apr. 05, 2014
CEO [Member] | Unsecured Debt [Member]
Related Parties Transactions (Textual)
Unsecured notes payable and accrued interest- related party		$ 82,000
CEO [Member] | Accrued interest [Member]
Related Parties Transactions (Textual)
Unsecured notes payable and accrued interest- related party		33,233
Mr. Kopple [Member]
Related Parties Transactions (Textual)
Interest rate				10.00%	10.00%
Mr. Kopple [Member] | Convertible Secured Notes [Member]
Related Parties Transactions (Textual)
Convertible note payable and accrued interest-related party, net of discount		2,000,000
Mr. Kopple [Member] | Unsecured Debt [Member]
Related Parties Transactions (Textual)
Unsecured notes payable and accrued interest- related party				$ 3,587,322	$ 3,418,738
Mr. Kopple [Member] | Accrued interest [Member]
Related Parties Transactions (Textual)
Unsecured notes payable and accrued interest- related party				$ 2,098,616	$ 784,934
Convertible note payable and accrued interest-related party, net of discount		$ 1,070,510

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Commitments (Details)	1 Months Ended	6 Months Ended
	Jan. 27, 2017 USD ($) $ / shares shares	Aug. 31, 2017 USD ($) ft²	Aug. 31, 2016 USD ($)
Commitments (Textual)
Area of facility (in square feet) | ft²		20,000
Rent expense		$ 10,000
Payments for joint venture agreement	$ 250,000	$ 250,000
Joint venture (JV) agreement [Member]
Commitments (Textual)
Joint venture cost method interest rate, percentage	49.00%
Chinese company [Member]
Commitments (Textual)
Payments for joint venture agreement	$ 9,750,000
Sale of equity method investments interest	$ 2,000,000
Shares issue of price per share | $ / shares	$ 0.20
Ownership percentage in joint venture	51.00%
Sale of common stock | shares	10,000,000
Common stock purchase minimum amount	$ 1,250,000

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Subsequent Events (Details) $ in Millions	Aug. 31, 2017 USD ($) shares
Subsequent Events (Textual)
Stock warrants outstanding	28,954,021
Robert Kopple [Member]
Subsequent Events (Textual)
Warrants issued value | $	$ 5.4
Stock warrants outstanding	22,000,000