10-Q

UNITED STATES

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 May 31, 2018

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 July 10, 2018
Common Stock, par value $0.0001 per share	41,437,035 shares

AURA SYSTEMS, INC.

INDEX

Index			Page No.
PART I. FINANCIAL INFORMATION			1
	ITEM 1.	Financial Statements (Unaudited)	1
		Balance Sheets as of May 31, 2018 and February 28, 2018	1
		Statements of Operations for the Three months Ended May 31, 2018 and 2017	2
		Statements of Cash Flows for the Three months Ended May 31, 2018 and 2017	3
		Notes to Financial Statements	4
	ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13
	ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	18
	ITEM 4.	Controls and Procedures	18
PART II. OTHER INFORMATION			19
	ITEM 1.	Legal Proceedings	19
	ITEM 1A.	Risk Factors	19
	ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	19
	ITEM 3.	Defaults Upon Senior Securities	20
	ITEM 4.	Mine Safety Disclosures	20
	ITEM 5.	Other Information	20
	ITEM 6.	Exhibits	20
	SIGNATURES AND CERTIFICATIONS		21

ITEM 1. FINANCIAL STATEMENTS

AURA SYSTEMS, INC.
BALANCE SHEETS

(Unaudited)

	As of May 31,			As of February 28,
	2018			2018
ASSETS
Current assets:
Cash and cash equivalents	$	197,156		$	748,008
Accounts receivable - net		30,751			-
Other current assets		38,558			42,165
Total current assets		266,465			790,173
Investment in Joint Venture		250,000			250,000
Total assets	$	516,465		$	1,040,173
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Accounts payable	$	4,960,480		$	5,377,259
Accrued expenses		3,248,800			3,211,635
Customer advances		436,542			503,632
Shares to be issued		2,280,964			2,280,964
Notes payable		777,537			777,537
Convertible note payable and accrued interest-related party, net of discount		3,418,524			3,342,685
Convertible notes payable, net of discount		575,000			625,000
Notes payable and accrued interest- related party		5,475,445			5,353,980
Total current liabilities		21,173,292			21,472,692
Note payable-related party		3,000,000			3,000,000
Convertible notes payable		1,232,977			1,232,977
Total liabilities		25,406,269			25,705,669
Commitments and contingencies
Stockholders’ deficit:
Common stock, $0.0001 par value; 150,000,000 shares authorized at May 31 and February 28, 2018; 41,437,035 and 41,437,035 issued and outstanding at May 31 and February 28, 2018, respectively		4,144			4,144
Subscription receivable		(800,000	)		(1,300,000	)
Additional paid-in capital		438,559,164			438,247,091
Accumulated deficit		(462,653,112	)		(461,616,731	)
Total stockholders’ deficit		(24,889,804	)		(24,665,496	)
Total liabilities and stockholders’ deficit	$	516,465		$	1,040,173

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

1

AURA SYSTEMS, INC.
STATEMENTS OF OPERATIONS
FOR THREE MONTHS ENDED MAY 31, 2018 AND 2017
(Unaudited)

	May 31,
	2018			2017
Net Revenues	$	37,400		$	0
Cost of goods sold		14,677			0
Gross Profit		22,723			0
Operating expenses:
Engineering, research and development expenses		132,853			0
Selling, general and administrative expenses		1,001,966			567,996
Total operating expenses		1,134,819			567,996
Loss from operations		(1,112,095	)		(567,996	)
Other (income) and expense:
Interest expense, net		277,217			1,028,228
Other (income) expense, net		(352,931	)		787,136
Total other (income) expense		(75,714	)		1,815,364
Net Loss	$	(1,036,382	)	$	(2,383,360	)
Total basic and diluted loss per share	$	(0.03	)	$	(0.02	)
Weighted average shares used to compute basic and diluted loss per share		41,437,035			17,513,475

* Basic and diluted weighted average number of shares is equivalent since the effect of potential dilutive securities is anti-dilutive.

See accompanying notes to these unaudited financial statements.

2

AURA SYSTEMS, INC.
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MAY 31, 2018 AND 2017
(Unaudited)

	Three Months Ended May 31,
	2018			2017
Cash flow from operating activities:
Net Loss	$	(1,036,382	)	$	(2,383,360	)
Adjustments to reconcile Net loss to net cash used in operating activities
Amortization of debt discount		-			43,417
FMV of warrants issued for services		312,072			177,737
Stock issued for services		-			990,205
(Increase) decrease in:
Accounts receivable		(30,751	)		-
Other current assets and deposit		3,608			(2,694	)
Increase (decrease) in:
Accounts payable, customer deposit and accrued expenses		(249,400	)		37,826
Net cash used in operations		(1,000,852	)		(1,136,869	)
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
Payment to note payable		(50,000	)		(197,970	)
Proceeds from convertible notes payable		-			653,640
Proceeds from subscription receivable		500,000			-
Investor Advance		-			650,000
Net cash provided by financing activities:		450,000			2,105,670
Net increase(decrease) in cash & cash equivalents		(550,852	)		718,801
Cash and cash equivalents at beginning of period		748,008			255,869
Cash and cash equivalents at end of period	$	197,156		$	974,669
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, 2018 filed on June 13, 2018 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 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 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.

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 financial statements have been prepared assuming that the Company will continue as a going concern. During the three months ended May 31, 2018 and May 31, 2017, the Company incurred losses of $1,036,382 and $2,383,360, respectively and had negative cash flows from operating activities of $1,000,852 and $1,136,869, 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 annual meeting the shareholders will vote for five board candidates. The new board intends to 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 operations. We anticipate being able to fund these additions in the upcoming fiscal year.

6

NOTE 3 – NOTES PAYABLE

Notes payable consisted of the following:

	May 31, 2018		February 28, 2018
Notes payable, at 10% and 5%	$	3,777,537	$	3,777,537
Convertible Promissory Note dated August 10, 2012 with an interest rate of 5% per annum. On January 30, 2017, this note was amended providing, among other things, for the conversion of 80% of the principal and accrued interest into common stock at $1.386 per share conditioned on the occurrence of certain future events the last of which was completed on February 14, 2018. Further details are provided below.		264,462		264,462
Convertible Promissory Note dated October 2, 2012 with an interest rate of 5% per annum. On January 30, 2017, this note was amended providing, among other things, for the conversion of 80% of the principal and accrued interest into common stock at $1.386 per share conditioned on the occurrence of certain future events the last of which was completed on February 14, 2018. Further details are provided below.		133,178		133,178
Senior secured convertible notes dated May 7, 2013 with an interest rate of 5% per annum., On January 30, 2017, this note was amended providing, among other things, for the conversion of 80% of the principal and accrued interest into common stock at $1.386 per share conditioned on the occurrence of certain future events the last of which was completed on February 14, 2018. Further details are provided below.		757,155		757,155
Senior secured convertible notes dated June 20, 2013 with an interest are of 5% per annum On January 30, 2017, this note was amended providing, among other things, for the conversion of 80% of the principal and accrued interest into common stock at $1.386 per share conditioned on the occurrence of certain future events the last of which was completed on February 14, 2018. Further details are provided below.		203,182		203,182
Convertible notes dated April 2016 thru February 2017 with an an interest rate of 5% per annum.  Although the notes could have been converted into  shares of common stock upon shareholder approval of the  7:1 reverse stock split that occurred on February 14, 2018, the note holder elected not to convert and to have the note paid over an eleven-month period. The first payment of $50,000 was paid in April 2018.		450,000		500,000
		5,585,514		5,635,514
Less: Current portion	$	1,352,537	$	1,402,537
Long-term portion	$	4,232,977	$	4,232,977

CONVERTIBLE DEBT

On May 7, 2013, the Company transferred 4 notes payable with a total principal value of $1,000,000 together with accrued interest, and consulting fees to a senior secured convertible note with a principal value of $1,087,000 (“New Kenmont Note”) and warrants to Kenmont Capital Partners. The New Kenmont Note had a 1-year maturity date and was convertible into shares of common stock at the conversion price of $0.75 per share. The warrants were subsequently exercised. The Company recorded $342,020 as a discount, which was amortized over the life of the note. There is a remaining balance of $304,081 as of May 31, 2018.

On May 7, 2013, the Company transferred 2 note payables with a total principal value of $550,000 together with accrued interest to a senior secured convertible note with a principal value of $558,700 (“New LPD Note”) and warrants to LPD Investments, Ltd. The New LPD Note had a 1-year maturity date and was convertible into shares of common stock at the conversion price of $0.75 per share. The warrants were subsequently exercised. The Company recorded $175,793 as a discount, which will be amortized over the life of the note. There is a remaining balance of $163,677 as of May 31, 2018.

7

On May 7, 2013, the Company entered into an agreement with an individual for the sale of $750,000 of secured convertible note payable (the “Note”) and warrants. The Note had a 1-year maturity date and was convertible into shares of common stock at the conversion price of $0.75 per share. The warrants entitle the holder to acquire 1,000,000 shares and have an initial exercise price of $0.75 per share and have a 7-year term. The Company recorded $235,985 as a discount, which will be amortized over the life of the note. There is a remaining balance of $232,194 as of May 31, 2018.

On January 30, 2017, the Company entered into an amendment to the agreements described immediately above with five of seven secured creditors holding a security interest in all of the Company’s assets except for its patents and other intellectual properties. The original agreements, dated May 7, 2013, provided that if at least 75% of the stock issuable upon conversion of the convertible notes votes to amend the agreement and/or waive any conditions or defaults, then any such amendments or waivers shall be binding on all secured creditors. The five secured creditors signing the amendment totaled in excess of 95% of the issuable stock upon conversion and, therefore the amendment is binding on all seven of the secured creditors. The amendment provided that all accrued and unpaid interest will be added to the principal amount. The amended notes provided for no interest from November 1, 2016 to February 14, 2018, the date on which the 1-for-7 reverse stock split became effective and at which time 80% of the total debt, including accrued interest, was converted into shares of common stock and a new five year 5% per annum convertible note was issued for the remainder. The amendment also provides that if the Company enters into a “Qualified Financing” (defined as receipt by the Company of not less than $4,000,000 in aggregate gross proceeds from the sale of securities in one or a series of related transactions after the execution date), then the Company shall remit to the holder the “Cash Payment Amount” as set forth in the amendment.

On June 20, 2013, the Company entered into an agreement with four individuals for the sale of $325,000 of secured convertible notes payable (the “Notes”) and warrants. The Notes had a 1-year maturity date and were convertible into shares of common stock at the conversion price of $0.50 per share. The warrants were subsequently exercised. The Company recorded $63,622 as a discount, which will be amortized over the life of the notes. There is a remaining balance of $203,182 as of May 31, 2018.

On August 19, 2013, the Company entered into an agreement with a member of its Board of Directors for the sale of $2,500,000 of convertible notes payable (the “BOD Notes”) and warrants. The BOD Notes carry a base interest rate of 9.5%, had a 4-year maturity date and are convertible into shares of common stock at the conversion price of $0.50 per share. The warrants were subsequently exercised. The Company recorded $667,118 as a discount, which will be amortized over the life of the note. There is a balance of $3,396,858 as of May 31, 2018.

On February 21, 2017, the Company entered into several Refinancing Agreements with a debt holder totaling $2,237,456 including interest of $489,466. The agreements waived all events of default and provided for new five-year 5% convertible notes with no interest for the first six months. Upon the effective date of February 14, 2018 of the 1 for 7 reverse stock split, the notes were converted into 1,164,555 shares of common stock.

8

NOTE 4 – ACCRUED EXPENSES

Accrued expenses consisted of the following:

	May 31, 2018		February 28, 2018
Accrued payroll and related expenses	$	2,767,565	$	2,775,312
Accrued interest		481,235		401,323
Other		-		35,000
Total	$	3,248,800	$	3,211,635

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 three months ended May 31, 2018, we did not issue any shares of common stock.

During the three months ended May 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.

9

Employee Stock Options

During the three months ended May 31, 2018, there were no stock options granted to employees and 742,857 stock options with an exercise price of $1.40 per share granted to directors, which are set forth below under “Warrants.” 

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, 2018		$5.25-$7.00	$	0.00		1,032,000
Cancelled		-		-		-
Granted		-		-		-
Outstanding, May 31, 2018		$5.25-$7.00	$	0.00		1,032,000

The exercise prices for the options outstanding at May 31, 2018, 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
$5.25-$7.00		1,032,000		1.75 years	$	5.55	1.75 years		1,032,000	$	5.55

Warrants

Activity in issued and outstanding warrants is as follows:

	Number of Shares		Exercise Prices
Outstanding, February 28, 2018		8,743,505		$.70-$7.00
Granted		742,857	$	1.40
Exercised		-		-
Cancelled
Outstanding, May 31, 2018		9,486,362		$0.70-$7.00

The exercise prices for the warrants outstanding at May 31, 2018, 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
$1.40		742,857		742,857	58 months	$	1.40	$	1.40	$	0.00
$1.40		5,154,646		5,154,646	57 months	$	1.40	$	1.40	$	0.00
$0.70-4.55		2,783,002		2,783,002	34 months	$	2.85	$	2.85	$	0.00
$5.25		154,666		154,666	33 months	$	5.25	$	5.25	$	0.00
$5.25		651,191		651,191	20 months	$	5.25	$	5.25	$	0.00
		9,486,362		9,486,362

10

NOTE 6 – RELATED PARTIES TRANSACTIONS

On January 24, 2017, the Company entered into a Debt Refinancing Agreement with Mr. Breslow, a former Director of the Company. Pursuant to the agreement, both Mr. Breslow and the Company acknowledged that total debt owed to Mr. Breslow was $23,872,614 including $8,890,574 of accrued interest. Mr. Breslow agreed to cancel and forgive all interest due, waive all events of default and sign a new five-year convertible note in the amount of $14,982,041 providing for no interest for six months and interest of 5% per annum thereafter payable monthly in arrears. The note also provides various default provisions. In accordance with the agreement, on February 14, 2018, the effective date of the 1 for 7 reverse stock split, $11,982,041 of the note was converted into 7,403,705 shares of common stock and the then accrued interest of $9,388,338 was forgiven. A new $3,000,000 note representing the remaining balance was entered into due and payable in five years bearing interest at 5% per annum payable monthly in arrears.

At May 31, 2018, the balance in Notes Payable and accrued interest-related party, current, includes $3,268,081 plus accrued interest of $2,083,203 to Mr. Kopple (a former Board member), a 10% shareholder. Related Parties Transactions also includes $82,000 of unsecured notes payable plus accrued interest of $40,104 to our CEO pursuant to a demand note entered into on April 5, 2014. At May 31, 2018, the balance in Convertible note payable and accrued interest-related party, long term, includes $2,000,000 of unsecured convertible notes payable plus accrued interest of $1,396,858 and an unsecured convertible note of $20,000 plus accrued interest of $1,666 to Mr. Kopple. Subscriptions receivable at May 31, 2018 includes $1,300,000 for the issuance of 2,653,061 shares of common stock issued to Mr. Lowy, a 30% shareholder (as of June 5, 2018, $1,000,000 was received by the Company). The balance in notes payable - long term, includes $3,000,000 to Mr. Breslow, a 20% shareholder.

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

In March 2017, the Company entered into a joint venture with a Chinese partner to form Jiangsu Shengfeng Mobile Power Technology Co., Ltd. (“Jiangsu Shengfeng”) to address the Chinese market. Under the Jiangsu Shengfeng joint venture agreement, Aura owns 49% of the venture and our Chinese partner owns 51%. The Chinese partner contributed approximately $9.25 million to the venture –– principally in the form of facilities and equipment as wells as approximately $500,000 in cash. The Company contributed to the venture in the form of $250,000 in cash as well as a limited license to the joint venture to manufacture, sell and service the AuraGen^® products within China. The limited license contributed to the Jiangsu Shengfeng joint venture, however, does not permit Jiangsu Shengfeng to manufacture the AuraGen^® rotor; rather, the joint venture is required to purchase all rotor subassemblies as well as certain software elements directly from the Company. Jiangsu Shengfeng’s board of directors consists of three members appointed by the Company and three appointed by our Chinese partner; Jiangsu Shengfeng’s CEO is appointed by our Chinese partner while its CFO and director for quality assurance and control are appointed by Aura.

11

In addition, the Chinese company invested $2,000,000 in Aura common stock at $1.40 per share for a total of 1,428,571 shares of common stock and is required to purchase a minimum of $1,250,000 of product from the Company supported by letters of credit for distribution until their factory is built, equipment installed, and staff hired and properly trained by Aura personnel. Aura has also committed to supply personnel for six months at no cost other than to reimburse for travel, room and board. This commitment has been fulfilled and Aura is under no further obligation to supply personnel at no cost. The agreement was subject to the approval of the Chinese Government which was received in April 2017.

Contingencies

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.

The Company is one of several defendants named in a lawsuit filed by two of seven secured creditors demanding repayment of loans totaling $125,000 plus accrued interest and exemplary damages. The Company entered into an amended agreement with the five other secured creditors and based on the original agreement, which provided that if the agreement was amended by creditors whose debt totaled equaled 75% or more of the secured creditor debt convertible into the Company’s common stock, the amended agreement becomes binding on all seven creditors including the suing creditors. The five secured creditors who entered into the amendment agreement totaled in excess of 95% of the secured creditors debt convertible into the Company’s common stock and therefore became binding on the suing creditors as well.

The Company is presently engaged in a dispute with one of its former directors, Robert Kopple, relating to approximately $5.4 million and approximately 3.14 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 Mr. Gagerman (currently not a director) and director 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.

In April 2018, the Company filed suit against its former counsel, Kilpatrick Townsend& Stockton LLP relating to various acts of malpractice and breach of fiduciary duty committed by the firm in connection with its representation of Aura.

The Company has a dispute with its former landlord and vacated its former premises prior to the end of its lease. The premises have been released to a third party and no action has been filed against the Company, nor does the Company believe it has any liability. Further while the Company believes it has claims against the landlord based on their actions, the Company has nonetheless elected to accrue the amount due for unpaid rent.

12

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, 2018 (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.

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Overview

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 and fiscal 2018, the Company suspended its engineering, manufacturing, sales, and marketing activities to focus on renegotiating numerous financial obligations.

In fiscal 2018, the Company successfully eliminated approximately 68% of its total indebtedness.

Specifically, in fiscal 2018, our secured creditors converted approximately $5.73 million of secured debt into approximately 4.1 million shares of the Company’s common stock. The converted debt represents approximately 80% of the total secured debt of the Company. The balance of the secured debt (the remaining approximate 20%), is to be paid to the secured creditors in cash if the Company raises at least $4.0 million in proceeds through new equity offerings. Additionally, in fiscal 2018, approximately 12.77 million of unsecured debt was converted into approximately 9.3 million shares of the Company’s common stock and approximately $12.3 million of unsecured debt was forgiven. In total, during fiscal 2018, the Company therefore eliminated a total of approximately $30.23 million of debt.

As of the date of this Report, Robert Kopple, the Company’s former Vice Chairman of the Board, is the only significant unsecured note holder that has not agreed to restructure his debt. Mr. Kopple claims that he and his affiliates are owed approximately $5.35 million on terms significantly preferable to other similarly-situated unsecured creditors. The Company disputes Mr. Kopple’s claims. See “Item 3. Legal Proceedings” included in the Company’s Annual Report on Form 10-K for the year ended February 28, 2018 for information regarding the dispute with Mr. Kopple regarding these transactions. Mr. Kopple has not accepted the Company’s numerous offers to restructure this debt.

On February 14, 2018, the Company effectuated a one-for-seven reverse stock split.

The Company is planning to restart operations with a new management team and is presently in the process of identifying candidates for Chief Financial Officer and Chief Executive Officer. Currently, the Company has a contractual agreement for $1.25 million of orders for the AuraGen^® product to fill during the next eight months and anticipates that it may receive significant additional orders once the Company is back in operation.

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

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

(ii) The second component of our business model is focused on the engineering support for the sales activities described above. The engineering support consists of the introduction of new features for our AuraGen^® solution such as higher power, different voltages, three phase options, shore power systems, higher current solutions as well as interface kits for different platforms. After suspending engineering, manufacturing, sales, and marketing activities to focus on renegotiating numerous financial obligations in fiscal 2017 and 2018, we expect modest engineering activities budgeted at approximately $750,000 during the fiscal 2019 year.

(iii) The third component of our business model is customer service. In fiscal 2019, 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.

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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.

15

Results of Operations

Three months ended May 31, 2018 compared to three months ended May 31, 2017

Net revenues were $37,400 for the three months ended May 31, 2018 (the “First Quarter FY2019”) compared to $0 for the three months ended May 31, 2017 (the “First Quarter FY2018”). The Company has only recently begun to ship small amounts of product following its reorganization.

Cost of goods sold were $14,677 in the First Quarter FY2019 compared to $0 in the First Quarter FY2018.

Engineering, research and development expenses were $132,853 in the First Quarter FY2019, compared to $0 in the First Quarter FY 2018. The expense in the current year period is primarily due to the Company redesigning the ECU for the Auragen system.

Selling, general and administrative expense increased $433,970 (76%) to $1,001,966 in the First Quarter FY2019 from $567,996 in the First Quarter FY2019. The increase is primarily due to a non-cash charge of $312,000 for warrants issued to the Board of Directors and an increase of approximately $160,000 in legal expenses, partially offset by a slight reduction in other expenses.

Net interest expense in the First Quarter FY2019 decreased $751,011 (73%) to $277,217 from $1,028,228 in the First Quarter FY2018. The decrease is due to the reduction in outstanding debt as a result of the conversion of debt to equity in the restructuring that occurred in the fourth quarter of the prior fiscal year.

Our net loss for the First Quarter FY2019 decreased to $1,036,382 from $2,383,360 in the First Quarter FY2018.

Liquidity and Capital Resources

We had cash of approximately $197,000 and $748,000 as of May 31, 2018, and February 28, 2018, respectively.  We had a working capital deficit at May 31, 2018, and February 28, 2018 of $20,906,827 and $20,682,519, respectively. The working capital deficit includes notes payable and accrued interest to related parties of $8,893,969 and $8,696,665 as of November 30 and February 28, 2018, respectively.

Net cash used in operations for the three months ended May 31, 2018, was $1,000,852, a decrease of $136,017 from the comparable period in the prior fiscal year. Net cash provided by financing activities during the three months ended May 31, 2018, was $450,000, resulting from net proceeds from subscriptions receivable of $500,000 partially offset by a payment of $50,000 on a note payable.

There were no acquisitions of property and equipment during the First Quarter FY2019 or the First Quarter FY2018.

Accrued expenses as of May 31, 2018 increased $37,165 to $3,248,800 from $3,211,635 as of February 28, 2018. Approximately $2,250,000 of accrued expenses is salaries accrued but unpaid to certain current and former employees due to a lack of resources, and approximately $500,000 is accrued but unused vacation earned by employees.

The Company had a deficit of $24,889,804 in shareholders’ equity as of May 31, 2018, compared to $24,665,496 as of February 28, 2018.

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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 three months ended May 31, 2018 we did not issue any shares of common stock.

During the three months ended May 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.

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.

ITEM3. 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 as of the end of the period covered by this report 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 May 31, 2018, 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. Please refer to Item 3, “Legal Proceedings,” in our Annual Report on Form 10-K for the year ended February 28, 2018 for a description. 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.

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. During the three months ended May 31, 2018, the plaintiffs filed a second amended complaint. In response to the plaintiffs’ second amended complaint, both the Company and Mr. Gagerman intend to further demurrer seeking dismissal of this action.

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, 2018.

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

During the quarter ended May 31, 2018, we did not issue any shares of common stock.

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ITEM 3. Defaults Upon Senior Securities.

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” and “Note 5 – Related Parties Transactions” to the Company’s condensed financial statements and “Liquidity and Capital Resources” in “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” elsewhere in this quarterly report on Form 10-Q for additional information regarding amounts that may be owed under the Company’s notes payable and the recent restructuring of certain Company debt.

ITEM 4. Mine Safety Disclosures

Not applicable.

ITEM 5. Other Information.

None.

ITEM 6.  Exhibits

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

20

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: July 11, 2018	AURA SYSTEMS, INC.
	(Registrant)
	By:	/s/ Melvin Gagerman
		Melvin Gagerman
		Acting Chief Financial Officer
		(Principal Financial and Accounting Officer and
		Duly Authorized Officer)

21

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Melvin Gagerman, certify that:

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

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

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

4.     The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

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

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

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

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

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

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

b)       Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: July 11, 2018	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: July 11, 2018	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 May 31, 2018 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.

Date: July 11, 2018	By:	/s/ Melvin Gagerman
		Melvin Gagerman
		Chief Executive Officer,
		Acting Chief Financial Officer

XML

Document and Entity Information - shares	3 Months Ended
	May 31, 2018	Jul. 10, 2018
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	May 31, 2018
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q1
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		41,437,035

XML

Balance Sheets (Unaudited) - USD ($)	May 31, 2018	Feb. 28, 2018
Current assets:
Cash and cash equivalents	$ 197,156	$ 748,008
Accounts receivable - net	30,751
Other current assets	38,558	42,165
Total current assets	266,465	790,173
Investment in Joint Venture	250,000	250,000
Total assets	516,465	1,040,173
Current liabilities:
Accounts payable	4,960,480	5,377,259
Accrued expenses	3,248,800	3,211,635
Customer advances	436,542	503,632
Shares to be issued	2,280,964	2,280,964
Notes payable	777,537	777,537
Convertible note payable and accrued interest-related party, net of discount	3,418,524	3,342,685
Convertible notes payable, net of discount	575,000	625,000
Notes payable and accrued interest- related party	5,475,445	5,353,980
Total current liabilities	21,173,292	21,472,692
Note payable-related party	3,000,000	3,000,000
Convertible notes payable	1,232,977	1,232,977
Total liabilities	25,406,269	25,705,669
Commitments and contingencies
Stockholders' deficit:
Common stock, $0.0001 par value; 150,000,000 shares authorized at May 31 and February 28, 2018; 41,437,035 and 41,437,035 issued and outstanding at May 31 and February 28, 2018, respectively	4,144	4,144
Subscription receivable	(800,000)	(1,300,000)
Additional paid-in capital	438,559,164	438,247,091
Accumulated deficit	(462,653,112)	(461,616,731)
Total stockholders' deficit	(24,889,804)	(24,665,496)
Total liabilities and stockholders' deficit	$ 516,465	$ 1,040,173

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Balance Sheets (Parenthetical) (Unaudited) - $ / shares	May 31, 2018	Feb. 28, 2018
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	41,437,035	41,437,035
Common stock, shares outstanding	41,437,035	41,437,035

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Statements of Operations (Unaudited) - USD ($)	3 Months Ended
	May 31, 2018	May 31, 2017
Income Statement [Abstract]
Net Revenues	$ 37,400	$ 0
Cost of goods sold	14,677	0
Gross Profit	22,723	0
Operating expenses:
Engineering, research and development expenses	132,853	0
Selling, general and administrative expenses	1,001,966	567,996
Total operating expenses	1,134,819	567,996
Loss from operations	(1,112,095)	(567,996)
Other (income) and expense:
Interest expense, net	277,217	1,028,228
Other (income) expense, net	(352,931)	787,136
Total other (income) expense	(75,714)	1,815,364
Net Loss	$ (1,036,382)	$ (2,383,360)
Total basic and diluted loss per share	$ (0.03)	$ (0.02)
Weighted average shares used to compute basic and diluted loss per share	41,437,035	17,513,475

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Statements of Cash Flows (Unaudited) - USD ($)	3 Months Ended
	May 31, 2018	May 31, 2017
Cash flow from operating activities:
Net Loss	$ (1,036,382)	$ (2,383,360)
Adjustments to reconcile Net loss to net cash used in operating activities
Amortization of debt discount		43,417
FMV of warrants issued for services	312,072	177,737
Stock issued for services		990,205
(Increase) decrease in:
Accounts receivable	(30,751)
Other current assets and deposit	3,608	(2,694)
Increase (decrease) in:
Accounts payable, customer deposit and accrued expenses	(249,400)	37,826
Net cash used in operations	(1,000,852)	(1,136,869)
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
Payment to note payable	(50,000)	(197,970)
Proceeds from convertible notes payable		653,640
Proceeds from subscription receivable	500,000
Investor Advance		650,000
Net cash provided by financing activities:	450,000	2,105,670
Net increase(decrease) in cash & cash equivalents	(550,852)	718,801
Cash and cash equivalents at beginning of period	748,008	255,869
Cash and cash equivalents at end of period	197,156	974,669
Cash paid during the period for:
Interest
Income taxes

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Accounting Policies

3 Months Ended

May 31, 2018

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, 2018 filed on June 13, 2018 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 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 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.

Reclassifications

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

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Going Concern

3 Months Ended

May 31, 2018

Going Concern [Abstract]

GOING CONCERN

NOTE 2 – GOING CONCERN

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. During the three months ended May 31, 2018 and May 31, 2017, the Company incurred losses of $1,036,382 and $2,383,360, respectively and had negative cash flows from operating activities of $1,000,852 and $1,136,869, 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 annual meeting the shareholders will vote for five board candidates. The new board intends to 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 operations. We anticipate being able to fund these additions in the upcoming fiscal year.

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Notes Payable

3 Months Ended

May 31, 2018

Notes Payable [Abstract]

NOTES PAYABLE

NOTE 3 – NOTES PAYABLE

Notes payable consisted of the following:

	May 31, 2018		February 28, 2018
Notes payable, at 10% and 5%	$	3,777,537	$	3,777,537
Convertible Promissory Note dated August 10, 2012 with an interest rate of 5% per annum. On January 30, 2017, this note was amended providing, among other things, for the conversion of 80% of the principal and accrued interest into common stock at $1.386 per share conditioned on the occurrence of certain future events the last of which was completed on February 14, 2018. Further details are provided below.		264,462		264,462
Convertible Promissory Note dated October 2, 2012 with an interest rate of 5% per annum. On January 30, 2017, this note was amended providing, among other things, for the conversion of 80% of the principal and accrued interest into common stock at $1.386 per share conditioned on the occurrence of certain future events the last of which was completed on February 14, 2018. Further details are provided below.		133,178		133,178
Senior secured convertible notes dated May 7, 2013 with an interest rate of 5% per annum., On January 30, 2017, this note was amended providing, among other things, for the conversion of 80% of the principal and accrued interest into common stock at $1.386 per share conditioned on the occurrence of certain future events the last of which was completed on February 14, 2018. Further details are provided below.		757,155		757,155
Senior secured convertible notes dated June 20, 2013 with an interest are of 5% per annum On January 30, 2017, this note was amended providing, among other things, for the conversion of 80% of the principal and accrued interest into common stock at $1.386 per share conditioned on the occurrence of certain future events the last of which was completed on February 14, 2018. Further details are provided below.		203,182		203,182
Convertible notes dated April 2016 thru February 2017 with an an interest rate of 5% per annum.  Although the notes could have been converted into  shares of common stock upon shareholder approval of the  7:1 reverse stock split that occurred on February 14, 2018, the note holder elected not to convert and to have the note paid over an eleven-month period. The first payment of $50,000 was paid in April 2018.		450,000		500,000
		5,585,514		5,635,514
Less: Current portion	$	1,352,537	$	1,402,537
Long-term portion	$	4,232,977	$	4,232,977

CONVERTIBLE DEBT

On May 7, 2013, the Company transferred 4 notes payable with a total principal value of $1,000,000 together with accrued interest, and consulting fees to a senior secured convertible note with a principal value of $1,087,000 (“New Kenmont Note”) and warrants to Kenmont Capital Partners. The New Kenmont Note had a 1-year maturity date and was convertible into shares of common stock at the conversion price of $0.75 per share. The warrants were subsequently exercised. The Company recorded $342,020 as a discount, which was amortized over the life of the note. There is a remaining balance of $304,081 as of May 31, 2018.

On May 7, 2013, the Company transferred 2 note payables with a total principal value of $550,000 together with accrued interest to a senior secured convertible note with a principal value of $558,700 (“New LPD Note”) and warrants to LPD Investments, Ltd. The New LPD Note had a 1-year maturity date and was convertible into shares of common stock at the conversion price of $0.75 per share. The warrants were subsequently exercised. The Company recorded $175,793 as a discount, which will be amortized over the life of the note. There is a remaining balance of $163,677 as of May 31, 2018.

On May 7, 2013, the Company entered into an agreement with an individual for the sale of $750,000 of secured convertible note payable (the “Note”) and warrants. The Note had a 1-year maturity date and was convertible into shares of common stock at the conversion price of $0.75 per share. The warrants entitle the holder to acquire 1,000,000 shares and have an initial exercise price of $0.75 per share and have a 7-year term. The Company recorded $235,985 as a discount, which will be amortized over the life of the note. There is a remaining balance of $232,194 as of May 31, 2018.

On January 30, 2017, the Company entered into an amendment to the agreements described immediately above with five of seven secured creditors holding a security interest in all of the Company’s assets except for its patents and other intellectual properties. The original agreements, dated May 7, 2013, provided that if at least 75% of the stock issuable upon conversion of the convertible notes votes to amend the agreement and/or waive any conditions or defaults, then any such amendments or waivers shall be binding on all secured creditors. The five secured creditors signing the amendment totaled in excess of 95% of the issuable stock upon conversion and, therefore the amendment is binding on all seven of the secured creditors. The amendment provided that all accrued and unpaid interest will be added to the principal amount. The amended notes provided for no interest from November 1, 2016 to February 14, 2018, the date on which the 1-for-7 reverse stock split became effective and at which time 80% of the total debt, including accrued interest, was converted into shares of common stock and a new five year 5% per annum convertible note was issued for the remainder. The amendment also provides that if the Company enters into a “Qualified Financing” (defined as receipt by the Company of not less than $4,000,000 in aggregate gross proceeds from the sale of securities in one or a series of related transactions after the execution date), then the Company shall remit to the holder the “Cash Payment Amount” as set forth in the amendment.

On June 20, 2013, the Company entered into an agreement with four individuals for the sale of $325,000 of secured convertible notes payable (the “Notes”) and warrants. The Notes had a 1-year maturity date and were convertible into shares of common stock at the conversion price of $0.50 per share. The warrants were subsequently exercised. The Company recorded $63,622 as a discount, which will be amortized over the life of the notes. There is a remaining balance of $203,182 as of May 31, 2018.

On August 19, 2013, the Company entered into an agreement with a member of its Board of Directors for the sale of $2,500,000 of convertible notes payable (the “BOD Notes”) and warrants. The BOD Notes carry a base interest rate of 9.5%, had a 4-year maturity date and are convertible into shares of common stock at the conversion price of $0.50 per share. The warrants were subsequently exercised. The Company recorded $667,118 as a discount, which will be amortized over the life of the note. There is a balance of $3,396,858 as of May 31, 2018.

On February 21, 2017, the Company entered into several Refinancing Agreements with a debt holder totaling $2,237,456 including interest of $489,466. The agreements waived all events of default and provided for new five-year 5% convertible notes with no interest for the first six months. Upon the effective date of February 14, 2018 of the 1 for 7 reverse stock split, the notes were converted into 1,164,555 shares of common stock. 

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Accrued Expenses

3 Months Ended

May 31, 2018

Accrued Expenses [Abstract]

ACCRUED EXPENSES

NOTE 4 – ACCRUED EXPENSES

Accrued expenses consisted of the following:

	May 31, 2018		February 28, 2018
Accrued payroll and related expenses	$	2,767,565	$	2,775,312
Accrued interest		481,235		401,323
Other		-		35,000
Total	$	3,248,800	$	3,211,635

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

3 Months Ended

May 31, 2018

Stockholders' Equity [Abstract]

SHAREHOLDERS' EQUITY

NOTE 5 – SHAREHOLDERS’ EQUITY

Common Stock

During the three months ended May 31, 2018, we did not issue any shares of common stock.

During the three months ended May 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.

Employee Stock Options

During the three months ended May 31, 2018, there were no stock options granted to employees and 742,857 stock options with an exercise price of $1.40 per share granted to directors, which are set forth below under “Warrants.” 

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, 2018		$5.25-$7.00	$	0.00		1,032,000
Cancelled		-		-		-
Granted		-		-		-
Outstanding, May 31, 2018		$5.25-$7.00	$	0.00		1,032,000

The exercise prices for the options outstanding at May 31, 2018, 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
$5.25-$7.00		1,032,000		1.75 years	$	5.55	1.75 years		1,032,000	$	5.55

Warrants

Activity in issued and outstanding warrants is as follows:

	Number of Shares		Exercise Prices
Outstanding, February 28, 2018		8,743,505		$.70-$7.00
Granted		742,857	$	1.40
Exercised		-		-
Cancelled
Outstanding, May 31, 2018		9,486,362		$0.70-$7.00

The exercise prices for the warrants outstanding at May 31, 2018, 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
$1.40		742,857		742,857	58 months	$	1.40	$	1.40	$	0.00
$1.40		5,154,646		5,154,646	57 months	$	1.40	$	1.40	$	0.00
$0.70-4.55		2,783,002		2,783,002	34 months	$	2.85	$	2.85	$	0.00
$5.25		154,666		154,666	33 months	$	5.25	$	5.25	$	0.00
$5.25		651,191		651,191	20 months	$	5.25	$	5.25	$	0.00
		9,486,362		9,486,362

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Related Parties Transactions

3 Months Ended

May 31, 2018

Related Parties Transactions [Abstract]

RELATED PARTIES TRANSACTIONS

NOTE 6 – RELATED PARTIES TRANSACTIONS

On January 24, 2017, the Company entered into a Debt Refinancing Agreement with Mr. Breslow, a former Director of the Company. Pursuant to the agreement, both Mr. Breslow and the Company acknowledged that total debt owed to Mr. Breslow was $23,872,614 including $8,890,574 of accrued interest. Mr. Breslow agreed to cancel and forgive all interest due, waive all events of default and sign a new five-year convertible note in the amount of $14,982,041 providing for no interest for six months and interest of 5% per annum thereafter payable monthly in arrears. The note also provides various default provisions. In accordance with the agreement, on February 14, 2018, the effective date of the 1 for 7 reverse stock split, $11,982,041 of the note was converted into 7,403,705 shares of common stock and the then accrued interest of $9,388,338 was forgiven. A new $3,000,000 note representing the remaining balance was entered into due and payable in five years bearing interest at 5% per annum payable monthly in arrears.

At May 31, 2018, the balance in Notes Payable and accrued interest-related party, current, includes $3,268,081 plus accrued interest of $2,083,203 to Mr. Kopple (a former Board member), a 10% shareholder. Related Parties Transactions also includes $82,000 of unsecured notes payable plus accrued interest of $40,104 to our CEO pursuant to a demand note entered into on April 5, 2014. At May 31, 2018, the balance in Convertible note payable and accrued interest-related party, long term, includes $2,000,000 of unsecured convertible notes payable plus accrued interest of $1,396,858 and an unsecured convertible note of $20,000 plus accrued interest of $1,666 to Mr. Kopple. Subscriptions receivable at May 31, 2018 includes $1,300,000 for the issuance of 2,653,061 shares of common stock issued to Mr. Lowy, a 30% shareholder (as of June 5, 2018, $1,000,000 was received by the Company). The balance in notes payable - long term, includes $3,000,000 to Mr. Breslow, a 20% shareholder.

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Commitments

3 Months Ended

May 31, 2018

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

In March 2017, the Company entered into a joint venture with a Chinese partner to form Jiangsu Shengfeng Mobile Power Technology Co., Ltd. (“Jiangsu Shengfeng”) to address the Chinese market. Under the Jiangsu Shengfeng joint venture agreement, Aura owns 49% of the venture and our Chinese partner owns 51%. The Chinese partner contributed approximately $9.25 million to the venture –– principally in the form of facilities and equipment as wells as approximately $500,000 in cash. The Company contributed to the venture in the form of $250,000 in cash as well as a limited license to the joint venture to manufacture, sell and service the AuraGen^® products within China. The limited license contributed to the Jiangsu Shengfeng joint venture, however, does not permit Jiangsu Shengfeng to manufacture the AuraGen^® rotor; rather, the joint venture is required to purchase all rotor subassemblies as well as certain software elements directly from the Company. Jiangsu Shengfeng’s board of directors consists of three members appointed by the Company and three appointed by our Chinese partner; Jiangsu Shengfeng’s CEO is appointed by our Chinese partner while its CFO and director for quality assurance and control are appointed by Aura.

In addition, the Chinese company invested $2,000,000 in Aura common stock at $1.40 per share for a total of 1,428,571 shares of common stock and is required to purchase a minimum of $1,250,000 of product from the Company supported by letters of credit for distribution until their factory is built, equipment installed, and staff hired and properly trained by Aura personnel. Aura has also committed to supply personnel for six months at no cost other than to reimburse for travel, room and board. This commitment has been fulfilled and Aura is under no further obligation to supply personnel at no cost. The agreement was subject to the approval of the Chinese Government which was received in April 2017.

Contingencies

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.

The Company is one of several defendants named in a lawsuit filed by two of seven secured creditors demanding repayment of loans totaling $125,000 plus accrued interest and exemplary damages. The Company entered into an amended agreement with the five other secured creditors and based on the original agreement, which provided that if the agreement was amended by creditors whose debt totaled equaled 75% or more of the secured creditor debt convertible into the Company’s common stock, the amended agreement becomes binding on all seven creditors including the suing creditors. The five secured creditors who entered into the amendment agreement totaled in excess of 95% of the secured creditors debt convertible into the Company’s common stock and therefore became binding on the suing creditors as well.

The Company is presently engaged in a dispute with one of its former directors, Robert Kopple, relating to approximately $5.4 million and approximately 3.14 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 Mr. Gagerman (currently not a director) and director 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.

In April 2018, the Company filed suit against its former counsel, Kilpatrick Townsend& Stockton LLP relating to various acts of malpractice and breach of fiduciary duty committed by the firm in connection with its representation of Aura.

The Company has a dispute with its former landlord and vacated its former premises prior to the end of its lease. The premises have been released to a third party and no action has been filed against the Company, nor does the Company believe it has any liability. Further while the Company believes it has claims against the landlord based on their actions, the Company has nonetheless elected to accrue the amount due for unpaid rent.

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Accounting Policies (Policies)

3 Months Ended

May 31, 2018

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, 2018 filed on June 13, 2018 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 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 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.

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)

3 Months Ended

May 31, 2018

Notes Payable [Abstract]

Schedule of notes payable

	May 31, 2018		February 28, 2018
Notes payable, at 10% and 5%	$	3,777,537	$	3,777,537
Convertible Promissory Note dated August 10, 2012 with an interest rate of 5% per annum. On January 30, 2017, this note was amended providing, among other things, for the conversion of 80% of the principal and accrued interest into common stock at $1.386 per share conditioned on the occurrence of certain future events the last of which was completed on February 14, 2018. Further details are provided below.		264,462		264,462
Convertible Promissory Note dated October 2, 2012 with an interest rate of 5% per annum. On January 30, 2017, this note was amended providing, among other things, for the conversion of 80% of the principal and accrued interest into common stock at $1.386 per share conditioned on the occurrence of certain future events the last of which was completed on February 14, 2018. Further details are provided below.		133,178		133,178
Senior secured convertible notes dated May 7, 2013 with an interest rate of 5% per annum., On January 30, 2017, this note was amended providing, among other things, for the conversion of 80% of the principal and accrued interest into common stock at $1.386 per share conditioned on the occurrence of certain future events the last of which was completed on February 14, 2018. Further details are provided below.		757,155		757,155
Senior secured convertible notes dated June 20, 2013 with an interest are of 5% per annum On January 30, 2017, this note was amended providing, among other things, for the conversion of 80% of the principal and accrued interest into common stock at $1.386 per share conditioned on the occurrence of certain future events the last of which was completed on February 14, 2018. Further details are provided below.		203,182		203,182
Convertible notes dated April 2016 thru February 2017 with an an interest rate of 5% per annum.  Although the notes could have been converted into  shares of common stock upon shareholder approval of the  7:1 reverse stock split that occurred on February 14, 2018, the note holder elected not to convert and to have the note paid over an eleven-month period. The first payment of $50,000 was paid in April 2018.		450,000		500,000
		5,585,514		5,635,514
Less: Current portion	$	1,352,537	$	1,402,537
Long-term portion	$	4,232,977	$	4,232,977

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Accrued Expenses (Tables)

3 Months Ended

May 31, 2018

Accrued Expenses [Abstract]

Schedule of accrued expenses

	May 31, 2018		February 28, 2018
Accrued payroll and related expenses	$	2,767,565	$	2,775,312
Accrued interest		481,235		401,323
Other		-		35,000
Total	$	3,248,800	$	3,211,635

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Shareholders' Equity (Tables)

3 Months Ended

May 31, 2018

Stockholders' Equity [Abstract]

Schedule of employee stock option plan

	2006 Plan
	Weighted- Average Exercise Price		Aggregate Intrinsic Value		Number of Options
Outstanding, February 28, 2018		$5.25-$7.00	$	0.00		1,032,000
Cancelled		-		-		-
Granted		-		-		-
Outstanding, May 31, 2018		$5.25-$7.00	$	0.00		1,032,000

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
$5.25-$7.00		1,032,000		1.75 years	$	5.55	1.75 years		1,032,000	$	5.55

Schedule of activity in issued and outstanding warrants

	Number of Shares		Exercise Prices
Outstanding, February 28, 2018		8,743,505		$.70-$7.00
Granted		742,857	$	1.40
Exercised		-		-
Cancelled
Outstanding, May 31, 2018		9,486,362		$0.70-$7.00

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
$1.40		742,857		742,857	58 months	$	1.40	$	1.40	$	0.00
$1.40		5,154,646		5,154,646	57 months	$	1.40	$	1.40	$	0.00
$0.70-4.55		2,783,002		2,783,002	34 months	$	2.85	$	2.85	$	0.00
$5.25		154,666		154,666	33 months	$	5.25	$	5.25	$	0.00
$5.25		651,191		651,191	20 months	$	5.25	$	5.25	$	0.00
		9,486,362		9,486,362

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Going Concern (Details)	3 Months Ended
	May 31, 2018 USD ($) ft²	May 31, 2017 USD ($)
Going Concern (Textual)
Net Loss	$ (1,036,382)	$ (2,383,360)
Cash flows from operating activities	$ (1,000,852)	$ (1,136,869)
Area of land | ft²	45,000

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Notes Payable (Details) - USD ($)	May 31, 2018	Feb. 28, 2018
Debt Instrument [Line Items]
Convertible notes payable	$ 5,585,514	$ 5,635,514
Less: Current portion	1,352,537	1,402,537
Long-term portion	4,232,977	4,232,977
Notes payable [Member]
Debt Instrument [Line Items]
Notes payable	3,777,537	3,777,537
Convertible Promissory Note dated August 10, 2012 [Member]
Debt Instrument [Line Items]
Convertible notes payable	264,462	264,462
Convertible Promissory Note dated October 2, 2012 [Member]
Debt Instrument [Line Items]
Convertible notes payable	133,178	133,178
Senior secured convertible notes dated May 7, 2013 [Member]
Debt Instrument [Line Items]
Convertible notes payable	757,155	757,155
Senior secured convertible notes dated June 20, 2013 [Member]
Debt Instrument [Line Items]
Convertible notes payable	203,182	203,182
Convertible notes dated April 2016 thru February 2017 [Member]
Debt Instrument [Line Items]
Convertible notes payable	$ 450,000	$ 500,000

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Notes Payable (Parenthetical) (Details)	3 Months Ended
	May 31, 2018 USD ($)
Notes payable [Member] | Minimum [Member]
Debt Instrument [Line Items]
Notes payable interest rate	5.00%
Notes payable [Member] | Maximum [Member]
Debt Instrument [Line Items]
Notes payable interest rate	10.00%
Convertible Promissory Note dated August 10, 2012 [Member]
Debt Instrument [Line Items]
Notes payable interest rate	5.00%
Conversion percentage	80.00%
Converted into common stock price	1.386%
Converted instrument date	Feb. 14, 2018
Convertible Promissory Note dated October 2, 2012 [Member]
Debt Instrument [Line Items]
Notes payable interest rate	5.00%
Conversion percentage	80.00%
Converted into common stock price	1.386%
Converted instrument date	Feb. 14, 2018
Senior secured convertible notes dated May 7, 2013 [Member]
Debt Instrument [Line Items]
Notes payable interest rate	5.00%
Conversion percentage	80.00%
Converted into common stock price	1.386%
Converted instrument date	Feb. 14, 2018
Senior secured convertible notes dated June 20, 2013 [Member]
Debt Instrument [Line Items]
Notes payable interest rate	5.00%
Conversion percentage	80.00%
Converted into common stock price	1.386%
Converted instrument date	Feb. 14, 2018
Convertible notes dated April 2016 thru February 2017 [Member]
Debt Instrument [Line Items]
Notes payable interest rate	5.00%
Due date of notes	Feb. 28, 2017
Reverse stock split	7:1 reverse stock split.
Note holders first payment	$ 50,000

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Notes Payable (Details Textual)					1 Months Ended	3 Months Ended
	Feb. 21, 2017 USD ($) shares	Aug. 19, 2013 USD ($) $ / shares	Jun. 20, 2013 USD ($) $ / shares	May 07, 2013 USD ($) Notes $ / shares shares	Jan. 30, 2017	May 31, 2018 USD ($)	May 31, 2017 USD ($)
Notes Payable (Textual)
Amortization of debt discount							$ 43,417
Kenmont Capital Partners [Member] | Convertible Secured Notes [Member]
Notes Payable (Textual)
Pre conversion debt principal amount				$ 1,000,000
Debt amount				$ 1,087,000
Conversion price per share of notes payable | $ / shares				$ 0.75
Amortization of debt discount				$ 342,020
Amortized remaining balance						304,081
Number of notes payable to transferred | Notes				4
Notes maturity date, term				1 year
Notes payable interest rate				75.00%
LPD Investments [Member] | Convertible Secured Notes [Member]
Notes Payable (Textual)
Pre conversion debt principal amount				$ 550,000
Debt amount				$ 558,700
Conversion price per share of notes payable | $ / shares				$ 0.75
Amortization of debt discount				$ 175,793
Amortized remaining balance						163,677
Number of notes payable to transferred | Notes				2
Notes maturity date, term				1 year
Holder [Member]
Notes Payable (Textual)
Amortized remaining balance						203,182
Description of convertible promissory note					On January 30, 2017, the Company entered into an amendment to the agreements described immediately above with five of seven secured creditors holding a security interest in all of the Company's assets except for its patents and other intellectual properties. The original agreements, dated May 7, 2013, provided that if at least 75% of the stock issuable upon conversion of the convertible notes votes to amend the agreement and/or waive any conditions or defaults, then any such amendments or waivers shall be binding on all secured creditors. The five secured creditors signing the amendment totaled in excess of 95% of the issuable stock upon conversion and, therefore the amendment is binding on all seven of the secured creditors. The amendment provided that all accrued and unpaid interest will be added to the principal amount. The amended notes provided for no interest from November 1, 2016 to February 14, 2018, the date on which the 1-for-7 reverse stock split became effective and at which time 80% of the total debt, including accrued interest, was converted into shares of common stock and a new five year 5% per annum convertible note was issued for the remainder. The amendment also provides that if the Company enters into a "Qualified Financing" (defined as receipt by the Company of not less than $4,000,000 in aggregate gross proceeds from the sale of securities in one or a series of related transactions after the execution date), then the Company shall remit to the holder the "Cash Payment Amount" as set forth in the amendment.
Holder [Member] | Unsecured Debt [Member]
Notes Payable (Textual)
Notes maturity date, term	5 years
Notes payable interest rate	5.00%
Refinancing agreements totaling	$ 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)
Pre conversion debt principal amount			$ 325,000	$ 750,000
Conversion price per share of notes payable | $ / shares			$ 0.50	$ 0.75
Term of warrant			1 year	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				1,000,000
Amortized remaining balance						232,194
Notes maturity date, term			1 year	1 year
Holder [Member] | Robert Kopple [Member] | Convertible Secured Notes [Member]
Notes Payable (Textual)
Pre conversion debt principal amount		$ 2,500,000
Conversion price per share of notes payable | $ / shares		$ 0.50
Amortization of debt discount		$ 667,118
Exercise price per common share under warrant one (in dollars per share) | $ / shares		$ 0.75
Amortized remaining balance						$ 3,396,858
Notes maturity date, term		4 years
Notes payable interest rate		9.50%

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Accrued Expenses (Details) - USD ($)	May 31, 2018	Feb. 28, 2018
Accrued Expenses [Abstract]
Accrued payroll and related expenses	$ 2,767,565	$ 2,775,312
Accrued interest	481,235	401,323
Other		35,000
Total	$ 3,248,800	$ 3,211,635

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Shareholders' Equity (Details) - 2006 Plan [Member]	3 Months Ended
	May 31, 2018 USD ($) $ / shares shares
Weighted - Average Exercise Price
Weighted - Average Exercise Price, Cancelled
Weighted - Average Exercise Price, Granted
Aggregate Intrinsic Value
Aggregate Intrinsic Value, Outstanding, February 28, 2018 | $	$ 0
Aggregate Intrinsic Value, Outstanding, May 31, 2018 | $	$ 0
Number of Options
Number of Options, Outstanding, February 28, 2018 | shares	1,032,000
Number of Options, Granted | shares
Number of Options, Cancelled | shares
Number of Options, Outstanding, May 31, 2018 | shares	1,032,000
Minimum [Member]
Weighted - Average Exercise Price
Weighted - Average Exercise Price, Outstanding, February 28, 2018	$ 5.25
Weighted - Average Exercise Price, Outstanding, May 31, 2018	5.25
Maximum [Member]
Weighted - Average Exercise Price
Weighted - Average Exercise Price, Outstanding, February 28, 2018	7.00
Weighted - Average Exercise Price, Outstanding, May 31, 2018	$ 7.00

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Shareholders' Equity (Details 1) - 5.25-$7.00 [Member]	3 Months Ended
	May 31, 2018 $ / shares shares
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Options Outstanding, Range of Exercise Price, Minimum	$ 5.25
Options Outstanding, Range of Exercise Price, Maximum	$ 7.00
Options Outstanding, Number | shares	1,032,000
Options Outstanding, Weighted Average Remaining Life	1 year 9 months
Options Outstanding, Weighted Average Exercise Price	$ 5.55
Exercisable Options, Weighted Average Remaining Life	1 year 9 months
Exercisable Options, Number | shares	1,032,000
Exercisable Options, Weighted Average Exercise Price	$ 5.55

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Shareholders' Equity (Details 2)	3 Months Ended
	May 31, 2018 $ / shares shares
Class of Stock [Line Items]
Number of Shares, Outstanding, May 31, 2018 | shares	9,486,362
Warrants [Member]
Class of Stock [Line Items]
Number of Shares, Outstanding, February 28, 2018 | shares	8,743,505
Number of Shares, Granted | shares	742,857
Number of Shares, Exercised | shares
Number of Shares, Cancelled | shares
Number of Shares, Outstanding, May 31, 2018 | shares	9,486,362
Exercise Prices, Granted	$ 1.40
Exercise Prices, Exercised
Exercise Prices, Cancelled
Warrants [Member] | Minimum [Member]
Class of Stock [Line Items]
Exercise Prices, Outstanding, February 28, 2018	0.70
Exercise Prices, Outstanding, May 31, 2018	0.70
Warrants [Member] | Maximum [Member]
Class of Stock [Line Items]
Exercise Prices, Outstanding, February 28, 2018	7.00
Exercise Prices, Outstanding, May 31, 2018	$ 7.00

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Shareholders' Equity (Details 3)	3 Months Ended
	May 31, 2018 $ / shares shares
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Stock Warrants Outstanding | shares	9,486,362
Stock Warrants Exercisable | shares	9,486,362
1.40 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Range of Exercise Prices	$ 1.40
Stock Warrants Outstanding | shares	742,857
Stock Warrants Exercisable | shares	742,857
Weighted-Average Remaining Contractual Life	58 months
Weighted-Average Exercise Price of Warrants Outstanding	$ 1.40
Weighted-Average Exercise Price of Warrants Exercisable	1.40
Intrinsic Value	0.00
$1.40 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Range of Exercise Prices	$ 1.40
Stock Warrants Outstanding | shares	5,154,646
Stock Warrants Exercisable | shares	5,154,646
Weighted-Average Remaining Contractual Life	57 months
Weighted-Average Exercise Price of Warrants Outstanding	$ 1.40
Weighted-Average Exercise Price of Warrants Exercisable	1.40
Intrinsic Value	$ 0.00
$0.70-4.55 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Stock Warrants Outstanding | shares	2,783,002
Stock Warrants Exercisable | shares	2,783,002
Weighted-Average Remaining Contractual Life	34 months
Weighted-Average Exercise Price of Warrants Outstanding	$ 2.85
Weighted-Average Exercise Price of Warrants Exercisable	2.85
Intrinsic Value	0.00
$0.70-4.55 [Member] | Maximum [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Range of Exercise Prices	4.55
$0.70-4.55 [Member] | Minimum [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Range of Exercise Prices	0.70
5.25 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Range of Exercise Prices	$ 5.25
Stock Warrants Outstanding | shares	154,666
Stock Warrants Exercisable | shares	154,666
Weighted-Average Remaining Contractual Life	33 months
Weighted-Average Exercise Price of Warrants Outstanding	$ 5.25
Weighted-Average Exercise Price of Warrants Exercisable	5.25
Intrinsic Value	0.00
$5.25 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Range of Exercise Prices	$ 5.25
Stock Warrants Outstanding | shares	651,191
Stock Warrants Exercisable | shares	651,191
Weighted-Average Remaining Contractual Life	20 months
Weighted-Average Exercise Price of Warrants Outstanding	$ 5.25
Weighted-Average Exercise Price of Warrants Exercisable	$ 5.25

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Shareholders' Equity (Details Textual) - USD ($)	3 Months Ended
	May 31, 2018	May 31, 2017
Employee Stock Option [Member]
Shareholders' Equity (Textual)
Stock option granted	742,857
Stock options, exercise price	$ 1.40
Settlement Agreement [Member]
Shareholders' Equity (Textual)
Common stock shares issued		5,116,959
Common stock shares issued, value		$ 665,204
Consulting Agreement [Member]
Shareholders' Equity (Textual)
Common stock shares issued		2,500,000
Common stock shares issued, value		$ 325,000
Chinese Joint Venture [Member]
Shareholders' Equity (Textual)
Common stock shares issued		5,000,000
Common stock shares issued, value		$ 1,000,000

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Related Parties Transactions (Details) - USD ($)

1 Months Ended

3 Months Ended

Feb. 14, 2018

May 31, 2018

Feb. 28, 2018

Jan. 24, 2017

Apr. 05, 2014

Related Parties Transactions (Textual)

Unsecured notes payable and accrued interest - related party

$ 5,475,445

$ 5,353,980

Convertible note, amount

$ 3,000,000

June 5, 2018 [Member]

Related Parties Transactions (Textual)

Common stock received

$ 1,000,000

Convertible Secured Notes [Member]

Related Parties Transactions (Textual)

Interest rate

5.00%

Accrued interest [Member] | Unsecured convertible notes payable [Member]

Related Parties Transactions (Textual)

Convertible note payable and accrued interest-related party, net of discount

$ 1,396,858

Accrued interest [Member] | Unsecured convertible note [Member]

Related Parties Transactions (Textual)

Convertible note payable and accrued interest-related party, net of discount

$ 20,000

Mr. Breslow [Member]

Related Parties Transactions (Textual)

Unsecured notes payable and accrued interest - related party

$ 14,982,041

Debt amount

23,872,614

Shareholder, rate

20.00%

Convertible note payable and accrued interest-related party, net of discount

$ 9,388,338

$ 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

1 for 7 reverse stock split.

Interest rate

5.00%

5.00%

Notes payable - long term

$ 3,000,000

Mr. Breslow [Member] | Unsecured Debt [Member]

Related Parties Transactions (Textual)

Unsecured notes payable and accrued interest - related party

$ 3,268,081

CEO [Member]

Related Parties Transactions (Textual)

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

$ 40,104

Mr. Kopple [Member]

Related Parties Transactions (Textual)

Interest rate

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] | Accrued interest [Member]

Related Parties Transactions (Textual)

Unsecured notes payable and accrued interest - related party

2,083,203

Convertible note payable and accrued interest-related party, net of discount

$ 1,666

Mr. Lowy [Member]

Related Parties Transactions (Textual)

Shareholder, rate

30.00%

Common stock issued, shares

2,653,061

Common stock shares issued, value

$ 1,300,000

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Commitments (Details)	1 Months Ended	3 Months Ended
	Mar. 31, 2017 USD ($) $ / shares	May 31, 2018 USD ($) ft²	May 31, 2017 USD ($)
Commitments & Contingencies (Textual)
Area of facility (in square feet) | ft²		20,000
Rent per month		$ 10,000
Payments for joint venture agreement	$ 9,250,000		$ 250,000
Sale of equity method investments interest	500,000
Company invested amount	2,000,000
Total shares of common stock	$ 1,428,571
Repayments of loans		$ 125,000
Contingencies description		The Company is presently engaged in a dispute with one of its former directors, Robert Kopple, relating to approximately $5.4 million and approximately 3.14 million warrants which Mr. Kopple claims to be owed to him and his affiliates by the Company.
Percentage of convertible debt		95.00%
Joint venture (JV) agreement [Member]
Commitments & Contingencies (Textual)
Ownership percentage in joint venture	49.00%
Sale of equity method investments interest	$ 250,000
Shares issue of price per share | $ / shares	$ 1.40
Common stock purchase minimum amount	$ 1,250,000
Chinese company [Member]
Commitments & Contingencies (Textual)
Ownership percentage in joint venture	51.00%