Delaware
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95-4106894
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(State or other jurisdiction
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(I.R.S. Employer Identification No.)
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of incorporation or organization)
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Large Accelerated Filer
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Accelerated Filer
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Non-accelerated filer
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Smaller Reporting Company [x]
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Class
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Outstanding July 8, 2014
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Common Stock, par value $0.0001 per share
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109,049,032 shares
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Index
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Page No.
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||
PART I.
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FINANCIAL INFORMATION
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||
ITEM 1.
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Financial Statements (Unaudited)
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||
Condensed Balance Sheets as of May 31, 2014 and February 28, 2014
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4
|
||
Condensed Statements of Operations for the Three months Ended May 31, 2014 and 2013
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5
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||
Condensed Statements of Cash Flows for the Three months Ended May 31, 2014 and 2013
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6
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||
Notes to Condensed Financial Statements
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7
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||
ITEM 2.
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Management's Discussion and Analysis of Financial Condition and Results of Operations
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14
|
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ITEM 4T.
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Controls and Procedures
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19
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PART II.
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OTHER INFORMATION
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||
ITEM 2.
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Unregistered Sales of Equity Securities and Use of Proceeds
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19
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ITEM 6.
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Exhibits
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20
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SIGNATURES AND CERTIFICATIONS
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21
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May 31,
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||||||||
2014
|
2013
|
|||||||
Net Revenues
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$ | 449,972 | $ | 808,526 | ||||
Cost of goods sold
|
210,059 | 320,220 | ||||||
Gross Profit
|
239,913 | 488,306 | ||||||
Operating expenses:
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||||||||
Engineering, research and development expenses
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304,003 | 398,798 | ||||||
Selling, general and administrative expenses
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3,124,346 | 2,565,170 | ||||||
Total operating expenses
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3,428,349 | 2,963,968 | ||||||
Loss from operations
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(3,188,436 | ) | (2,475,662 | ) | ||||
Other (income) and expense:
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||||||||
Interest expense, net
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825,436 | 716,298 | ||||||
Other income, net
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(5,580 | ) | (212,717 | ) | ||||
Total other (income) expense
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819,856 | 503,581 | ||||||
Net Loss
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$ | (4,008,292 | ) | $ | (2,979,243 | ) | ||
Total basic and diluted loss per share
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$ | (0.04 | ) | $ | (0.04 | ) | ||
Weighted average shares used to compute basic and diluted loss per share
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105,140,462 | 77,521,286 | ||||||
2014
|
2013
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|||||||
Cash flow from operating activities:
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||||||||
Net Loss
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$ | ( 4,008,292 | ) | $ | ( 2,979,243 | ) | ||
Adjustments to reconcile Net loss to net cash used in operating activities
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||||||||
Depreciation Expense
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3,992 | 19,110 | ||||||
Debt discount
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- | (753,798 | ) | |||||
Amortization of debt discount
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214,073 | 224,723 | ||||||
Gain on conversion
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- | (203,110 | ) | |||||
Stock issued for services
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420,000 | 297,725 | ||||||
Provision for inventory obsolescence
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(92,825 | ) | (43,088 | ) | ||||
Stock options and warrants expense
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1,397,597 | 901,195 | ||||||
(Increase) decrease in:
Accounts receivable
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(36,997 | ) | (110,396 | ) | ||||
Inventory
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87,193 | 170,631 | ||||||
Other current assets and deposit
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(17,562 | ) | 47,164 | |||||
Increase (decrease) in:
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||||||||
Accounts payable, customer deposit and accrued expenses
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(111,016 | ) | 777,765 | |||||
Net cash used in operations
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(2,143,837 | ) | (1,651,320 | ) | ||||
Financing activities:
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||||||||
Proceeds from warrant exercise
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1,733,453 | - | ||||||
Proceeds from notes payable-net
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70,000 | 955,000 | ||||||
Proceeds from convertible notes payable
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- | 845,700 | ||||||
Payments on convertible notes payable
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- | (306,250 | ) | |||||
Proceeds from notes payable-related party, net
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400,000 | 82,000 | ||||||
Net cash provided by financing activities:
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2,203,453 | 1,576,450 | ||||||
Net increase (decrease) in cash & cash equivalents
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59,616 | (74,870 | ) | |||||
Cash and cash equivalents at beginning of period
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40,927 | 89,196 | ||||||
Cash and cash equivalents at end of period
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$ | 100,543 | $ | 14,326 | ||||
Supplemental disclosures of cash flow information
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||||||||
Cash paid during the period for:
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||||||||
Interest
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$ | - | $ | 45,031 | ||||
Income taxes
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- | - |
May 31,
2014
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February 28,
2014
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|||||||
Raw materials
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$ | 1,856,082 | $ | 1,808,556 | ||||
Finished goods
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1,596,838 | 1,735,019 | ||||||
3,452,920 | 3,543,575 | |||||||
Reserve for potential product obsolescence
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(2,307,527 | ) | (2,334,487 | ) | ||||
Discount on long term inventory
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(8,724 | ) | (78,051 | ) | ||||
1,136,669 | 1,131,037 | |||||||
Non-current portion
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(136,669 | ) | (131,037 | |||||
Current portion
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$ | 1,000,000 | $ | 1,000,000 | ||||
May 31, 2014
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February 28, 2014
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|||||||
Machinery and equipment
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$ | 964,111 | $ | 964,111 | ||||
Furniture and fixtures
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163,302 | 163,302 | ||||||
1,127,413 | 1,127,413 | |||||||
Less accumulated depreciation
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(1,123,450 | ) | (1,119,458 | ) | ||||
Property, plant and equipment, net
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$ | 3,963 | $ | 7,955 |
May 31, 2014
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February 28, 2014
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|||||||
Demand notes payable, at 10% and 16%
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$ | 1,629,990 | $ | 1,559,990 | ||||
Convertible Promissory Note dated August 10, 2012, due August 10, 2017, convertible into shares of our common stock at a price of $0.76 per share. The note carries an interest rate of 7% with interest only payments due on the 10
th
of each month with the principal payment due on the maturity date.
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801,736 | 786,198 | ||||||
Convertible Promissory Note dated October 2, 2012, due October 2, 2017, convertible into shares of our common stock at a price of $0.76 per share. The note carries an interest rate of 7% with interest only payments due on the 2
nd
of each month with the principal payment due on the maturity date.
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408,279 | 401,399 | ||||||
Senior secured convertible notes dated May 7, 2013, due June 15, 2013, convertible into shares of our common stock at a price of $0.75 per share. The notes carry an interest rate of 12% with interest due on the last day of the month. If the note is not repaid by the due date, the interest rate increases to 16%.
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2,395,700 | 2,261,643 | ||||||
Senior secured convertible notes dated June 20, 2013, due June 20, 2014, convertible into shares of our common stock at a price of $0.75 per share. The notes carry an interest rate of 16% with interest due on the last day of the month. If the note is not repaid by the due date, the interest rate increases to 16%.
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321,819 | 305,913 | ||||||
5,557,524 | 5,315,143 | |||||||
Less: Current portion
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$ | 4,347,509 | $ | 4,127,545 | ||||
Long-term portion
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$ | 1,210,015 | $ | 1,187,598 |
May 31, 2014
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February 28, 2014
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|||||||
Accrued payroll and related expenses
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$ | 2,345,331 | $ | 2,729,944 | ||||
Accrued rent
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205,354 | 198,111 | ||||||
Accrued interest
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642,445 | 456,801 | ||||||
Other
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- | 1,079 | ||||||
Total
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$ | 3,193,130 | $ | 3,385,937 |
2006 Plan
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|||||||
Weighted-Average Exercise Price
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Aggregate Intrinsic Value
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Number of Options
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|||||
|
|
|
|||||
Outstanding, February 28, 2014
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$0.75-$1.00
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$0.00
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8,602,333
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||||
Cancelled
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$0.75
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52,000
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|||||
Granted
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-
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-
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|||||
Outstanding, May 31, 2014
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$0.75-$1.00
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$0.00
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8,550,333
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Options Outstanding
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Exercisable Options
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||||||||||||||||||
Range of Exercise
Price
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Number
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Weighted Average Remaining Life
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Weighted Average Exercise Price
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Weighted Average Remaining Life
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Number
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Weighted Average Exercise Price
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|||||||||||||
$0.75-$1.00
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8,550,333
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5.65 years
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$
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0.79
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5.75 years
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8,183,666
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$
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0.79
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Number of Shares
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Exercise Prices
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||
Outstanding, February 28, 2014
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48,503,720
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$0.75-$2.00
|
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Granted
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-
|
-
|
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Exercised
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(17,334,540)
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$0.10
|
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Cancelled
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(217,830)
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$0.75
|
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Outstanding, May 31, 2014
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30,951,350
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$0.75-$2.00
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Range of Exercise Prices
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Stock Warrants Outstanding
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Stock Warrants Exercisable
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Weighted-Average Remaining Contractual Life
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Weighted-Average Exercise Price of Warrants Outstanding
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Weighted-Average Exercise Price of Warrants Exercisable
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Intrinsic Value
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||||||
$0.75
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1,082,734
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1,082,734
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81 months
|
$0.75
|
$0.75
|
$0.00
|
||||||
$0.75
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1,000,000
|
1,000,000
|
71 months
|
$0.75
|
$0.75
|
$0.00
|
||||||
$0.75-$1.00
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5,990,275
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5,990,275
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66 months
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$0.77
|
$0.77
|
$0.00
|
||||||
$1.00-$1.25
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995,000
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995,000
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28months
|
$1.04
|
$1.04
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$0.00
|
||||||
$1.00
|
16,422,787
|
16,422,787
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27 months
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$1.00
|
$1.00
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$0.00
|
||||||
$1.50
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105,000
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105,000
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22 months
|
$1.50
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$1.50
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$0.00
|
||||||
$0.75-1.50
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909,198
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909,198
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19 months
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$1.14
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$1.14
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$0.00
|
||||||
$1.50
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156,000
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156,000
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15 months
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$1.50
|
$1.50
|
$0.00
|
||||||
$1.50
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704,000
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704,000
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14 months
|
$1.50
|
$1.50
|
$0.00
|
||||||
$1.50
|
350,642
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350,642
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11 months
|
$1.50
|
$1.50
|
$0.00
|
||||||
$2.00
|
235,714
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235,714
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5 months
|
$2.00
|
$2.00
|
$0.00
|
||||||
$0.75-1.50
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3,000,000
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3,000,000
|
1 months
|
$1.00
|
$1.00
|
$0.00
|
||||||
30,951,350
|
30,951,350
|
2014
|
2013
|
|||||||
United States
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$ | 268,303 | $ | 616,227 | ||||
Canada
|
32,470 | 48,060 | ||||||
Europe
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31,546 | 4,136 | ||||||
Asia
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65,548 | 131,353 | ||||||
Other
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52,105 | 8,750 | ||||||
Total
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$ | 449,972 | $ | 808,526 |
·
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Our ability to generate positive cash flow from operations;
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·
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Our ability to obtain additional financing to fund our operations;
|
·
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Our business development and operating development; and
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·
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Our expectations of growth in demand for our products.
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10.31
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Demand Note dated May 19, 2014 by Aura Systems, Inc. in favor of K.F. Properties in the original principal amount of $400,000
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By:
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/s/ Melvin Gagerman
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Melvin Gagerman
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Chief Executive Officer
|
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By:
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/s/ Melvin Gagerman
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Melvin Gagerman
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|
Chief Financial Officer
|
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1.
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The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
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2.
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The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company for the periods indicated.
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Date: July 15, 2014
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By:
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/s/ Melvin Gagerman
|
Melvin Gagerman
Chief Executive Officer, Chief
Financial Officer, Chief Accounting
Officer
|