Aura Systems Inc. Annual Meeting of Stockholders; Remarks of Chairman Zvi -Harry- Kurtzman

    EL SEGUNDO, Calif.--Oct. 2, 2001--Aura Systems, Inc. (OTC:AURA) held its Annual Meeting of Stockholders yesterday.
    Below are the remarks of Zvi (Harry) Kurtzman, Chairman and Chief Executive Officer of the Company.

    Remarks of Zvi (Harry) Kurtzman:

    Dear Shareholders

    Once again, we meet for our annual meeting. Since our last meeting at the beginning of the year, a lot has happened to Aura and the world. Today I would like to summarize the events of last year and then share with you our business approach and plan. Before we start, I would like to ask everyone to observe a moment of silence in memory of the victims of the disaster that struck our nation on September 11.

    Events of Fiscal 2001

    Back in April of 1994, the then head of Ballistic Missile Defense testified in front of Congress and he was asked how he had spent money for the benefit of the nation. Among others, he cited to the Congressional Armed Services Committee that one example of excellent research that he believes will benefit the nation is the electromagnetic work done by Aura Systems in El Segundo, the Company that Ballistic Missile Defense sponsored. Seven years later in May 2000 we were notified by the Ballistic Missile Defense Office that the AuraGen technology was selected for an award as one of the 21 innovations out of hundreds of technologies that were examined. The selection criteria were the potential to provide 'significant economic and social return to the nation'.
    In August and September of 2000 the US Army certified the AuraGen for airborne operations and we started to install the VIPERs and train army personnel in selected military organizations such as the 82nd Airborne and Special Forces. These activities are on going as we speak and have slowly spread to other military groups including US forces in Europe.
    In October of 2000, we started selling units to the FBI for their Hostage Rescue Team and Evidence Recovery Team. We believe that the AuraGen will significantly enhance the ability of law enforcement to utilize its sophisticated equipment in their daily work.
    Earlier in 2000 we started shipping AuraGens G5000 (5KW) to support the General Motors Goodwrench Mobile Service Program. The G5000 is now a requirement on all the Goodwrench Service vans. Later in the year GM displayed four vehicles with the G5000 fully integrated at the SEMA show in Las Vegas. The relationship with GM is slowly growing and recently had a significant new development in GMC's 'Fit for Profit' program and Chevrolet's 'Commercial Customer Choice' program.
    We spent a significant part of the year trying to set up a distribution network that will provide us with a national footprint for service and installation. It became very clear that this is a critical requirement if we are going to sell to OEMs that service the whole country. Toward the end of the year, we signed our first distribution agreement with the Western Region of Stewart and Stevenson.
    While the above and other marketing activities were ongoing, our engineering staff was diligently advancing the AuraGen product in terms of increased power output, AC/DC options as well as the engine-off option. These developments are needed to make the AuraGen the mobile power of choice among diverse users. In addition, our vehicle integration team worked diligently to develop mounts to fit the AuraGen on different platforms. We started with a few mounts on SUVs and pickup trucks and we now have mounts to fit over 90 different engine configurations including mid duty size trucks such as Detroit Diesel, Caterpillar, Cummins, Navistar, Freightliner, Ford, GM and others. This is a very big task as we continue to increase the platforms that the AuraGen can be installed on.

    Some of the accomplishments during the first 6 months of our current year are:

    On the legal and financial front

1. We settled our dispute with Deutsche Financial Services. This was
    a major milestone in putting to bed some of the bad experiences
    from NewCom.

2. We recently settled the other major open litigation and we now for
    the first time in years don't have any significant lawsuits or
    disputes.

3. We reduced our outstanding liabilities by settling with and paying
    numerous creditors.

    On the sales and marketing front

4. We established a national distribution network with corporate
    agreements with Stewart and Stevenson, Williams Detroit Diesel and
    Inland Detroit Diesel. Among these distributors, we now cover most
    of the country except the North East with 24-7 service.

5. Ford Motor Co. recently approved the AuraGen for Ford vehicle
    applications when the vehicles are in park mode. When the AuraGen
    includes the ICS (inverter charger system) option, Ford also
    approved our product to be used when the vehicles are in drive
    mode.

6. We are now part of the GM 'Fit for Profit' program and the
    'Commercial Customer Choice' program where GM will provide a
    factory rebate to commercial customers who buy a 2002 model pickup
    or van and have an AuraGen installed. This rebate is 100% paid by
    GM without any contribution from Aura.

7. We will participate with GM at SEMA, being part of the GM exhibit
    at the end of October to demonstrate the AuraGen on new GM
    applications.

8. We were featured on the cover of Diesel Progress and had an
    excellent article describing our product in that issue.

9. We are marketing the AuraGen to numerous organizations with a
    potential for very large annual numbers.

    On the technical front

10. We finalized the design for the 8.5KW unit and put it into
    production. We are now selling and shipping these units.

11. We completed the development and testing of the ICS (inverter
    charger system) option. This option allows the AuraGen to provide
    power with the engine off mode. We are preparing the production
    documentation and drawings so that we could start production soon.

12. We developed a solution for Transit Buses to replace their
    oil-cooled alternator with a 5.5KW DC unit. We are working with
    transit authorities to define their needs for both AC and DC
    power, developing test plan and specifications for both retrofit
    as well as new purchase programs.

13. We developed a RV solution and started activities with major
    players in that industry to incorporate the AuraGen with a custom
    solution for their RVs products for next year.

14. We have started to re-design the ECU (electronic control unit) to
    incorporate all that we have learned in the last few years. This
    will result in a smaller and potentially cheaper unit that will
    include the ICS and other options including European 240-Volt
    system. We expect to be ready for production by the end of the
    fiscal year.

15. We started to design a 4 KW 8 inch in diameter AuraGen. This
    design when done will extend our applications by being able to fit
    smaller platforms such as smaller pickup trucks SUVs and numerous
    police vehicles. We expect to complete the design and testing by
    the end of the year.

16. We are validating the interfaces to new model vehicles, as they
    become available. These validation efforts involve both engine
    mounts and throttle control interfaces.

    I believe you will all agree that we are very busy taking care of business.

    Our Business plan and approach

    There are three key elements in our business approach. The first element is the use of our intellectual property in our business. The second element is outsourcing manufacturing and the third element is market positioning.
    As you well know the AuraGen is not just a product but a whole technology that addresses the mobile power needs across many different industries. This technology took over 500 man-years of engineering to develop, over 100 man-years of engineering drafting to generate production drawings, over 2 years of testing and qualifications, years to develop OEM quality manuals and millions of dollars to develop over 90 different vehicle interfaces. It took years to develop a manufacturing infrastructure and a whole year to develop a national footprint for installation and service. The motivation for this very large investment in both dollars and time is our intellectual property in the form of global patent coverage and proprietary know-how and expertise that we developed over the last 10 years. It is this intellectual property that provides us the opportunity to provide a unique and new solution to the mobile power needs across many different users at a competitive price. We are constantly working to increase our IP with new patent applications and additional proprietary know-how.
    Years ago we recognized that there are many organizations that are very high quality and competitive manufacturers. Our technical expertise lies in Engineering and Technology. We made the decision to outsource all the manufacturing of both the mechanical and electrical subassemblies and to keep in house all engineering and software as well as the final assembly and testing. This allows us to maintain control of our product, its quality and to ensure that every unit is fully tested before being shipped to customers. In addition we are able to control the cost of the product without large investments in manufacturing equipment and tools.
    The AuraGen is the only true mobile power system available today. It is fully integrated into the vehicle, transparent to the user and requires nothing more than to push a start button to operate. It is safer and more cost effective to use than gensets and it is the only system that provides pure sine wave power. Since the AuraGen is integrated into vehicles with all the environmental protections that are required the AuraGen is less polluting than stand alone small engines used in gensets.
    The AuraGen is being positioned as the Mobile Power Solution of Choice for utilities, telecommunications, RVs, oil and gas services, transit authorities, mobile air and refrigeration applications, construction, emergency / rescue, food services, service work, military and automotive OEMs (I may have left some out). These are very large markets with requirements of many AuraGens per year, year after year.
    The challenges we face today are all based on not if, but when. When will our sales activities reach the critical point and spread like an epidemic across the different users of mobile electric power. We started the year with good momentum but the economy has slowed and with it we experienced delays in decision making by many organizations. Capital budgets have been slashed and in many cases drastically slowed down. Of course the September 11 incident came and the country came to a stand still and is just now beginning to recover from the severe shock of the terrorist attacks. The summer, which is our second quarter, was very disappointing, as it was to many other companies both large and small. Although we did not have any significant cancellations of orders, sales and shipping that were expected from some major customers for the second quarter have not yet materialized. We now understand that some of them will soon be released. We lost the first month of the third quarter, but we hope that things will soon start to pick-up again, and we will still have a major year. Based on recent events and timing we now believe that while the total number of units that we expect to sell this year will be less than initially estimated, the total revenues expected could still be substantial due to the product mix that we now have available.
    We came a long way in technical developments, setting up infrastructure for manufacturing, setting up a national quality distribution and market penetration in many different industries. It has not been easy, it took a long time and it was not cheap. We navigated turbulent uncharted waters and made lots of mistakes along the way. At times we diverted and diluted our efforts and it took a major wake-up call to get us back on track. On the other hand, our accomplishments are remarkable. We did with relatively little resources what major organizations could not do at any cost.
    Some shareholders understood the efforts and time required to do what no other man has done before. Some were critical and knew all the short cuts and all the right decisions after the fact. We did what we believed we had to do for our shareholders, in order to survive this trip and get into charted calm waters. Some of our decisions and actions along the way we are very proud of, in hindsight, others we could have done better. History will be the judge. Your management team and I gave it all we had. We are now ready as a company to go forward and reap the benefits of this long experience. We are now ready to use our achievements to generate returns for those who stayed with us during these trying times. We now are at a point ready to move up to the next stage. This new stage is in charted territory, building AuraGens, improving AuraGens, adding applications, developing sales channels and sales techniques, controlling costs and generating profits for the Company and its shareholders. These challenges are different from the ones we faced in the past and require different types of thinking and abilities. Over the last several months your management has worked out an orderly transition plan with the Board of Directors. In the months to come we will work together with the Board to replace myself and other members of management with a new team that will take the Company to new heights. It was not always fun but it was never boring. Thank you for your support throughout this adventure.

    God bless America, God bless Aura and God bless all of you.

    (End of Remarks by Zvi (Harry) Kurtzman)

    Aura Systems, Inc., a leader in electromagnetic systems, is located in El Segundo, CA. More information about the Company is available on the Company's website http://www.aurasystems.com/.

    "Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: The statements contained in this release which are not historical facts are forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those set forth in or implied by forward-looking statements. These risks are described in the Company's Securities and Exchange Commission filings.