exhibit  10.32

**WARRANT AMENDMENT AGREEMENT**

****THIS WARRANT AMENDMENT  AGREEMENT (this "Agreement") is entered into as of January 8, 2004, by and among  AURA SYSTEMS, INC., a Delaware corporation (the "Company"), KOYAH LEVERAGE PARTNERS,  L.P., a Delaware limited partnership ("Koyah Leverage"), KOYAH PARTNERS, L.P.,  a Delaware limited partnership ("Koyah"), JAMES M. SIMMONS ("Simmons"),  WENDELL REUGH ("Reugh"), FOREST MAGERS ("Magers") and RAVEN  PARTNERS, L.P., a Delaware limited partnership ("Raven").

 WHEREAS, the Company entered  into a Subscription Agreement dated as of March 16, 2001 (the "First Subscription  Agreement") with Koyah Leverage, Koyah, Simmons, Reugh and Magers (collectively,  the "First Holders"); 

 WHEREAS, in connection with  the First Subscription Agreement, the Company entered into Registration Rights  Agreement dated as of March 16, 2001 (the "First Registration Rights Agreement")  with the First Holders; 

 WHEREAS, pursuant to the  First Registration Rights Agreement, as of the date hereof, the Company has  issued or is obligated to issue to the First Holders outstanding warrants for  the purchase of its common stock (collectively, the "First Registration Warrants")  at an exercise price of $.34 per share;

 WHEREAS, the Company also  entered into a Subscription Agreement dated as of May 9, 2002 (the "Second  Subscription Agreement") with Koyah Leverage, Koyah and Raven (collectively  the "Second Holders" and, together the First Holders, the "Holders");

 WHEREAS, in connection with  the Second Subscription Agreement, the Company entered into a Registration Rights  Agreement dated as of May 9, 2002 (the "Second Registration Rights  Agreement" and, together with the First Registration Rights Agreement,  the "Registration Rights Agreements") with the Second Holders;

 WHEREAS, pursuant to the  Second Registration Rights Agreement, as of the date hereof, the Company has  issued or is obligated to issue outstanding warrants for the purchase of its  common stock (collectively the "Second Registration Warrants" and,  together with the First Registration Warrants, the "Registration Warrants")  at an exercise price of $.20 per share;

 WHEREAS, the parties wish  to amend various provisions of the Registration Warrants and the Registration  Rights Agreements, on the terms and conditions set forth herein; 

 NOW, THEREFORE, for valuable  consideration, the receipt of which is hereby acknowledged, the parties do hereby  agree as follows: 

 1.       Treatment of the Registration Warrants. Subject to and  on the terms and conditions set forth herein, the Registration Warrants of each  Holder shall be consolidated and converted into, and exchanged for, a single  replacement Warrant issued by the Company to such Holder for the purchase of  shares of its common stock, in the form attached hereto as Exhibit A  and dated as of the date hereof and for the number of shares of its common stock  set forth below (collectively, the "Replacement Warrants"): 

| **Holder**     | **No. of Replacement        Warrant Shares** |
|----------------|----------------------------------------------|
| Koyah Leverage | 2,000,000                                    |
| Koyah          | 750,000                                      |
| Simmons        | 350,000                                      |
| Reugh          | 40,000                                       |
| Magers         | 40,000                                       |
| Raven          | 20,000                                       |
| TOTAL          | 3,200,000                                    |

The Replacement Warrant of each Holder  shall amend and restate the terms and conditions of the Registration Warrants  of such Holder from and after the date hereof to, among other things, (i) change  the number of shares of common stock purchasable, (ii) reduce the exercise price  and (iii) extend the expiration date, in accordance with the terms and  conditions set forth in the Replacement Warrant of such Holder. The Replacement  Warrant of each Holder shall replace and supersede the Registration Warrants  of such Holder from and after the date hereof. 

 2.       Amendment of Registration Rights Agreements. Subject to  and on the terms and conditions set forth herein, the Registration Rights Agreements  shall be amended as follows:

 2.1 Amendment of  First Registration Rights Agreement. 

 (a) The definition of "Registrable  Securities" contained in Section 1.1(f) of the First Registration Rights  Agreement shall be amended to read as follows:

(f) "Registrable Securities"  means (i) the shares of the Company's Common Stock issued pursuant to the Subscription  Agreement, (ii) the shares of the Company's Common Stock issuable on exercise  of the Replacement Warrants (as defined in the Warrant Amendment Agreement dated  as of January 8, 2004 among the Company and the Holders named therein), and  (iii) any Common Stock of the Company issued as (or issuable on the conversion  or exercise of any warrant, right or other security that is issued as) a dividend  or other distribution with respect to, or in exchange for, or in replacement  of, the shares referenced in clauses (i) and (ii) above; provided that there  shall be excluded any Registrable Securities sold by a person in a transaction  in which that person's rights under this Section 1 are not assigned.

 (b) Sections  1.3 (c), (d) and (e) of the First Registration Rights Agreement shall be deleted  in order to cease any further accrual of First Registration Warrants. Notwithstanding  the deletion of Sections 1.3 (c), (d) and (e) of the First Registration Rights  Agreement, the obligations of the Company to file and maintain the effectiveness  of a registration statement covering the shares to be registered and all other  obligations of the Company in connection with registration rights under the  First Registration Rights Agreement shall remain unchanged and in full force  and effect.

 2.2 Amendment of  Second Registration Rights Agreement. 

 (a) The  definition of "Registrable Securities" contained in Section 1.1 (f)  of the Second Registration Rights Agreement shall be amended to read as follows:

(f) "Registrable Securities"  means (i) the shares of the Stock (as defined in the Subscription Agreement),  (ii) the shares of the Company's Common Stock (as defined in the Subscription  Agreement) issuable upon exercise of the Replacement Warrants (as defined in  the Warrant Amendment Agreement dated as of January 7, 2004 among the Company  and the Holders named therein), (iii) 5,000,000 shares of the Company's Common  Stock and 2,500,000 shares of the Company's Common Stock issuable upon exercise  of warrants held by Koyah Leverage Partners, L.P. which were previously acquired  by it, (iv) 1,250,000 shares of the Company's Common Stock and 625,000 shares  of the Company's Common Stock issuable upon exercise of warrants held by Koyah  Partners, L.P. which were previously acquired by it, (v) 180,000 shares of the  Company's Common Stock held by Raven Partners, L.P. (formerly Koyah Community  Partners, L.P.) which were previously acquired by it, and (vi) any other shares  of stock of the Company issued as (or issuable on the conversion or exercise  of any warrant, right or other security that is issued as) a dividend or other  distribution with respect to, or in exchange for, or in replacement of, the  shares referenced in clauses (i) through (v) above; provided that there shall  be excluded any Registrable Securities sold by a person in a transaction in  which that person's rights under this Section 1 are not assigned.

 (b) Sections  1.3 (c), (d) and (e) of the Second Registration Rights Agreement shall be deleted  in order to cease any further accrual of the Second Registration Warrants.  Notwithstanding the deletion of Sections 1.3 (c), (d) and (e) of the Second  Registration Rights Agreement, the obligations of the Company to file and maintain  the effectiveness of a registration statement covering the shares to be registered  and all other obligations of the Company in connection with registration rights  under the Second Registration Rights Agreement shall remain unchanged and in  full force and effect.

 3.       Documents to be Delivered by the Company. Promptly after  the date hereof, the Company shall issue and deliver to each Holder the Replacement  Warrant of such Holder.

 4.       Documents to be Delivered by Each Holder. Promptly after  the date hereof, each Holder shall return to the Company the Registration Warrants  of such Holder for surrender and cancellation.

 5.       Miscellaneous. 

 5.1.  Registration Rights Agreements  Remain in Full Force and Effect. Except as specifically modified by this  Agreement, the Registration Rights Agreements shall remain unchanged and in  full force and effect.

 5.2.  Amendments and Waivers.  Any term of this Agreement may be amended and the observance of any term of  this Agreement may be waived (either generally or in a particular instance and  either retroactively or prospectively), only with the written consent of the  (i) Company and, (ii) Holders holding more than 50% of the Replacement Warrants.  Any amendment or waiver effected in accordance with this Section 5.2 shall be  binding upon each Holder, and the Company. 

 5.3.  Notices. Any notice,  consent, authorization or other communication to be given hereunder shall be  in writing and shall be deemed duly given and received when delivered personally  or transmitted by facsimile transmission with receipt acknowledged by the addressee  or three days after being mailed by first class mail, or the next business day  after being deposited for next-day delivery with a nationally recognized  overnight delivery service, charges and postage prepaid, properly addressed  to the party to receive such notice at the address for such party indicated  on the signature page of this Agreement or at such address as such party may  designate by advance written notice to the other parties.

 5.4.  Entire Agreement. This  Agreement and the Replacement Warrants contain the entire agreement of the parties  and supersede all prior negotiations, correspondence, term sheets, agreements  and understandings, written and oral, between or among the parties regarding  the subject matter hereof and thereof.

 5.5.  Successors and Assigns.  This Agreement shall inure to the benefit of and be binding upon the respective  heirs, representatives, successors and permitted assigns of the parties. Nothing  in this Agreement, express or implied, is intended to confer upon any party  other than the parties hereto or their respective heirs, representatives, successors  and permitted assigns any rights, remedies, obligations, or liabilities under  or by reason of this Agreement, except as expressly provided in this Agreement.

 5.6.  Severability. If any  provision of this Agreement, or the application of such provision to any person  or circumstance, shall be held invalid or unenforceable, the remainder of this  Agreement, or the application of such provision to persons or circumstances  other than those to which it is held to be invalid or unenforceable, shall not  be affected thereby.

 5.7.  **Governing Law. This  Agreement shall be governed by and construed and interpreted in accordance with  the law of the State of Washington, without regard to that state's conflict  of laws principles. All disputes between the parties arising out of or in connection  with this Agreement or the Replacement Warrants, whether sounding in contract,  tort, equity or otherwise, shall be resolved only by state and federal courts  located in Spokane, Washington, and the courts to which an appeal therefrom  may be taken. All parties waive any objections to the location of the above  referenced courts, including but not limited to any objection based on lack  of jurisdiction, improper venue or forum non-conveniens. Notwithstanding  the foregoing, any party obtaining any order or judgment in any of the above  referenced courts may bring an action in a court in another jurisdiction in  order to enforce such order or judgment.**

 5.8.  Attorneys' Fees. The  Company shall pay the reasonable attorneys' fees, costs and disbursements of  the Holders in enforcing the terms of this Agreement or the Replacement Warrants,  whether or not any action at law or in equity is brought.

 5.9.  Further Assurances.  Each party shall execute such other and further certificates, instruments and  other documents as may be reasonably necessary and proper to implement, complete  and perfect the transactions contemplated by this Agreement.

 5.10.         Counterparts. This Agreement may be executed in any number of  counterparts, each of which shall constitute an original, and all of which together  shall be considered one and the same agreement.

 5.11.         Titles and Subtitles. The titles and subtitles used in this Agreement  are used for convenience only and are not to be considered in construing or  interpreting this Agreement.

 5.12.         Exculpation Among Holders. Each Holder acknowledges that it is  not relying upon any person, firm or corporation, other than the Company and  its officers and directors, in making any investment decision related to the  transactions contemplated by this Agreement or the Replacement Warrants. Each  Holder agrees that no other Holder or its respective controlling person, officers,  directors, partners, agents or employees shall be liable to such Holder for  any action heretofore or hereafter taken or omitted to be taken by any of them  in connection with the transactions contemplated by, or the execution of or  performance under, this Agreement or the Replacement Warrants.

 5.13.         Representation. Each Holder acknowledges that (a) ICM Asset Management,  Inc. and/or its affiliates have retained Paine Hamblen Coffin Brooke & Miller  LLP to represent only ICM Asset Management, Inc. and its affiliates (collectively,  "ICM") in connection with this Agreement, the Replacement Warrants  and the transactions contemplated hereby and thereby, (b) the interests of ICM  may not necessarily coincide with the interests of other Holders, (c) Paine  Hamblen Coffin Brooke & Miller LLP does not represent any Holder other than  ICM, and (d) each Holder has consulted with, or has had an opportunity to consult  with, its own legal counsel and has not relied on Paine Hamblen Coffin Brooke  & Miller LLP for legal counsel in connection with this Agreement, the Replacement  Warrants and the transactions contemplated hereby and thereby.

 5.14.         Representation and Warranty of the Company. The Company hereby  represents and warrants this Agreement and the Replacement Warrants have been  duly authorized by all necessary action of the Company's Board of Directors.

 5.15.         Effectiveness. This Agreement shall become effective upon execution  by the Company, Koyah Leverage, Koyah and Raven, and upon such execution this  Agreement shall constitute a binding agreement between the Company and Koyah  Leverage, Koyah and Raven, severally but not jointly. Simmons, Reugh and/or  Magers may join in this Agreement as well by executing it, and upon such execution  this Agreement shall also constitute a binding agreement between the Company  and Simmons, Reugh and/or Magers, severally but not jointly. In the event that  Simmons, Reugh and/or Magers do not execute this Agreement, (i) the Registration  Warrants of Koyah Leverage, Koyah and Raven shall be amended in accordance with  the terms and conditions hereof, (ii) the First and Second Registration Rights  Agreement shall be amended in accordance with the terms and conditions hereof  as to Koyah Leverage, Koyah and Raven but not as to Simmons, Reugh and/or Magers  and the First Registration Rights Agreement instead shall remain in effect on  its current terms as to Simmons, Reugh and/or Magers, and (iii) the Registration  Warrants of Simmons, Reugh and/or Magers shall not be amended in accordance  with the terms and conditions hereof and such Registration Warrants instead  shall remain in effect on their current terms.

 5.16.         ICM Legal Counsel Fees and Expenses in Connection with this Agreement.  The Company shall pay the costs and expenses of legal counsel to ICM in connection  with the negotiation, execution and delivery of this Agreement, the Replacement  Warrants, and any other related agreements with the Holders as well as the consummation  of the transactions contemplated by such agreements, the administration of such  agreements and any amendments or waivers of such agreements. The Company shall  pay such costs and expenses immediately upon submittal, and ICM may apply any  retainer held by it or its legal counsel against such costs and expenses. Alternatively,  ICM may deduct some or all of such costs and expenses from the proceeds of any  loans from ICM when disbursing such loans and/or pay such costs and expenses  directly and then the amounts so paid shall constitute advances made under the  notes evidencing such loans, including without limitation the Convertible Promissory  Notes dated July 24, 2003, as amended, executed in favor of Koyah Leverage and  Koyah to the extent such advances are within the maximum principal amount of  such Convertible Promissory Notes and otherwise shall constitute amounts payable  by the Company. Notwithstanding that the Company is paying such costs and expenses,  the Company acknowledges and agrees that such legal counsel is representing  only ICM, and not the Company.

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IN WITNESS WHEREOF, the parties have  caused this Agreement to be duly executed and delivered as of the date first  set forth above.

**"Company"**

AURA SYSTEMS, INC.

By: 

Name: 

Title:

2335 Alaska Avenue

El Segundo, CA 90245

Attn: Neal Meehan

Fax: (310) 643-8719

**"Holders"**

KOYAH LEVERAGE PARTNERS, L.P.

By: Koyah Ventures LLC, its general  partner

By: 

Name: 

Title:

c/o ICM Asset Management, Inc.

601 W. Main Avenue, Suite 600

Spokane, WA 99201

Attn: Robert Law

Fax: (509) 444-4500

KOYAH PARTNERS, L.P.

By: Koyah Ventures LLC, its general  partner

By: 

Name: 

Title:

c/o ICM Asset Management, Inc.

601 W. Main Avenue, Suite 600

Spokane, WA 99201

Attn: Robert Law

Fax: (509) 444-4500

RAVEN PARTNERS, L.P.

By: Koyah Ventures LLC, its general  partner

By: 

Name: 

Title:

c/o ICM Asset Management, Inc.

601 W. Main Avenue, Suite 600

Spokane, WA 99201

Attn: Robert Law

Fax: (509) 444-4500

JAMES M. SIMMONS

c/o ICM Asset Management, Inc.

601 W. Main Avenue, Suite 600

Spokane, WA 99201

Attn: James M. Simmons

Fax: (509) 444-4500

WENDELL REUGH

4814 S. St. Andrews Lane

Spokane, WA 99223

FOREST MAGERS

P.O Box 433

Nordman, ID 83848