<PAGE>
 
================================================================================

                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C.  20549


                                   FORM 10-Q


                 QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
                      THE SECURITIES EXCHANGE ACT OF 1934


     For the Quarter Ended May 31, 1997         Commission File Number 0-17249



                              AURA SYSTEMS, INC.
            (Exact name of Registrant as specified in its charter)

          DELAWARE                                      95-4106894
     (State or other jurisdiction           (I.R.S. Employer Identification No.)
   of incorporation or organization)

                               2335 ALASKA AVE.
                         EL SEGUNDO, CALIFORNIA 90245
                   (Address of principal executive offices)

Registrant's telephone number, including area code:    (310) 643-5300

Former name, former address and former fiscal year, if changed since last
report: None


     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  X   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 at July 14, 1997
                   -----                    ----------------------------

              Common Stock, par value             78,994,516 Shares
                 $.005 per share

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<PAGE>
 
                      AURA SYSTEMS, INC. AND SUBSIDIARIES

                                     INDEX
<TABLE>
<CAPTION>
                                                                     Page No.
<S>                                                                  <C>
PART I.   FINANCIAL INFORMATION

     ITEM 1.   Financial Statements

               Statement Regarding Financial Information               1
                                
               Condensed Consolidated Balance Sheets as of
               May 31, 1997 and February 28, 1997                      2

               Condensed Consolidated Statement of Operations 
               for the Three Months Ended May 31, 1997 and 1996        3

               Condensed Consolidated Statements of Cash Flows 
               for the Three Months Ended May 31, 1997 and 1996        4
 
               Notes to Consolidated Financial Statements              5
                                
     ITEM 2.   Management's Discussion and Analysis of 
               Financial Condition and Results of Operations           7
 
 
PART II.  OTHER INFORMATION
 
     ITEM 1.   Legal Proceedings                                      10
 
     ITEM 6.   Exhibits and Reports on Form 8-K                       10
                                
SIGNATURES                                                            11
</TABLE>
<PAGE>
 
                      AURA SYSTEMS, INC. AND SUBSIDIARIES

                          QUARTER ENDED MAY 31, 1997

                         PART I. FINANCIAL INFORMATION



The financial statements included herein have been prepared by Aura Systems,
Inc. (the "Company"), without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission (the "SEC").  As contemplated by the SEC
under Rule 10-01 of Regulation S-X, the accompanying financial statements and
footnotes have been condensed and therefore do not contain all disclosures
required in annual financial statements.  However, the Company believes that the
disclosures are adequate to make the information presented not misleading.
These financial statements should be read in conjunction with the financial
statements and notes thereto included in the Company's Form 10-K and any
amendments thereto for the year ended February 28, 1997 as filed with the SEC
(file number 0-17249).

                                       1
<PAGE>
 
                      AURA SYSTEMS, INC. AND SUBSIDIARIES
                     CONDENSED CONSOLIDATED BALANCE SHEETS
                                  (UNAUDITED)
<TABLE>
<CAPTION>
                                                                     MAY 31,             FEBRUARY 28,
ASSETS                                                                1997                  1997
------                                                               -------             ------------
<S>                                                                  <C>                 <C>

CURRENT ASSETS
            Cash and equivalents                                      $  3,379,600        $  7,112,354
            Receivables, net                                            57,068,406          53,743,698
            Inventories and contracts in process                        37,516,373          33,847,296
            Prepayments and deposits                                     9,839,137           7,695,268
            Other current assets                                           164,798             391,361
                                                                      ------------        ------------
                TOTAL CURRENT ASSETS                                   107,968,314         102,789,977
                                                                      ------------        ------------
            Property and equipment, at cost                             57,795,342          52,867,243
            Less accumulated depreciation
               and amortization                                        (10,291,947)         (9,676,454)
                                                                      ------------        ------------

            NET PROPERTY AND EQUIPMENT                                  47,503,395          43,190,789

            Joint Ventures                                              10,347,560          10,210,872
            Long-Term investments                                        6,923,641           6,534,498
            Long-Term receivables                                        7,230,988           6,974,242
            Patents, net                                                 2,834,568           2,905,870
            Deferred charges, net                                          417,102             503,545
            Goodwill, net                                                6,341,298           6,540,990
            Other assets                                                 2,959,644           2,877,616
                                                                      ------------        ------------
               Total                                                  $192,526,510        $182,528,399
                                                                      ============        ============

LIABILITIES AND STOCKHOLDER'S EQUITY
------------------------------------

CURRENT LIABILITIES:
            Notes payable                                             $ 11,403,243        $ 14,859,567
            Accounts payable                                            24,637,400          23,716,251
            Accrued expenses                                             2,028,231           1,903,444
                                                                      ------------        ------------

            TOTAL CURRENT LIABILITIES                                   38,068,874          40,479,262

Notes payable and other liabilities                                      4,024,388           4,458,650
                                                                      ------------        ------------
            Convertible notes-secured                                    3,662,900           3,662,900
                                                                      ------------        ------------
            Convertible notes-unsecured                                 17,397,200           8,450,000
                                                                      ------------        ------------
            COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY
            Common stock par value $.005 per share
            paid in capital.  Issued and outstanding
            78,443,117 and 76,481,666 shares respectively.             199,752,404         196,039,793

            Accumulated deficit                                        (70,379,256)        (70,562,206)
                                                                      ------------        ------------
            Total stockholders' equity                                 129,373,148         125,477,587
                                                                      ------------        ------------
            Total                                                     $192,526,510        $182,528,399
                                                                      ============        ============
</TABLE>
     See accompanying notes to condensed consolidated financial statements.

                                       2
<PAGE>
 
                      AURA SYSTEMS, INC. AND SUBSIDIARIES
                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                  (UNAUDITED)
<TABLE>
<CAPTION>
                                       FOR THE THREE MONTHS ENDED MAY 31,
                                       ----------------------------------

                                              1997                1996
                                            --------            --------
<S>                                         <C>                 <C>

NET REVENUES                                 $27,415,997         $22,124,432

     Cost of goods and overhead               20,065,830          15,630,526
                                             -----------         -----------

GROSS PROFIT                                   7,350,167           6,493,906
                                             -----------         -----------

EXPENSES

     General and administrative                5,422,254           4,385,327

     Research and development                    878,914           1,462,288
                                             -----------         -----------

     Total costs and expenses                  6,301,168           5,847,615
                                             -----------         -----------

INCOME FROM OPERATIONS                         1,048,999             646,291

OTHER (INCOME) AND  EXPENSE

     Interest income                             (19,884)           (105,598)

     Interest expense                            885,933             146,153
                                             -----------         -----------

NET INCOME                                   $   182,950         $   605,736
                                             -----------         -----------

NET INCOME PER SHARE                               $.002                $.01
                                             ===========         ===========

WEIGHTED AVERAGE SHARES USED TO
COMPUTE NET INCOME PER SHARE                  77,089,293          62,720,093
                                             ===========         ===========
</TABLE>

     See accompanying notes to condensed consolidated financial statements.

                                       3
<PAGE>
 
                      AURA SYSTEMS, INC. AND SUBSIDIARIES
                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (UNAUDITED)
<TABLE>
<CAPTION>
                                                                FOR THE THREE MONTHS ENDED MAY 31,
                                                               ----------------------------------
                                                                       1997                1996
                                                                     --------            ---------
<S>                                                                  <C>                 <C>

NET CASH (USED) IN OPERATIONS                                         $(7,514,069)        $(13,566,652)
                                                                      -----------         ------------
CASH FLOWS FROM INVESTING ACTIVITIES

     Purchase of property and equipment                                (4,928,099)            (740,477)
                                                                      -----------         ------------

     NET CASH PROVIDED BY (USED) IN INVESTING ACTIVITIES               (4,928,099)            (740,477)
                                                                      -----------         ------------
CASH FLOWS FROM FINANCING ACTIVITIES:

     Net proceeds from borrowings                                      (3,456,324)           1,016,758

     Proceeds from issuance of convertible notes payable               15,000,000            1,000,000

     Repayment of debt                                                 (2,834,262)            (297,190)

     Net proceeds from sale of stock                                           --            1,501,500

     Proceeds from exercise of stock options                                   --               35,000
                                                                      -----------         ------------

     NET CASH PROVIDED  (USED) BY FINANCING ACTIVITIES                  8,709,414            3,256,068
                                                                                          ------------

     NET INCREASE (DECREASE) IN CASH                                   (3,732,754)         (11,051,061)

Cash and cash equivalents at beginning of year                          7,112,354           21,900,364
                                                                      -----------         ------------

CASH AND CASH EQUIVALENTS AT END OF PERIOD                            $ 3,379,600         $ 10,849,303
                                                                      ===========         ============
Supplemental disclosures of cash flow information:
          Cash paid during the period for:
               Interest                                               $   760,123         $     80,153
               Income tax                                                   6,400                  800
                                                                      ===========         ============
</TABLE>

Supplemental disclosure of noncash investing and financing activities:

During the quarter ended May 31, 1996, the Company acquired MYS Corp. for stock
valued at $2,000,000.

In the quarter ended May 31, 1997, $3,652,800 of convertible notes payable were
converted into common stock.

     See accompanying notes to condensed consolidated financial statements.

                                       4
<PAGE>
 
                              AURA SYSTEMS, INC.
                        NOTES TO CONDENSED CONSOLIDATED
                             FINANCIAL STATEMENTS
                                  (UNAUDITED)

1)        MANAGEMENT OPINION

          The condensed consolidated  financial statements include the accounts
of Aura  Systems, Inc. ("the Company") and subsidiaries from the dates of
acquisition.  All material inter-company balances and inter-company transactions
have been eliminated.

          In the opinion of management, the accompanying condensed consolidated
financial statements reflect all adjustments (which include only normal
recurring adjustments) and reclassifications for comparability necessary to
present fairly the financial position and results of operations as of and for
the three months ended May 31, 1997.

2)        CAPITAL

          In the quarter ended May 31, 1997, $3,652,800 of convertible notes
were converted into common stock of the Company.  In the quarter ended May 31,
1996, options to purchase 10,000 shares of common stock were exercised resulting
in proceeds of $35,000.  Additionally in the quarter ended May 31, 1996 the
Company received proceeds of $1,501,500 from the sale of common stock.

3)        SIGNIFICANT CUSTOMERS

          The Company sold sound related products and computer related products
to four significant customers during the quarter ended May 31, 1997.  Sales of
speakers to Radio Shack accounted for approximately $4.5 million in the quarter
ended May 31, 1997 as compared to approximately $4.1 million in the prior year
comparable quarter.  Sales of communication and multimedia products to major
mass merchandisers Best Buy, Circuit City and Computer City accounted for
approximately $7.0 million in the quarter ended May 31, 1997.  There were no
sales to the above customers in the prior year comparable quarter.  Sales of
computer monitors to a single unrelated party in the three months ended May 31,
1996 totalled approximately $5.8 million.  There were no sales to this customer
in the current year.

          None of the above customers are related or affiliated with the Company
or any other customers of the Company.

          The Company has no reason to believe that sales to any of the current
year customers will not continue.

4)        CONTINGENCIES

          The Company is engaged in various legal actions listed below.  To the
extent that judgment has been rendered, appropriate provision has been made in
the financial statements.

          Barovich/Chiau v. Aura
          ----------------------

          In May, 1995 two lawsuits naming Aura, certain of its directors and
executive officers and a former executive officer as defendants, were filed in
the United States District Court for the Central District of California (Case
Nos. CV-95-3296).  Both complaints (the "Complaints") purported to be securities
class actions on behalf of all 

                                       5
<PAGE>
 
persons who purchased common stock of Aura during the period from May 28, 1993
through January 17, 1995, inclusive (the "Class Period").  The Complaints
alleged that as a result of false and misleading information disseminated by the
defendants, the market price of Aura's common stock was artificially inflated
during the Class Period.

          On February 16, 1996, the Company filed its motion for summary
judgment which was granted on April 15, 1996. Judgment in favor of the Company
and all defendants was entered on April 16, 1996, thereby dismissing the action.
Plaintiff's thereafter filed a Notice of Appeal to the judgment on May 16, 1996
which is pending before the United States Court of Appeals.

          Morganstein v. Aura
          -------------------

          On April 28, 1997, a lawsuit naming Aura, certain of its directors and
executive officers, and the Company's independent accounting firm, was filed in
the United States District Court for the Central District of California (Case
No. 97-3103).  It purports to be a securities class action on behalf of all
persons who purchased common stock of Aura during the period from January 18,
1995 and April 25, 1997, inclusive (the "Class Period").  The complaint alleges
that as a result of false and misleading information disseminated by the
defendants, the market price of Aura's common stock was artificially inflated
during the Class Period.  It contains allegations which assert that the Company
violated federal securities laws by selling Aura Common stock at discounts to
the prevailing U.S. market price under Regulation S without informing Aura's
shareholders or the public at large.

          The Company believes the complaint is frivolous and is moving to
dismiss the action. Further, the Company intends to pursue all of its available
remedies in this matter, and sanctions if warranted against the plaintiff and
the attorneys, one of whom filed such a strike suit against the Company in the
past.

          Securities and Exchange Commission Settlement
          ---------------------------------------------

          In October, 1996, the Securities and Exchange Commission
("Commission") issued an order (Securities Act Release No. 7352) instituting an
administrative proceeding against Aura Systems, Zvi Kurtzman, and an Aura former
officer. The proceeding was settled on consent of all the parties, without
admitting or denying any of the Commission's findings.  In its order, the
Commission found that Aura and the others violated the reporting, recordkeeping
and anti-fraud provisions of the securities laws in 1993 and 1994 in connection
with its reporting on two transactions in reports previously filed with the
Commission.  The Commission's order directs that each party cease and desist
from committing or causing any future violation of these provisions.

          The Commission did not require Aura to restate any of the previously
issued financial statements or otherwise amend any of its prior reports filed
with the Commission.  Also, the Commission did not seek any monetary penalties
from Aura, Mr. Kurtzman or anyone else.  Neither Mr. Kurtzman nor anyone else
personally benefited in any way from these events.  For a more complete
description of the Commission's Order, see the Commission's release referred to
above.

          Other Litigation
          ----------------

          The Company is also engaged in other legal actions arising in the
ordinary course of business.  In the opinion of management based upon the advice
of counsel, the ultimate resolution of these matters will not have a material
adverse effect.  Therefore, no provision for these matters has been made in the
Company's  consolidated financial statements.

                                       6
<PAGE>
 
                     MANAGEMENT'S DISCUSSION AND ANALYSIS
               OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

          RESULTS OF OPERATIONS

          For the three months ended May 31, 1997, the Company earned $182,950
on revenue of $27,415,997 as compared to earnings of $605,736 on revenue of
$22,124,432 in the comparable prior year period.  The increase in revenue is
attributable primarily to an increase in sales from the Company's NewCom
subsidiary as a result of their expanding customer base which includes the major
electronics retailers such as Circuit City, Best Buy, Computer City and others.

          Sales of speakers to Radio Shack accounted for approximately $4.5
million or 16.4% in the quarter ended May 31, 1997 as compared to approximately
$4.1 million or 18.6% in the prior year comparable quarter.  Sales of
communication and multimedia products to major mass merchandisers Best Buy,
Circuit City and Computer City accounted for approximately $7.0 million or 25.5%
in the quarter ended May 31, 1997.  There were no sales to the above customers
in last year comparable quarter.  Sales of computer monitors to a single
unrelated party in the three months ended May 31, 1996 totalled approximately
$5.8 million or 26.2%.  There were no sales to this customer in the current
year.

          None of the above customers are related or affiliated with the
Company or any other customers of the Company.

          The Company has no reason to believe that sales to any of the
current year customers will not continue.

          Cost of goods and overhead increased by $4.4 million to $20.1 million
or 73% for the three months ended May 31, 1997 as compared to $15.6 million or
70.6% for the three months ended May 31, 1996.  This increase was mostly due to
price fluctuation in products bought by the Company.

          The increase in general and administrative expenses of $1.0 million to
$5.4 million or 19.8% as compared to $4.4 million or 19.8% in the prior year
equivalent quarter results primarily from an increase in personnel and an
increased level of advertising support for the distributors and retail customers
of the Company's NewCom subsidiary.  As a percentage general and administrative
expenses remained constant.

          Research and development expense decreased by $583,374 to $878,914 in
the three months ended May 31, 1997, as the Company focused its attention in the
sales area and in readying its new products for manufacturing.

          Interest expense increased by $739,780 to $885,933 from $146,153 in
the prior year period due to a premium of $600,000 paid on the repurchase of
convertible notes in the current year quarter, and to higher levels of borrowing
over the prior year.

          LIQUIDITY AND CAPITAL RESOURCES

          In the quarter ended May 31, 1997, the level of cash decreased to
$3,379,600 from $7,112,354 at February 28, 1997.  Inventories increased by
$3,324,708 as the Company built inventory to prepare for increasing shipments of
the Company's speakers, Bass Shakers, multimedia kits, modems and sound cards.

                                       7
<PAGE>
 
          Cash flows used in operations decreased by $6,052,583 as compared to
the prior year quarter.  The Company's working capital increased by $7,588,725
to $69,899,440 from the fiscal year end level, while the current ratio improved
to 2.84:1 from 2.54:1.

          In the quarter ended May 31, 1997, the Company received proceeds of
$15,000,000 from the issuance of convertible notes payable.  The Company also
redeemed $2,400,000 of previously issued convertible notes.  In the quarter
ended May 31, 1996, financing activities contributed $35,000 from the exercise
of options to purchase 10,000 shares of stock, additionally, the Company
received proceeds of $1,501,500 from the sale of common stock and also received
proceeds of $1,000,000 from the issuance of convertible notes payable.

          In the past, the Company's cash flow generated from operations has not
been sufficient to completely fund its working capital needs.  Accordingly, the
Company has also relied upon external sources of financing to maintain its
liquidity, principally private and bank indebtedness and equity financing.  No
assurances can be provided that these funding sources will be available in the
future.  The Company expects that, with the increasing shipments of the Bass
Shakers, speakers, multimedia kits, modems and sound cards, cash flows and
results of operations should be favorably impacted in the future.


ITEM 3.   CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF
          THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

          The Company desires to take advantage of the new "safe harbor"
provisions of the Private Securities Litigation Reform Act of 1995 and hereby
invokes such provisions.  The Company wishes to caution readers that important
factors, in some cases, have affected, and in the future could affect, the
Company's actual results and could cause the Company's actual consolidated
results for the first quarter of Fiscal 1997, and beyond, to differ materially
from those expressed in any forward-looking statements made by, or on behalf of
the Company.

          Such factors include, but are not limited to, the following risks and
contingencies: Changed business conditions in the consumer electronic and
automotive industries and the overall economy; increased marketing and
manufacturing competition and accompanying prices pressures; contingencies in
initiating production at new factories along with their potential
underutilization, resulting in production inefficiencies and higher costs and
start-up expenses and; inefficiencies, delays and increased depreciation costs
in connection with the start of production in new plants and expansions.

          Relating to the above are potential difficulties or delays in the
development, production, testing and marketing of products, including, but not
limited to, a failure to ship new products and technologies when anticipated.
There might exist a difficulty in obtaining raw materials, supplies, power and
natural resources and any other items needed for the production of Company and
another products, creating capacity constraints limiting the amounts of orders
for certain products and thereby causing effects on the Company's ability to
ship its products.  Manufacturing economies may fail to develop when planned,
products may be defective and/or customers may fail to accept them in the
consumer marketplace.

          In addition to the above, risks and contingencies may exist as to the
amount and rate of growth in the Company's selling, general and administrative
expenses, and the impact of unusual items resulting from the Company's ongoing
evaluation of its business strategies, asset valuations and organizational
structures.  Furthermore, any financing or other financial incentives by the
Company under or related to major infrastructure 

                                       8
<PAGE>
 
contracts could result in increased bad debt or other expenses or fluctuation of
profit margins from period to period.  The focus by some of the Company's
businesses on any large system order could entail fluctuating results from
quarter to quarter.

          The effects of, and changes in, trade, monetary and fiscal policies,
laws and regulations, other activities of governments, agencies and similar
organizations, and social and economic conditions, such as trade restrictions
impose yet other constraints on any company statements.  The cost and other
effects of legal and administrative cases and proceedings present impose another
factor which may or may not have an impact.

                                       9
<PAGE>
 
PART II - OTHER INFORMATION



ITEM 1    Legal Proceedings

          For information regarding pending legal proceedings, see Note 8 to the
          Company's Condensed Consolidated Financial Statements appearing
          elsewhere herein.

ITEM 6    Exhibits and Reports on Form 8-K
          --------------------------------

          a)   Exhibits:
          See Exhibit Index

          b)   Reports On Form 8-K:
          None

                                       10
<PAGE>
 
                                  SIGNATURES


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



                                                 AURA SYSTEMS, INC.
                                                 ------------------
                                                    (Registrant)



Date:     JULY 14, 1997           By:  /s/Steven C. Veen
          -------------                -----------------------------------------
                                                  STEVEN C. VEEN
                                               Senior Vice President
                                              Chief Financial Officer
                                  (Principal Financial and Accounting Officer)

                                       11
<PAGE>
 
                               INDEX TO EXHIBITS
 
  Exhibit                                                       Sequential
  Number                                                         Page No
                      Article 5, Financial Data Schedule
  EX-27