Unassociated Document

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10 – K/A

AMENDMENT NO. 1

x	ANNUAL REPORT PURSUANT TO 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended June 30, 2008

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________________________ to _______________________

Commission file number 005-80848

AuraSound, Inc.

(Name of small business issuer in its charter)

Nevada	20-5573204
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

11839 East Smith Avenue Santa Fe Springs, California	90670
(Address of principal executive offices)	(Zip Code)

Issuer's telephone number: (562) 447-1780

Securities registered under Section 12(b) of the Exchange Act: None

Securities registered under Section 12(g) of the Exchange Act:

Common Stock, $.001 Par Value

(Title of Class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ¨ Yes ¨ No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ¨ Yes ¨ No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the 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. x Yes o No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated file or a smaller reporting company.

Large accelerated filer ¨	Accelerated filer ¨

Non-accelerated filer o (Do not check if a smaller reporting company)	Smaller reporting company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter. As of December 31, 2007,the aggregate market value of the registrant’s voting and non-voting common equity held by non-affiliates was approximately $16,390,000.

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date. As of September 15, 2008, the issuer had 28,071,972 shares of its common stock, $0.01 par value issued and outstanding.

Documents incorporated by reference. List hereunder the following documents if incorporated by reference and the Part of the Form 10-K (e.g., Part I, Part II, etc.) into which the document is incorporated: (1) Any annual report to security holders; (2) Any proxy or information statement; and (3) Any prospectus filed pursuant to Rule 424(g) or (c) under the Securities Act of 1933. The listed documents should be clearly described for identification purposes. None

EXPLANATORY NOTE

On February 12, 2009 AuraSound, Inc. received a letter from the Securities and Exchange Commission (the “SEC”) regarding the company’s Form 10-K for the period ended June 30, 2008 (the “Original Report”). We have responded to the SEC’s comments in this amendment number 1 (the “Amendment”). The primary purpose of the Amendment is to

revise the disclosure included at Item 3 (Legal Proceedings);

provide a revised audit report from Kabani & Company, the independent registered public accounting firm responsible for auditing our financial statements,

provide a revised consolidated balance sheet to include information at June 30, 2007;

revise Note 1 to our consolidated financial statements to include a discussion of paragraph 17 of SFAS 141; and

provide a corrected certification pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 19347 referencing Mr. Arthur Liu as our Chief Financial Officer.

The Amendment includes all of the information contained in the Original Report, and we have made no attempt in the Amendment to modify or update the disclosures presented in the Original Report, except as identified above.

The disclosures in the Amendment continue to speak as of the date of the Original Report, and do not reflect events occurring after the filing of the Original Report. Accordingly, the Amendment should be read in conjunction with our other filings made with the Securities and Exchange Commission subsequent to the filing of the Original Report, including any amendments to those filings. The filing of the Amendment shall not be deemed to be an admission that the Original Report, when made, included any untrue statement of a material fact or omitted to state a material fact necessary to make a statement not misleading.

ITEM 3. LEGAL PROCEEDINGS.

On May 20, 2008, a complaint was filed in the Los Angeles Superior Court, number BC 391141, by Melvin Gagerman, Arthur Schwartz, Zvi Kurtzman, Cipora LaVut, Neal Kaufman and Steve Veen against Arthur Liu, AuraSound, Inc., a California corporation, Algo Technology, Inc., Algo Sound Inc., Gemini Partners and JP Group LLC. The plaintiffs allege breach of a verbal agreement by Arthur Liu and other causes of action. The complaint alleges that the plaintiffs were entitled to become shareholders of AuraSound, Inc. and/or Algo Sound Inc. as compensation for services rendered in connection with a proposed private placement. The complaint alleges that the shares were issued and then placed in escrow pending the successful closing of such private placement. The complaint further alleges that an agreement was reached whereby plaintiffs agreed to accept the amount of $2,243,815.97 in liu of stock, but that such amount was never paid. The complaint prays for general damages in that amount plus punitive and exemplary damages and interest. The Company believes that the complaint is without merit and intends to vigorously defend the action. Other than this action, we are not currently a party to any legal proceedings, the adverse outcome of which, in management’s opinion, individually or in the aggregate, would have a material adverse effect on our results of operations or financial position.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

AURASOUND, INC.

CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2008

Index to Consolidated Financial Statements

Reports of Independent Registered Public Accounting Firms	F1

Consolidated Financial Statements:
Consolidated Balance Sheet as of June 30, 2008 and June 30, 2007	F2
Consolidated Statements of Operations for the Years Ended June 30, 2008 and 2007	F3
Consolidated Statements of Stockholders’ Equity/Deficit for the Years Ended June 30, 2008 and 2007	F4
Consolidated Statements of Cash Flows for the Years Ended June 30, 2008 and 2007	F5

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders

AuraSound, Inc.

We have audited the accompanying consolidated balance sheets of AuraSound, Inc. (a Nevada corporation) as of June 30, 2008 and June 30, 2007 and the related consolidated statements of operations, stockholder’s (deficit) and cash flows for the years ended June 30, 2008 and 2007. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of AuraSound, Inc. as of June 30, 2008 and June 30, 2007 and the related consolidated statements of operations, stockholder’s (deficit) and cash flows for the years ended June 30, 2008 and 2007 in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. During the year ended June 30, 2008, the Company incurred net losses of $26,458,932. In addition, the Company had negative cash flow from operating activities amounting to $3,258,289 for the year ended June 30, 2008. These factors, among others, as discussed in Note 11 to the consolidated financial statements, raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 11. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ Kabani & Company, Inc.

Certified Public Accountants

Los Angeles, California

September 25, 2008

F-1

AURASOUND, INC.

(FORMERLY HEMCURE, INC.)

CONSOLIDATED BALANCE SHEET

	June 30, 2008			June 30, 2007
Assets
Current Assets
Cash and cash equivalents	$	72,559		$	1,610,952
Restricted cash		2,000,000			2,000,000
Trade accounts receivable, net		301,562			532,897
Inventories - Net		365,444			148,422
Other assets		99,672			-
Total current assets		2,839,237			4,292,271

Property and equipment, net		100,832			-
Intangible assets:
Goodwill		-			7,000,451
Proprietary technology		-			10,341,136
Customer relationships		-			4,562,290
Trade Marks		-			664,797
Total intangible assets		-			22,568,674
Total Assets	$	2,940,069		$	26,860,945

Liabilities and Stockholders' Deficit
Current Liabilites:
Accounts payable	$	924,612		$	345,062
Accrued expenses		301,663			934,772
Line of credit		2,000,000			-
Factoring payable		145,477			-
Due affiliate		99,132			-
Notes payable		-			688,000
Note payable-related party		1,173,029			2,544,601
Total Liabilities		4,643,913			4,512,435

Commitments and Contingencies		-			-

Stockholder's Deficit
Preferred Stock, $.01 par value, 20,000,000 shares authorized and none issued and outstanding		-			-
Common Stock, $.01 par value, 100,000,000 shares authorized, 28,071,972 issued and outstanding		280,720			20,000
Additional paid-in-capital		31,044,476			5,718,572
Shares to be issued		-			23,180,046
Accumulated deficit		(33,029,040	)		(6,570,108	)
Total Stockholder's Deficit		(1,703,844	)		22,348,510

Total Liabilities and Stockholders' Deficit	$	2,940,069		$	26,860,945

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

F-2

AURASOUND, INC.

(FORMERLY HEMCURE, INC.)

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED JUNE 30, 2008 AND 2007

	2008			2007
Net Revenue	$	1,888,692		$	208,988

Cost of sales		2,057,878			307,508

Gross Loss		(169,186	)		(98,520	)

Operating expenses
Research & development		1,217,995			51,699
Selling, general and administrative expenses		4,251,159			565,123
Impairment of intangible assets		20,395,215			-
Advance to vendors written off		341,406			3,066,476
Total operating expenses		26,205,775			3,683,298

Loss from operations		(26,374,961	)		(3,781,818	)

Other Expense
Interest expense (net)		83,971			27,442
Net Loss	$	(26,458,932	)	$	(3,809,260	)

Basic & diluted net income (loss) per share	$	(1.18	)	$	(4.65	)

Weighted average shares of share capital outstanding - basic & diluted		22,478,758			818,877

Weighted average number of shares used to compute basic and diluted loss per share is the same since the effect of dilutive securities is anti-dilutive

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

F-3

AURASOUND, INC.

(FORMERLY, HEMCURE, INC.)

CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY(DEFICIT)

FOR THE YEARS ENDED JUNE 30, 2008 AND 2007

	Capital Stock
	Shares		Amount		Paid In Capital		Shares to be issued			Accumulated Deficit			Total Stockholder's Equity(Deficit)
Balance June 30, 2006		563,695	$	5,637	$	2,754,654	$	-		$	(2,760,848	)	$	(557	)

Issuance of shares for services		206,829		2,068		204,761		-			-			206,829
Issuance of shares for acquisition		-		-		-		11,505,305			-			11,505,305
Private placement shares		-		-		-		11,674,741			-			11,674,741
Warrants granted for acquisition		-		-		1,541,976		-			-			1,541,976
Issued for the merger		1,229,476		12,295		1,217,181		-			-			1,229,476
Net loss for the fiscal year ended June 30, 2007		-		-		-		-			(3,809,260	)		(3,809,260	)
Balance June 30, 2007		2,000,000	$	20,000	$	5,718,572	$	23,180,046		$	(6,570,108	)	$	22,348,510

Issuance of shares committed in prior year		11,505,305		115,053		11,390,252		(11,505,305	)		-			-
Private placement shares-cash received in prior year		12,900,000		129,000		11,452,319		(11,674,741	)		-			(93,422	)
Issuance for exchange of debt		1,666,667		16,667		2,483,333		-			-			2,500,000
Net loss for the year ended June 30, 2008		-		-		-		-			(26,458,932	)		(26,458,932	)
Balance June 30, 2008		28,071,972	$	280,720	$	31,044,476	$	-		$	(33,029,040	)	$	(1,703,844	)

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

F-4

AURASOUND, INC

(FORMERLY, HEMCURE, INC.)

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED JUNE 30, 2008 AND 2007

	2008			2007
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(26,458,932	)	$	(3,809,260	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		2,181,314			181,120
Provision for bad debt		96,170			74,155
Provision for obsolete inventory		78,645			-
Impairment of intangible assets		20,395,215			-
Issuance of stock for services		-			206,829
(Increase) / decrease in assets:
Accounts receivable		135,165			(103,319	)
Inventories		(295,666	)		33,843
Other current assets		(99,672	)		-
Increase / (decrease) in liabilities:
Accounts payable and accrued expenses		709,473			(465,914	)
Total adjustments		23,200,643			(73,285	)
Net cash used in operations		(3,258,289	)		(3,882,545	)
CASH FLOWS FROM INVESTING ACTIVITIES
Restricted cash		-			(2,000,000	)
Acquisition of subsidiary		-			(400,000	)
Investment in fixed assets		(108,688	)
Net cash used in investing activities		(108,688	)		(2,400,000	)
CASH FLOWS FROM FINANCING ACTIVITIES
Advances on credit facility		2,145,477			-
Proceeds of related party notes payable		365,397			-
Payment on loans payable		(688,000	)		(3,781,744	)
Proceeds from affiliate		99,132			-
Issuance of shares		-			11,674,741
Private placement fee		(93,422	)		-
Net cash provided by financing activities		1,828,584			7,892,997
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(1,538,393	)		1,610,452
CASH AND CASH EQUIVALENTS, BEGINNING BALANCE		1,610,952			500
CASH AND CASH EQUIVALENTS, ENDING BALANCE	$	72,559		$	1,610,952
SUPPLEMENTAL DISCLOSURES:
Cash paid during the year for:
Interest payments	$	78,074		$	156,637
Income tax payments	$	-		$	-
Non-cash transactions
Issuance of common stock to be issued for purchase of business	$	-		$	11,505,305
Issuance of common stock to facilitators of acquisition	$	-		$	1,229,476
Issuance of warrants relating to purchase of business	$	-		$	1,541,976
Shares issued for related party notes payable	$	2,500,000		$	-

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

F-5

AURASOUND, INC.

(FORMERLY, HEMCURE, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - ORGANIZATION AND OPERATIONS

General

Hemcure, Inc. (the Company or we/us/our) was incorporated under the laws of the state of Minnesota in 1986. On September 8, 2006, our Company was reorganized by re-domiciling to the state of Nevada pursuant to a merger with Hemcure, Inc., a Nevada corporation and the adoption of Nevada Articles of Incorporation and By-laws. On June 7, 2007, we acquired AuraSound, Inc. ("AuraSound"). Aura Sound, a California corporation, was founded on July 28, 1999 to engage in the development, commercialization, and sales of audio products, sound systems, and audio components using electromagnetic technology. The Company, through it’s acquisition of Aura Sound, became an operating entity and is no longer a development stage entity. On February 12, 2008 the Company changed its name from Hemcure, Inc. to AuraSound, Inc.

Basis of Presentation

Prior to June 7, 2007, the Company did not engage in any operations and was dedicated to locating and consummating an acquisition, including the requisite fund raising efforts. On June 7, 2007, the Company completed a $12.9 million private placement and acquired AuraSound, Inc. in a stock acquisition. The 11,405,305 common stock issued for the acquisition has been valued at $1.00 per share, the same as the per share price of the private placement. The acquisition was accounted for as a purchase in accordance with FAS 141. The operating results for the period ended June 30, 2007 include the operating results of AuraSound, Inc. for the period between June 7, 2007 (the acquisition date) and June 30, 2007. The operating results for the period ended June 30, 2008 include the operating results of AuraSound, Inc. for the full twelve month period.

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation:

The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, AuraSound, Inc. All material inter-company accounts have been eliminated in consolidation.

Use Of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the combined financial statements and disclosures made in the accompanying notes. Actual results could differ from those estimates.

Cash and Cash Equivalents

Cash and cash equivalents include cash in hand and cash in time deposits, certificates of deposit and all highly liquid debt instruments with original maturities of three months or less.

Accounts Receivable

The Company maintains an allowance for uncollectible accounts receivable to estimate the risk of extending credit to customers and distributors. The allowance is estimated based on the customer or distributor's compliance with our credit terms, the financial condition of the customer or distributor and collection history where applicable. Additional allowances could be required if the financial condition of our customers or distributors were to be impaired beyond our estimates. As of June 30, 2008 and 2007, the allowance for doubtful accounts amounted to $255,864 and $159,694 respectively.

Inventories

Inventories are valued at the lower of cost (first-in, first-out) or market. Appropriate consideration is given to deterioration, obsolescence and other factors in evaluating net realizable value. As of June 30, 2008 the allowance for obsolescence amounted to $78,645. There was no allowance for obsolescence as of June 30, 2007.

F-6

AURASOUND, INC.

(FORMERLY, HEMCURE, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Property, Plant, and Equipment

Property, plant, and equipment, including leasehold improvements, are recorded at cost, less accumulated depreciation and amortization. Depreciation is provided using the straight-line method over the estimated useful lives of the respective assets as follows:

Buildings	40 years
Machinery and equipment	5 to 10 years
Furniture and fixtures	7 years

Improvements to leased property are amortized over the lesser of the life of the lease or the life of the improvements. Amortization expense on assets acquired under capital leases is included with depreciation and amortization expense on owned assets. As of June 30, 2008, the Company had net property, plant and equipment in the amount of $100,832 consisting of the following:

Machinery & Equipment	$	2,850
Tooling		105,193
Computer Equipment		645
Accumulated Depreciation		(7,856	)
Total	$	100,832

The Company had no property, plant and equipment at June 30, 2007.

The Company utilizes a facility leased from a related party.

Maintenance and minor replacements are charged to expense as incurred. Gains and losses on disposals are included in the results of operations.

Goodwill

Goodwill represents the excess of the purchase price over the fair value of the identifiable assets and liabilities acquired as a result of the Company’s acquisitions of interests in its subsidiaries. Under Statement of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill and Other Intangible Assets (“SFAS 142”),” goodwill is no longer amortized, but tested for impairment upon first adoption and annually, thereafter, or more frequently if events or changes in circumstances indicate that it might be impaired. The Company assesses goodwill for impairment periodically in accordance with SFAS 142. As a result of such assessment at June 30, 2008, Management determined that goodwill had been impaired due to insufficient undiscounted future cash flows to assure recovery of the carrying value of such assets (see note 13).

Intangible Assets

The Company applies the criteria specified in SFAS No. 141, “Business Combinations” to determine whether an intangible asset should be recognized separately from goodwill. Intangible assets acquired through business acquisitions are recognized as assets separate from goodwill if they satisfy either the “contractual-legal” or “separability” criterion. Per SFAS 142, intangible assets with definite lives are amortized over their estimated useful life and reviewed for impairment in accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-lived Assets.” Intangible assets, such as purchased technology, trademark, customer list, user base and non-compete agreements, arising from the acquisitions of subsidiaries and variable interest entities are recognized and measured at fair value upon acquisition. Intangible assets are amortized over their estimated useful lives from one to ten years. In accordance with SFAS 144, an evalution was made of the Company’s intangible assets at June 30, 2008 and it was determined the such assets had been impaired due to insufficient undiscounted future cash flows to assure recovery of the carrying value of such assets. At June 30, 2008, the Company impaired the following:

Proprietary Technology	$	9,034,886
Customer relationships		3,791,198
Trade name assets		568,680
Total	$	13,394,765

Valuation of Long-Lived Assets

Effective January 1, 2002, the Company adopted Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS 144”), which addresses financial accounting and reporting for the impairment or disposal of long-lived assets and supersedes SFAS No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of,” and the accounting and reporting provisions of APB Opinion No. 30, “Reporting the Results of Operations for a Disposal of a Segment of a Business.” The Company periodically evaluates the carrying value of long-lived assets to be held and used in accordance with SFAS 144. SFAS 144 requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amounts. In that event, a loss is recognized based on the amount by which the carrying amount exceeds the fair market value of the long-lived assets. Loss on long-lived assets to be disposed of is determined in a similar manner, except that fair market values are reduced for the cost of disposal.

F-7

AURASOUND, INC.

(FORMERLY, HEMCURE, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk are cash, accounts receivable and other receivables arising from our normal business activities. We place our cash in what we believe to be credit-worthy financial institutions. We have a diversified customer base. We control credit risk related to accounts receivable through credit approvals, credit limits and monitoring procedures. The Company routinely assesses the financial strength of its customers and, based upon factors surrounding the credit risk, establishes an allowance, if required, for uncollectible accounts and, as a consequence, believes that its accounts receivable credit risk exposure beyond such allowance is limited.

Revenue Recognition

The Company’s revenue recognition policies are in compliance with Staff Accounting Bulletin (SAB) 104. Sales revenue is recognized at the date of shipment to customers when a formal arrangement exists, the price is fixed or determinable, the delivery is completed, no other significant obligations of the Company exist and collectibility is reasonably assured.

Advertising Expense

Advertising costs are charged to expense as incurred and were immaterial for the years ended June 30, 2008 and 2007.

Research and Development

Research and development costs are expensed as incurred.

Income Taxes

The Company utilizes SFAS No. 109, "Accounting for Income Taxes," which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax basis of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

AuraSound has significant income tax net operating losses carried forward from prior years. Due to the change in ownership of more than fifty percent, the amount of NOL which may be used in any one year will be subject to a restriction under section 382 of the Internal Revenue Code. Due to the uncertainty of the realizability of the related deferred tax asset, a reserve equal to the amount of deferred income taxes has been established at June 30, 2008.

Fair Value of Financial Instruments

Statement of Financial Accounting Standard No. 107, “Disclosures about Fair Value of Financial Instruments”, requires that the Company disclose estimated fair values of financial instruments. The carrying amounts reported in the statements of financial position for assets and liabilities qualifying as financial instruments are a reasonable estimate of fair value.

Segment Reporting

Statement of Financial Accounting Standards No. 131 (“SFAS 131”), “Disclosure about Segments of an Enterprise and Related Information” requires use of the “management approach” model for segment reporting. The management approach model is based on the way a company’s management organizes segments within the company for making operating decisions and assessing performance. Reportable segments are based on products and services, geography, legal structure, management structure, or any other manner in which management disaggregates a company. SFAS 131 has no effect on the Company’s financial statements as the Company consists of one reportable business segment as of June 30, 2008 and 2007.

F-8

AURASOUND, INC.

(FORMERLY, HEMCURE, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Risks and Uncertainties

The Company is subject to substantial risks from, among other things, intense competition associated with the industry in general, other risks associated with financing, liquidity requirements, rapidly changing customer requirements, limited operating history and the volatility of public markets.

Contingencies

Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. Our management and legal counsel assess such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company’s legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought.

If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material would be disclosed.

Loss contingencies considered to be remote by management are generally not disclosed unless they involve guarantees, in which case the guarantee would be disclosed

Basic and diluted net loss per share

In accordance with SFAS No. 128, “Earnings Per Share,” the basic loss per common share is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding. Diluted loss per common share is computed similar to basic loss per common share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. Under this method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period. At June 30, 2008, the Company had 245,000 potentially dilutive warrant shares outstanding.

Stock-based compensation

The Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation”, which applies the fair-value method of accounting for stock-based compensation plans. In accordance with this standard, the Company accounts for stock-based compensation in accordance with Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees”.

In March 2000, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 44 (Interpretation 44), “Accounting for Certain Transactions Involving Stock Compensation.” Interpretation 44 provides criteria for the recognition of compensation expense in certain stock-based compensation arrangements that are accounted for under APB Opinion No. 25, “Accounting for Stock-Based Compensation”. Interpretation 44 became effective July 1, 2000, with certain provisions that were effective retroactively to December 15, 1998 and January 12, 2000. Interpretation 44 did not have any material impact on the Company’s financial statements.

In December 2004, the FASB issued FASB Statement No. 123R, "Share-Based Payment, an Amendment of FASB Statement No. 123" ("FAS No. 123R"). FAS No. 123R requires companies to recognize in the statement of operations the grant-date fair value of stock options and other equity-based compensation issued to employees. FAS No. 123R is effective beginning in the Company's first quarter of fiscal year ended June 30, 2007.

New Accounting Pronouncements

In September 2006, FASB issued SFAS 157 “Fair Value Measurements”. This Statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (“GAAP”), and expands disclosures about fair value measurements. This Statement applies under other accounting pronouncements that require or permit fair value measurements, the Board having previously concluded in those accounting pronouncements that fair value is the relevant measurement attribute. Accordingly, this Statement does not require any new fair value measurements. However, for some entities, the application of this Statement will change current practice. This Statement is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. Management is currently evaluating the effect of this pronouncement on the Company’s consolidated financial statements.

F-9

AURASOUND, INC.

(FORMERLY, HEMCURE, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

New Accounting Pronouncements (continued)

In September 2006, FASB issued SFAS 158 “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans—an amendment of FASB Statements No. 87, 88, 106, and 132(R)”. This Statement improves financial reporting by requiring an employer to recognize the over funded or under funded status of a defined benefit postretirement plan (other than a multiemployer plan) as an asset or liability in its statement of financial position and to recognize changes in that funded status in the year in which the changes occur through comprehensive income of a business entity or changes in unrestricted net assets of a not-for-profit organization. This Statement also improves financial reporting by requiring an employer to measure the funded status of a plan as of the date of its year-end statement of financial position, with limited exceptions. An employer with publicly traded equity securities is required to initially recognize the funded status of a defined benefit postretirement plan and to provide the required disclosures as of the end of the fiscal year ending after December 15, 2006. An employer without publicly traded equity securities is required to recognize the funded status of a defined benefit postretirement plan and to provide the required disclosures as of the end of the fiscal year ending after June 15, 2007. However, an employer without publicly traded equity securities is required to disclose the following information in the notes to financial statements for a fiscal year ending after December 15, 2006, but before June 16, 2007, unless it has applied the recognition provisions of this Statement in preparing those financial statements:

	1.	A brief description of the provisions of this Statement
	2.	The date that adoption is required
	3.	The date the employer plans to adopt the recognition provisions of this Statement, if earlier.

The requirement to measure plan assets and benefit obligations as of the date of the employer’s fiscal year-end statement of financial position is effective for fiscal years ending after December 15, 2008. The management is currently evaluating the effect of this pronouncement on the Company’s consolidated financial statements.

In July 2006, the FASB released FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109 (FIN 48)”. FIN 48 clarifies the accounting and reporting for uncertainties in income tax law. This interpretation prescribes a comprehensive model for the financial statement recognition, measurement, presentation and disclosure of uncertain tax positions taken or expected to be taken in income tax returns. This statement is effective for fiscal years beginning after December 15, 2006. Management is currently in the process of evaluating the expected effect of FIN 48 on our results of operations and financial position.

In February of 2007 the FASB issued SFAS 159, “The Fair Value Option for Financial Assets and Financial Liabilities—including an amendment of FASB Statement No. 115.” The statement permits entities to choose to measure many financial instruments and certain other items at fair value. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. The statement is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. Management is currently evaluating the effect of this pronouncement on the Company’s consolidated financial statements.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements”. This Statement amends ARB 51 to establish accounting and reporting standards for the noncontrolling (minority) interest in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. SFAS No. 160 is effective for the Company’s fiscal year beginning October 1, 2009. Management is currently evaluating the effect of this pronouncement on financial statements.

In March 2008, the FASB issued FASB Statement No. 161, Disclosures about Derivative Instruments and Hedging Activities. The new standard is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity’s financial position, financial performance, and cash flows. It is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. The new standard also improves transparency about the location and amounts of derivative instruments in an entity’s financial statements; how derivative instruments and related hedged items are accounted for under Statement 133; and how derivative instruments and related hedged items affect its financial position, financial performance, and cash flows. Management is currently evaluating the effect of this pronouncement on financial statements.

F-10

AURASOUND, INC.

(FORMERLY, HEMCURE, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

New Accounting Pronouncements (continued)

In December 2007, the FASB issued SFAS No. 141(R), “Business Combinations”. This Statement replaces SFAS No. 141, Business Combinations. This Statement retains the fundamental requirements in Statement 141 that the acquisition method of accounting (which Statement 141 called the purchase method) be used for all business combinations and for an acquirer to be identified for each business combination. This Statement also establishes principles and requirements for how the acquirer: a) recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any non-controlling interest in the acquiree; b) recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase and c) determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. SFAS No. 141(R) will apply prospectively to business combinations for which the acquisition date is on or after Company’s fiscal year beginning October 1, 2009. While the Company has not yet evaluated this statement for the impact, if any, that SFAS No. 141(R) will have on its consolidated financial statements, the Company will be required to expense costs related to any acquisitions after September 30, 2009.

In May of 2008, FASB issued SFASB No.162, “The Hierarchy of Generally Accepted Accounting Principles”. The pronouncement mandates the GAAP hierarchy reside in the accounting literature as opposed to the audit literature. This has the practical impact of elevating FASB Statements of Financial Accounting Concepts in the GAAP hierarchy. This pronouncement will become effective 60 days following SEC approval. The Company does not believe this pronouncement will impact its financial statements.

In May of 2008, FASB issued SFASB No. 163, “Accounting for Financial Guarantee Insurance Contracts-an interpretation of FASB Statement No. 60”. The scope of the statement is limited to financial guarantee insurance (and reinsurance) contracts. The pronouncement is effective for fiscal years beginning after December 31, 2008. The Company does not believe this pronouncement will impact its financial statements.

Reclassifications:

For comparative purposes, the prior year’s consolidated financial statements have been reclassified to conform with report classifications of the current year.

NOTE 3 - INVENTORIES

Inventories at June 30, 2008 and 2007 consisted of the following:

	2008			2007
Raw materials	$	10,050		$	16,338
Finished goods		434,039			132,084
Provision for obsolescence		(78,645	)		-
Total	$	365,444		$	148,422

NOTE 4 -ACCRUED EXPENSES

Accrued expenses consisted of the following as of June 30, 2008 and 2007:

		2008		2007
Accrued consulting fees	$	236,359	$	112,282
Accrued Interest		37,138		753,469
Accrued Payroll and others		28,166		69,021
Total	$	301,663	$	934,772

NOTE 5- DEBT AGREEMENTS & RESTRICTED CASH

Credit facility

Effective June 7, 2007, the Company entered into a one-year $12 million credit facility with Bank SinoPac pursuant to which a $10.0 million revolving accounts receivable facility and a $2 million fixed deposit credit facility were made available to the Company. Obligations under the agreement are secured by substantially all the assets of the Company. The accounts receivable facility, which may be used for working capital and other general corporate purposes bears interest at the rate of prime minus .5%. The letter of credit facility bears interest at the rate of TCD plus 1%. The credit facility is also subject to certain covenants and conditions and contains standard representations, covenants and events of default for facilities of this type. Occurrence of an event of default allows the lenders to accelerate the payment of the loans and/or terminate the commitments to lend, in addition to the exercise of other legal remedies, including foreclosing on collateral. The Company was not in compliance of certain covenants as of June 30, 2008. As of June 30, 2008, $2,,000,000 had been drawn from this facility. As of June 30, 2007, $0 had been drawn from this facility.

F-11

AURASOUND, INC.

(FORMERLY, HEMCURE, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Credit facility (continued)

Pursuant to the credit facility, the Company has also pledged and assigned a time certificate of deposit account for one year having an initial deposit balance of $2,000,000 to be held and maintained at all times with the bank. This balance has been recorded as a restricted cash balance in the accompanying financials.

Factoring payable

At June 30, 2008, the factoring charge amounted to one half of one percent (.50%) of the gross amount of Accounts Receivable assigned to Factor on a non-recourse basis. In addition all accounts factored on a recourse basis Company shall pay the Factor fifteen hundreths of one percent (.15%) of the gross amount of Accounts Receivable assigned. The Company’s obligations to the bank are collateralized by all of the Company’s present and future tangible and intangible assets including documents, instruments, chattel paper, returned or repossessed goods and all books and records and proceeds of the foregoing. The advances for the factored receivables are made pursuant to the revolving credit and security agreement, which expires on the first Anniversary Date unless terminated earlier by Factor upon the occurrence of an Event of Default. This agreement shall be automatically renewed each year on the Anniversary Date for an additional one year term unless Company or Factor provides the other written notice of non-renewal of this agreement. There are no specific covenants attached to the credit line except a $20.00 wire fee per transaction. As of June 30, 2008 the Factor Payable amounted to $145,477. As of June 30, 2007 the Factor Payable amounted to $0.

Notes payable

During the year ended June 30, 2007, the Company issued promissory notes in the principal amount of $688,000 to certain investors. The notes were secured against the assets of the Company pursuant to a security agreement. All the notes accrued interest at the rate of 9% per annum with the principal and interest due on demand. The Company accrued interest of $64,108 on these notes through June 30, 2007. On August 1, 2007 the principal and all interest accrued thereon was paid in full.

NOTE 6 - RELATED PARTY TRANSACTIONS AND COMMITMENT

The Company pays $20,000 per month as a management fee to an entity owned by our Chairman of the Board of directors, Mr. Arthur Liu, for the services provided such as accounting, shipping and receiving, and, general administrative. The Company paid an average of $6,237 per month to the same entity for rent as it shares the offices, test laboratories and warehouse facilities with the related entity. The rent allocation is 40% of the rent payable by the related entity to the landlord. The annual rent commitment to the landlord is as follows:

Year ended	Amount
June 30, 2008	$	79,892
June 30, 2009	$	80,038
June 30, 2010	$	82,205

The lease will expire on July 31, 2013. The Company is not a party to the lease.

As of June 30, 2008 and 2007, the amount due was $99,132 and $0 respectively. The June 30, 2008 amount was due on demand and non interest bearing.

Notes payable at June 30, 2008 consist of notes payable to an entity controlled by our Chief Executive Officer and Chairman. These notes were issued on various dates and all bear interest at 8% per annum, with principal and interest due on March 31, 2009 or on demand. Interest expense for the period ended June 30, 2008 and 2007 amounted to $115,122 and $16,964 respectively. In conjunction with the private placement it undertook on June 7, 2007, the Company agreed that it would not repay more than $900,000 of the June 6, 2007 balance without shareholder consent. On June 6, 2007, the Company repaid $700,000 and on July 6, 2007, the Company repaid $200,000 of such notes. The Company also repaid $300,000 of a management fee accrual to the related party. On October 15, 2007, the Company exchanged $2,500,000 of related party debt including accrued interest thereon into 1,666,667 units. Each unit consisted of one share of the Company’s $0.01 par value common stock and a five-year warrant to purchase one share of the Company’s common stock at an exercise price of $1.50 per share. On the exchange date, fair value of the stock was $.51 per share for a total amount of $850,000. The fair market value of the warrants was $126,758 calculated using the Black-Scholes model using the following assumptions: discount rate of 4.40%, volatility of 15% and expected term of one year. As the transction was accounted for a realated party controlling both the entities, the gain on exchange has been credited to paid in capital. The balance due to this related party as of June 30, 2008 and June 30, 2007 amounted to $1,173,029 and $2,544,601 respectively and is reflected in notes payable to related party on the accompanying financials. As of June 30, 2008 and June 30, 2007, the accrued interest on the notes payable to this related party amounted to $23,880 and $693,137 respectively and is reflected in accrued expenses on the accompanying financials.

F-12

AURASOUND, INC.

(FORMERLY, HEMCURE, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 7 - STOCKHOLDERS' EQUITY

Common Stock

At June 30, 2008 and 2007, the Company was authorized to issue 20,000,000 shares of $0.01 par value preferred stock and 100,000,000 shares of $0.01 par value common stock. As of June 30, 2008 there were no preferred shares issued and outstanding. There were 28,071,972 and 2,000,000 common shares issued and outstanding as of June 30, 2008 and 2007 respectively.

On February 20, 2007, the Company issued 206,829 shares of common stock to Mr. Bartley Loethen as consideration for legal services rendered. The shares were recorded at the fair market value of $206,829.

On June 7, 2007, the Company completed the $12.9 million private placement of units and recorded 12,900,000 shares of its $0.01 par value common stock to be issued to investors. Each unit sold was comprised of 1 share and 1 warrant. The shares were issued in August, 2007. Investors of $3,000,000 or more have the option to purchase additional units, each unit consisting of one share of our common stock and a five-year warrant to purchase one share of our common stock at an exercise price of $1.50 per share. The number of units which may be purchased is equal to 50% of the dollar amount invested by such investor at a price of $1.35 per unit and is only available for a period of 12 months from the initial closing date of the private placement. We reserved 8,888,888 shares of our common stock underlying such options. As of June 7, 2008, these options expired and it is no longer appropriate to provide a reserve for these options.

Also on June 7, 2007, the Company acquired AuraSound, Inc. for 11,505,305 shares of its $0.01 par value common stock as consideration for such acquisition. The shares were valued at the fair market value and were recorded as shares to be issued as of June 30, 2007 because the shares had not been issued as of that date. The shares were subsequently issued in October 2007 . The Company also issued 1,229,476 to the facilitators of the acquisition transaction as a success fee. These shares were also valued at the fair market value of $1,229,476.

On October 15, 2007, the Company exchanged $2,500,000 of related party debt including accrued interest thereon into 1,666,667 units (Note 6)

NOTE 8 - STOCK OPTIONS AND WARRANTS

On June 7, 2007 in conjunction with the private placement and the acquisition of AuraSound, Inc., the Company reserved 25,233,888 common shares for issuance in respect of:

Options:

Investors of $3,000,000 or more in the private placement that closed on June 7, 2007 have the option to purchase additional units, each unit consisting of one share of our common stock and a five-year warrant to purchase one shares of our common stock at an exercise price of $1.50 per share. The number of units which may be purchased is equal to 50% of the dollar amount invested by such investor at a price of $1.35 per unit and is only available for a period of 12 months from the initial closing date of the private placement. We reserved 8,888,888 shares of our common stock underlying such options and the warrants which would have been granted if the options had been exercised. The value of the options of $378,424 was calculated using the Black-Scholes model using the following assumptions: discount rate of 4%, volatility of 44% and expected term of one year. All options lapsed and were cancelled at the beginning of business on June 8, 2008.

F-13

AURASOUND, INC.

(FORMERLY, HEMCURE, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes information about stock options at June 30, 2008:

	Shares	Exercise Price		Remaining Life	Aggregate Intrinsic Value
Outstanding June 30, 2007	4,444,444	$	1.35	1 year	$	6,000,000
Exercised	-		-
Cancelled on June 8, 2008	4,444,444	$	1.35
Outstanding June 30, 2008	-	$	-		$	-

Warrants:

Following is a summary of the status of warrants outstanding at June 30, 2008:

	Outstanding					Exercisable
Price	Shares		Life (Months)	Exercise Price		Shares	Intrinsic Value
$0.80		245,000	60	$	0.8	245,000	$	73,500
$1.00		3,200,000	60	$	1	3,200,000		320,000
$1.50		14,566,667	60	$	1.5	14,566,667		-
		18,011,667				18,011,667	$	393,500

The following table summarizes the activity for all stock warrants outstanding at June 30, 2008:

	Shares	Exercise Price		Remaining Life	Aggregate Intrinsic Value
Outstanding June 30, 2007	16,346,000	$	1.39	3.94 years	$	393,500
Granted	1,666,667		1.50	4.30 years		-
Exercised	-		-
Cancelled	-		-
Outstanding June 30, 2008	18,011,667	$	1.40	3.97 years	$	393,500

The value of the warrants was calculated using the Black-Scholes model using the following assumptions: Discount rate of 4.40%, volatility of 25% and expected term of five years.

NOTE 9 - INCOME TAXES

The Company did not record any income tax expense due to net loss during the year ended June 30, 2008 and 2007. The actual tax benefit differs from the expected tax benefit computed by applying the United States corporate tax rate of 40% to loss before income taxes as follows for the years ended June 30, 2008 and 2007:

	2008			2007
Expected tax benefit		34	%	34	%
State income taxes, net of federal benefit		6		6
Changes in valuation allowance		(40	)	(40	)
Total		-	%	-	%

The following table summarizes the significant components of the Company's deferred tax asset at June 30, 2008, and 2007:

	2008			2007
Deferred tax asset due net operating loss:	$	10,132,000		$	276,992
Valuation allowance		(10,132,000	)		(276,992	)
Net deferred tax asset	$	-		$	-

The Company recorded an allowance of 100% for its net operating loss carryforward due to the uncertainty of its realization.

A provision for income taxes has not been provided in these financial statements due to the net loss. At June 30, 2008, the Company had net operating loss carryforwards of approximately $24,019,000, which expire through June 30, 2028. Certain of the NOL is subject to a restriction under section 382 of the Internal Revenue Code, whereby the amount which may be reflected in any one year is limited.

F-14

AURASOUND, INC.

(FORMERLY, HEMCURE, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10 - ACQUISITION

On June 6, 2007, the Company acquired AuraSound, Inc. (“AuraSound”). AuraSound designs, and markets premium audio products, including the micro-audio products designed for applications such as computers, cell phones, televisions and other miniature speaker devices. The purchase price paid by the Company was $12,958,757, which consisted of 11,505,305 shares of common stock having an aggregate value of $11,505,305 and 3,445,000 replacement warrants, to lenders and consultants of Aura Sound, valued at the fair market value of $1,453,452. To fund the operations of AuraSound, Inc. and payoff certain bridge loans and other specified obligations relating to the acquisition of AuraSound, Inc., the Company completed a $12.9 million private placement.

The Company incurred transaction costs of $400,000 and issued 1,229,476 shares of common stock to the facilitators of the transaction. The transaction has been accounted for as a purchase, and accordingly, the results of operations have been included in the statement of operations from the date of acquisition. The allocations of the fair values of assets and liabilities were based upon an independent consultant’s appraisal of such values. The excess of the purchase price over the value of the acquired assets was $7,000,451 and is classified as goodwill.

A summary of the allocation of the purchase price is as follows:

Accounts receivables	$	503,733
Inventories		182,264
Proprietary technology		10,449,990
Customer relationships		4,626,548
Trademarks		672,806
Total Assets	$	16,435,341
Accounts payable and accrued liabilities	$	1,744,690
Notes payable		7,014,345
Total liabilities	$	8,759,035
Net asset acquired	$	7,676,306

Consideration paid:
Total cost of investment	$	14,676,757
Goodwill	$	7,000,451

The following (unaudited) pro forma consolidated results of operations have been prepared as if the acquisition of AuraSound, Inc. had occurred at July 1, 2006 and 2005:

	June 30, 2007			June 30, 2006
Sales	$	2,497,823		$	1,795,783
Net income	$	(2,459,241	)	$	(1,138,006	)
Net income per share - basic and diluted	$	(1.23	)	$	(2.02	)

As disclosed in Note 13, the Company has impaired the goodwill at June 30, 2008

NOTE 11- GOING CONCERN

The accompanying financial statements have been prepared on a going concern basis which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As shown in the financial statements, during the years ended June 30, 2008 and 2007, the Company incurred losses of $26,458,932 and $3,809,260, respectively. The Company had an accumulated deficit of $33,029,040 as of June 30, 2008. The increased loss from operations resulted primarily from the amortization of the intangible assets which totaled $2,181,314 and the $20,395,215 non-cash charge relating to the impairment of the intangible assets at June 30, 2008. $3,066,477 of the loss incurred during the fiscal year ended June 30, 2007 and $341,406 of the loss incurred during the fiscal year ended June 30, 2008 related to expenses incurred in connection with advances to Grandford Holdings.. In light of the problems experienced by the Company in establishing a primary supplier, there is no certainty that the Company will be able to provide the quality and timely deliveries required by our customers. As disclosed in Note 5, the Company was not in compliance with certain covenants related to its line of credit as of June 30, 2008.

F-15

AURASOUND, INC.

(FORMERLY, HEMCURE, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11- GOING CONCERN (continued)

If the Company is unable to generate profits and unable to continue to obtain financing for its working capital requirements, it may have to curtail its business sharply or cease business altogether.

The financial statements do not include any adjustments relating to the recoverability and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. 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.

In June 2007, the Company completed a $12.9 million private placement aimed at providing sufficient funds to establish AuraSound as a significant source for speakers designed for notebook computers and cell phones in addition to its already established home entertainment line of speakers. Immediately following the closing, approximately $1.8 million was used to pay the expenses related to the offering, approximately $4.4 million was used to pay-off certain bridge loans, including interest, and $2 million was deposited into an account with our primary bank, in accordance with the terms of a lending agreement. In addition, in order to ramp-up production at the manufacturer in China, we established a prepayment policy with Grandford Holdings, Ltd., then the company’s long-term supplier, and sent $4.2 million to Grandford Holdings, Ltd. during June and July 2007 for the purchase of inventory, engineering services, tools, jigs, dies and special equipment. The remaining $.5 million, $2.0 million drawn on the deposit credit facility and an additional $635,000 loaned to us by Arthur Liu, our Chief Executive Officer, Chairman of the board of directors, and our largest stockholder, has been used to fund the establishment of offices in Hong Kong, Taiwan, Shanghai and Japan and to cover overhead at the corporate offices in Santa Fe Springs, California through July 2008. The Company continues to depend on Mr. Liu for additional support.

NOTE 12 MAJOR CUSTOMERS AND MAJOR VENDORS

The Company had two major customers during the year ended June 30, 2008 which accounted for 26% of its sales. The Company had three major customers during the year ended June 30, 2007 which accounted for 81% of its sales. The receivables due from these customers as of June 30, 2008 and 2007 totaled $100,681 and $170,629 respectively.

The Company had one major vendor during the year ended June 30, 2008 which accounted for 97% of the Company’s purchases. During the year ended June 30, 2007 one major vendor accounted for 96% of the Company’s purchases. As of June 30, 2007, the Company had made advance payments totaling $3,066,477 to that supplier for tools, jigs, molds and raw materials relating to products being manufactured for the Company. During September 2007, we determined that there were significant performance issues with the supplier which we attempted to resolve. As a result of the continuing poor performance the Company discontinued its’ relationship with the supplier and expensed $3,066,477 of advance payments in the period ended June 30, 2007 and $341,406 during the fiscal year ended June 30, 2008. As a solution, the Company established a new primary supplier (GGEC) which begin producing our audio products in March 2008.

NOTE 13 IMPAIRMENT OF GOODWILL

The Company evaluates intangible assets and other long-lived assets for impairment, at a minimum, on an annual basis and whenever events or changes in circumstances indicate that the carrying value may not be recoverable from its estimated future cash flows. Recoverability of intangible assets, other long-lived assets and goodwill is measured by comparing their net book value to the related projected undiscounted cash flows from these assets, considering a number of factors including past operating results, budgets, economic projections, market trends and product development cycles. If the net book value of the asset exceeds the related undiscounted cash flows, the asset is considered impaired, and a second test is performed to measure the amount of impairment loss. The Company assessed the carrying value of goodwill in accordance with the requirements of SFAS #142 "Goodwill and Other Intangible Assets". Based on its assessment, the Company determined that goodwill resulting from the acquisition of Aurasound, Inc. amounted to US$7,000,451 is fully impaired as of June 30, 2008.

NOTE 14 SUBSEQUENT EVENTS

As of September 25, 2008, the Company had repaid all amounts due under the accounts receivable credit facility with Bank SinoPac and had repaid the $2.0 million in loans plus accrued interest thereon which had been made to the Company by Bank SinoPac under the deposit credit facility by collecting the restricted cash deposit totaling $2.0 million plus accrued interest thereon and applying the amount received to repay the debt. The restricted cash deposit was the primary security for the deposit credit facility.

F-16

ITEM 15.

EXHIBITS.

Exhibit Number		Description

31.1		Corrected Certification of Principal Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934

31.2		Certification of President/Chief Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934

31.3		Certification of Principal Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934

32		Certification Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002(8)

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this Amendment No. 1 to Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized.

	AURASOUND, INC.


Dated: March 25, 2009	By:	/s/ Arthur Liu
		Arthur Liu, President and Chief
		Executive Officer

	By:	/s/ Arthur Liu
		Arthur Liu
		Principal Accounting and
		Finance Officer

By:	/s/ Arthur Liu
	Arthur Liu
	President and Chief Executive Officer