AuraSound, Inc.
|
(Exact name of registrant as specified in its charter)
|
Nevada
|
20-5573204
|
|
(State or other jurisdiction of incorporation or organization)
|
(I.R.S. Employer Identification No.)
|
2850 Red Hill Avenue, Suite 100,
Santa Ana, California
|
92705
|
|
(Address of principal executive offices)
|
(Zip Code)
|
(949) 829-4000
|
(Registrant’s telephone number, including area code)
|
Large Accelerated Filer
|
o
|
Accelerated Filer
|
o
|
Non-accelerated Filer
|
o
|
Smaller Reporting Company
|
x
|
September 30, 2010
(Restated)
|
June 30, 2010
|
|||||||
Assets
|
||||||||
Current Assets
|
||||||||
Cash and cash equivalents
|
$
|
3,245,967
|
$
|
129,939
|
||||
Trade accounts receivable, net
|
9,804,096
|
3,432,135
|
||||||
Inventory, net
|
10,987,514
|
537,198
|
||||||
Other assets
|
27,325
|
—
|
||||||
Total Current Assets
|
24,064,902
|
4,099,272
|
||||||
Property and Equipment, net
|
138,310
|
106,465
|
||||||
Intangible Assets, net
|
4,363,666
|
—
|
||||||
Goodwill
|
5,972,039
|
—
|
||||||
Total Assets
|
$
|
34,538,917
|
$
|
4,205,737
|
||||
Liabilities and Stockholder’s Equity (Deficit)
|
||||||||
Current Liabilities
|
||||||||
Accounts payable
|
$
|
29,202,521
|
$
|
6,916,004
|
||||
Accrued expenses
|
236,622
|
800,044
|
||||||
Due to officer
|
—
|
25,000
|
||||||
Notes payable
|
—
|
2,978,282
|
||||||
Shares to be issued
|
4,888,464
|
—
|
||||||
Total Current Liabilities
|
$
|
34,327,607
|
$
|
10,719,330
|
||||
Commitments and Contingencies
|
||||||||
Stockholders Equity (Deficit) Preferred stock - $0.01 par value, 3,333,333 shares Authorized and none outstanding at September 30, 2010 and June 30, 2010.
|
—
|
—
|
||||||
Common stock - $0.01 par value, 16,666,667 shares authorized and 11,504,835 and 4,678,662 outstanding at September 30, 2010 and June 30, 2010.
|
$
|
115,049
|
$
|
46,787
|
||||
Additional paid in capital
|
37,899,600
|
31,278,409
|
||||||
Accumulated Deficit
|
(37,803,339
|
)
|
(37,838,789
|
)
|
||||
Total Stockholder’s Equity (Deficit)
|
211,310
|
(6,513,593
|
)
|
|||||
Total Liabilities and Stockholder’s Equity (Deficit)
|
$
|
34,538,917
|
$
|
4,205,737
|
For the three months-ended
|
||||||||
September 30, 2010
(Restated)
|
September 30, 2009
|
|||||||
Net revenue
|
$
|
10,971,201
|
$
|
1,278,900
|
||||
Cost of sales
|
9,771,021
|
1,211,353
|
||||||
Gross profit
|
1,200,180
|
67,547
|
||||||
Research and development expense
|
128,449
|
125,828
|
||||||
Selling, general & administrative expenses
|
899,945
|
429,783
|
||||||
Amortization of intangibles
|
136,334
|
—
|
||||||
Total operating expenses
|
1,164,728
|
555,611
|
||||||
Income (Loss) from operations
|
35,452
|
(488,064
|
)
|
|||||
Other (income) expense
|
||||||||
Interest expense, net
|
—
|
44,096
|
||||||
Other expense
|
—
|
—
|
||||||
Loss before income tax
|
35,452
|
(532,160
|
)
|
|||||
Income tax expense
|
—
|
—
|
||||||
Net income
|
35,452
|
(532,160
|
)
|
|||||
Income (loss) per common share
|
||||||||
Basic
|
$
|
0.00
|
$
|
(0.11
|
)
|
|||
Diluted
|
$
|
0.00
|
$
|
(0.02
|
)
|
|||
Weighted average shares
|
||||||||
Basic
|
10,781,397
|
4,678,662
|
||||||
Diluted
|
25,967,355
|
28,071,972
|
September 30, 2010
Restated
|
September 30, 2009
|
|||||||
CASH FLOWS PROVIDED FROM OPERATING ACTIVITIES
|
||||||||
Net income (loss)
|
$
|
35,452
|
$
|
(532,160
|
)
|
|||
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
|
||||||||
Reserves on accounts receivable
|
132,649
|
—
|
||||||
Reserves on inventory
|
(275,639
|
)
|
—
|
|||||
Depreciation
|
5,967
|
4,152
|
||||||
Amortization
|
136,334
|
—
|
||||||
Changes in operating assets and liabilities:
|
||||||||
Accounts receivable, net
|
(1,365,796
|
)
|
(767,070
|
)
|
||||
Inventory
|
(6,147,786
|
)
|
(72,424
|
)
|
||||
Other assets
|
(27,325
|
)
|
—
|
|||||
Accounts payable
|
10,462,317
|
1,087,972
|
||||||
Accrued expenses
|
31,415
|
169,943
|
||||||
Due affiliate
|
(25,000
|
)
|
37,514
|
|||||
Other
|
—
|
2,027
|
||||||
Net cash provided by/ (used in) provided by operating activities
|
2,962,588
|
(70,046
|
)
|
|||||
CASH FLOWS PROVIDED FROM INVESTING ACTIVITIES
|
||||||||
Acquisition of property and equipment
|
(1,529
|
)
|
(1,212
|
)
|
||||
Cash acquired in acquisition of net assets and liabilities of ASI
|
154,970
|
—
|
||||||
Net cash provided by/(used in) investing activities
|
153,441
|
(1,212
|
)
|
|||||
CASH FLOWS PROVIDED FROM FINANCING ACTIVITIES
|
||||||||
—
|
—
|
|||||||
—
|
—
|
|||||||
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
3,116,029
|
(71,258
|
)
|
|||||
CASH AND CASH EQUIVALENTS, BEGINNING BALANCE
|
129,939
|
321,455
|
||||||
CASH AND CASH EQUIVALENTS, ENDING BALANCE
|
$
|
3,245,967
|
$
|
250,197
|
||||
SUPPLEMENTAL DISCLOSURES:
|
||||||||
Cash paid during the year for:
|
||||||||
Interest
|
$
|
—
|
$
|
—
|
||||
Income tax
|
$
|
—
|
$
|
—
|
||||
Conversion of accounts payable and accrued expenses to equity
|
$
|
2,232,861
|
$
|
—
|
||||
Conversion of notes payable to equity
|
$
|
1,724,724
|
$
|
—
|
||||
Conversion of related party notes payable to equity
|
$
|
1,253,558
|
$
|
—
|
||||
Issuance of Common Stock and
|
||||||||
Warrants for purchase of net assets and liabilities of ASI
|
$
|
6,366,775
|
$
|
—
|
Depreciable Period
|
|
Furniture and fixtures
|
7 years
|
Machinery and equipment
|
5 to 10 years
|
Tooling
|
5 to 10 years
|
Computer software and equipment
|
3 to 5 years
|
Amount
|
||||
Purchase price
|
$
|
6,349,205
|
||
Fair Value of assets acquired
|
||||
Current assets
|
9,320,676
|
|||
Property & equipment
|
36,285
|
|||
Intangible Assets
|
4,500,000
|
|||
13,856,961
|
||||
Fair value of liabilities acquired
|
||||
Current liabilities
|
13,479,795
|
|||
Net assets acquired
|
377,166
|
|||
Goodwill
|
$
|
5,972,039
|
For the three months-ended
|
||||||||
September 30, 2010
|
September 30, 2009
|
|||||||
Net sales
|
$ | 13,564,464 | $ | 6,548,834 | ||||
Loss from operations
|
273,188 | $ | (843,003 | ) | ||||
Net loss
|
$ | 251,847 | $ | (1,034,470 | ) |
September 30,
2010
|
June 30,
2010
|
|||||||
Raw materials
|
$ | — | $ | 11,230 | ||||
Finished goods
|
11,159,014 | 719,107 | ||||||
Inventory before provision
|
11,159,014 | 730,337 | ||||||
Provision for obsolescence
|
(171,500 | ) | (193,139 | ) | ||||
Inventory, net
|
$ | 10,987,514 | $ | 537,198 |
September 30,
2010
|
June 30,
2010
|
|||||||
Leasehold improvements
|
$ | 22,108 | $ | — | ||||
Furniture and Fixtures
|
37,726 | — | ||||||
Machinery and equipment
|
36,281 | 36,281 | ||||||
Tooling
|
105,193 | 105,193 | ||||||
Computer software and equipment
|
17,726 | 7,411 | ||||||
Total property and equipment
|
219,034 | 148,885 | ||||||
Accumulated depreciation
|
(80,724 | ) | (42,420 | ) | ||||
Net value of property and equipment
|
$ | 138,310 | $ | 106,465 |
Average Useful Life (Years)
|
Amount
|
Accumulated Amortization
|
Balance, net
|
|||||||||||||
Amortizable intangible assets
|
||||||||||||||||
Customer relationships
|
10 | $ | 2,200,000 | (36,668 | ) | $ | 2,163,332 | |||||||||
Non-compete agreement
|
3 | 1,600,000 | (88,000 | ) | 1,512,000 | |||||||||||
Trade name
|
10 | 700,000 | (11,666 | ) | 688,334 | |||||||||||
$ | 4,500,000 | $ | (136,334 | ) | $ | 4,363,666 |
30-Jun-11
|
$
|
755,166
|
||
30-Jun-12
|
823,333
|
|||
30-Jun-13
|
823,333
|
|||
30-Jun-14
|
334,000
|
|||
30-Jun-15
|
290,000
|
|||
Thereafter
|
1,474,167
|
|||
Total
|
$
|
4,500,000
|
September 30,
2010
|
June 30,
2010
|
|||||||
Accrued consulting
|
$ | 172,537 | $ | 236,359 | ||||
Accrued interest
|
— | 344,115 | ||||||
Accrued payroll and other
|
64,085 | 219,570 | ||||||
Total
|
$ | 236,622 | $ | 800,044 |
Par value $0.01
|
September 30,
2010
|
June 30,
2010
|
|||||
Authorized
|
3,333,333
|
3,333,333
|
|||||
Issued
|
—
|
—
|
|||||
Outstanding
|
—
|
—
|
Par value $0.01
|
September 30,
2010
|
June 30,
2010
|
|||||
Authorized
|
16,666,667
|
16,666,667
|
|||||
Issued
|
11,504,835
|
4,678,662
|
|||||
Outstanding
|
11,504,835
|
4,678,662
|
Warrants
|
Exercise Price(s)
|
Average Remaining Contractual Life
|
Aggregate Intrinsic
Value
|
||||||||||
Balance, June 30, 2010
|
3,001,945
|
$
|
4.80 - $9.00
|
2.0 years
|
$ | — | |||||||
Granted
|
14,140,989
|
$
|
0.50 - $1.00
|
4.1 years
|
$ | ||||||||
Exercised
|
—
|
||||||||||||
Expired
|
—
|
||||||||||||
Balance, September 30, 2010
|
17,142,934
|
$
|
0.50 - $1.00
|
3.9 years
|
$
|
20,540,084 | |||||||
Exercisable, September 30, 2010
|
14,142,934
|
$
|
0.50 - $1.00
|
3.7 years
|
$
|
17,540,084 |
September 30,
2010
|
September 30,
2009
|
|||||||
US Federal
|
$ | 12,054 | $ | (180,934 | ) | |||
US State
|
2,127 | (31,930 | ) | |||||
Change in valuation allowance
|
(14,181 | ) | 212,864 | |||||
Total Provision for Income Tax
|
$ | — | $ | — |
September 30,
2010
|
September 30,
2009
|
|||||||
Tax expense (credit) at statutory rate – federal
|
34 | % | 34 | % | ||||
State tax expense net of federal tax
|
6 | % | 6 | % | ||||
Changes in valuation allowance
|
40 | % | -40 | % | ||||
Tax expense at actual rate
|
0 | % | 0 | % |
September 30,
2010
|
June 30,
2010
|
||||||
Accumulated net operating loss (NOL)
|
$
|
12,000,830
|
$
|
12,015,011
|
|||
Valuation allowance
|
(12,000,830
|
) |
(12,015,011
|
) | |||
Net deferred tax asset
|
$
|
—
|
$
|
—
|
Table 1A Current Assets
|
September 30, 2010
As Originally Filed
|
September 30, 2010
As Restated
|
Net Change
|
Purchase Accounting
(ASI)
|
Aug & Sept
ASI
|
Aug & Sept
Aura
|
|||||||
Cash and cash equivalents
|
$ 3,206,218
|
$ 3,245,967
|
$ 39,749
|
$ 39,749
|
1
|
||||||||
Trade accounts receivable, net
|
$ 10,473,580
|
$ 9,804,096
|
$ (669,484)
|
$ (943,186)
|
2
|
$ 273,702
|
3
|
||||||
Inventory, net
|
$ 10,877,596
|
$ 10,987,514
|
$ 109,918
|
$ 33,891
|
4
|
$ -
|
$ 76,027
|
5
|
|||||
Other assets
|
$ 69,029
|
$ 27,325
|
$ (41,704)
|
$ (37,000)
|
6
|
$ -
|
$ (4,704)
|
7
|
|||||
Total Current Assets
|
$ 24,626,423
|
$ 24,064,902
|
$ (561,521)
|
||||||||||
Property and Equipment, net
|
$ 188,836
|
$ 138,311
|
$ (50,525)
|
$ (50,525)
|
8
|
||||||||
Intangible Assets, net
|
$ 4,170,000
|
$ 4,363,666
|
$ 193,666
|
$ 200,000
|
9
|
$ -
|
$ (6,334)
|
10
|
|||||
Goodwill
|
$ 3,931,205
|
$ 5,972,039
|
$ 2,040,834
|
$ 2,040,834
|
11
|
||||||||
Total Assets
|
$ 32,916,464
|
$ 34,538,917
|
$ 1,622,453
|
Footnote: | |
1 |
Increase in cash due to not accounting for ASI bank accounts acquired in the acquisition.
|
2 |
Accounts receivable was overstated due to poor bookkeeping & consolidation.
|
3 |
Revenue that was not booked in proper period.
|
4 |
Incomplete supporting documents.
|
5 |
Inventory reserves decreased by about $50,000 and additional inventory of $26,000 were recorded.
|
6 |
Asset write off from initial schedule.
|
7 |
Prepaid assets from 7/1/10 to 9/30/10 were not decreased for each month.
|
8 |
Expenses below capitalization threshold for Aurasound was recorded as fixed asset but should have been expensed. Also depreciation schedule was updated.
|
9 |
Revised purchase accounting valuation.
|
10 |
Additional amortization expense related to change in purchase accounting.
|
11 |
Revised purchase accounting valuation.
|
Table 1B Current Liabilities
|
September 30, 2010
As Originally Filed
|
September 30, 2010
As Restated
|
Net Change
|
Purchase Accounting
(ASI)
|
Aug & Sept
ASI
|
Aug & Sept
Aura
|
|||||||
Accounts payable
|
$ 25,918,354
|
$ 29,202,521
|
$ 3,284,167
|
$ 754,884
|
1
|
$ -
|
$ 2,529,283
|
2
|
|||||
Accrued expenses
|
$ 1,014,368
|
$ 236,622
|
$ (777,746)
|
$ (36,320)
|
3
|
$ -
|
$ (741,426)
|
4
|
|||||
Warrantee liability
|
$ 385,444
|
$ -
|
$ (385,444)
|
$ (385,444)
|
5
|
||||||||
Other liabilities
|
$ 383,540
|
$ -
|
$ (383,540)
|
$ -
|
$ (383,540)
|
6
|
|||||||
Total Current Liabilities
|
$ 35,590,170
|
$ 34,327,607
|
$ (1,262,563)
|
||||||||||
Additional paid in capital
|
$ 37,636,800
|
$ 37,899,600
|
$ 262,800
|
$ 262,800
|
7
|
||||||||
Accumulated Deficit
|
$ (37,425,555)
|
$ (37,803,339)
|
$ (377,784)
|
||||||||||
Total Stockholder’s Equity (Deficit)
|
$ 326,294
|
$ 211,310
|
$ (114,984)
|
Footnote: | |
1 |
Accounts payable not recorded in a timely manner.
|
2 |
Vendor and fright expenses that occurred during the period of Aug. 1 to Sept. 30 were originally booked in Oct.
|
3 |
Accrued expenses were incorrectly booked, reclassed to Accounts payables.
|
4 |
Accrued expenses were incorrectly booked, reclassed to Accounts payables.
|
5 |
Aura management team revised the warranty liability and instead set up provisions for inventory, sales returns and rework expenses to properly reflect the business.
|
6 |
Items classified as other liabilities were actually accounts payables transactions.
|
7 |
Increase in PIC is due to debt conversation.
|
Table 2 Net Income
|
September 30, 2010
As Originally Filed
|
September 30, 2010
As Restated
|
Net Change
|
Purchase Acct
(ASI)
|
Aug & Sept
ASI
|
||||||||
Revenue
|
$ 10,720,594
|
$ 10,971,201
|
$ 250,607
|
$ 250,607
|
1
|
||||||||
Cost of sales
|
$ 9,034,728
|
$ 9,771,021
|
$ 736,293
|
$ 736,293
|
2
|
||||||||
Gross profit
|
$ 1,685,866
|
$ 1,200,180
|
$ (485,686)
|
||||||||||
Research and development expense
|
$ 87,468
|
$ 128,449
|
$ 40,981
|
$ 40,981
|
3
|
||||||||
Selling, general & administrative expenses
|
$ 1,185,148
|
$ 899,945
|
$ (285,203)
|
$ (285,203)
|
4
|
||||||||
Amortization of intangibles
|
$ -
|
$ 136,334
|
$ 136,334
|
$ 136,334
|
5
|
||||||||
Total operating expenses
|
$ 1,272,616
|
$ 1,164,728
|
$ (107,888)
|
||||||||||
Income from Operations
|
$ 413,250
|
$ 35,452
|
$ (377,798)
|
||||||||||
Net income
|
$ 413,234
|
$ 35,452
|
$ (377,782)
|
Footnote: | |
1 |
$250,607 in sales for Aurasound were recorded in October but belonged to August and September.
|
2 |
Increase in COGS is due to $400,000 increase in freight bills booked for August and September, $107,000 of expenses were reclassed from SGA, and $230,000 were inventory cost.
|
3 |
$40,981 of expenses were initially classed in SGA.
|
4 |
$40,981 of expenses was reclassed to R&D, 136,334 was reclassed to Amortization expense, and about $107,000 were expenses related to cost of sale.
|
5 |
Amortization was originally classified in SGA.
|
31.1
|
Certification of Principal Executive Officer Pursuant to Rule 13a-14(a) / 15d-14(a) of the Securities Exchange Act of 1934*
|
31.2
|
Certification of Principal Financial Officer Pursuant to Rule 13a-14(a) / 15d-14(a) of the Securities Exchange Act of 1934*
|
32
|
Certification of Principal Executive Officer and Principal Financial Officer Pursuant to Rule 13a-14(b) / 15d-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350*
|
AURASOUND, INC.
|
||
Dated: April 29, 2011
|
By:
|
/s/ Harald Weisshaupt
|
Harald Weisshaupt
|
||
President and Chief Executive Officer (Principal Executive Officer)
|
||
By:
|
/s/ Harald Weisshaupt
|
|
Harald Weisshaupt
|
||
Chief Financial Officer (Principal Accounting and
|
||
Financial Officer)
|
/s/ Harald Weisshaupt
|
|
Harald Weisshaupt, President and Chief Executive Officer
(Principal Executive Officer)
|
/s/Harald Weisshaupt
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Harald Weisshaupt, Chief Financial Officer
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/s/ Harald Weisshaupt
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Harald Weisshaupt
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President and Chief Executive Officer
(Principal Executive Officer)
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Dated: April 29, 2011
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/s/ Harald Weisshaupt
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Harald Weisshaupt
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Chief Financial Officer
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