10-K/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10 – K/A

(Amendment No. 1)

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

For the fiscal year ended June 30, 2011

£ 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.

(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, Santa Ana, California	92705
(Address of principal executive offices)	(Zip Code)

(949) 829-4000

(Registrant’s telephone number, including area code)

(Former name, address, and fiscal year if changed since last report)

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

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

Common Stock, $0.01 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   S   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   S   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 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.  S Yes    o No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). S   Yes   £   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.   S

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer	£	Accelerated Filer	£
Non-accelerated Filer	£	Smaller Reporting Company	S

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

As of December 31, 2010, the aggregate market value of the registrant’s voting and non-voting common equity held by non-affiliates was approximately $6,210,507.

As of September 29, 2011, the issuer had 16,629,654 shares of its common stock, $0.01 par value issued and outstanding.

Explanatory Note

We are filing this Amendment No. 1 (“Form 10-K/A”) to our Annual Report on Form 10-K for the Fiscal Year Ended June 30, 2011, originally filed with the Securities and Exchange Commission (the “SEC”) on October 13, 2011 (the “Form 10-K”) in order to file the interactive data files in XBRL format required by Rule 405 of Regulation S-T and Item 601 of Regulation S-K.

In accordance with Rule 12b-15 under the Securities Exchange Act of 1934, as amended, each item of the Form 10-K that is amended by this Form 10-K/A is restated in its entirety, and this Form 10-K/A is accompanied by currently dated certifications on Exhibits 31.1, 31.2, and 32.1 by our Chief Executive Officer and Chief Financial Officer.

Except as expressly set forth in this Form 10-K/A, we are not amending any other part of the Form 10-K. This Form 10-K/A does not reflect events occurring after the filing of the Form 10-K or modify or update any related or other disclosures, including forward-looking statements, unless expressly noted otherwise. Accordingly, this Form 10-K/A should be read in conjunction with the Form 10-K and with our other filings made with the SEC subsequent to the filing of the Form 10-K, including any amendments to those filings.

2

TABLE OF CONTENTS

		Page
Part IV
Item 15.	Exhibits and Financial Statement Schedules	4
Signatures		7

3

ITEM 15. EXHIBITS.

Exhibit Number	Description
2.1	Amended and Restated Agreement and Plan of Share Exchange dated June 7, 2007 among AuraSound, Inc. and the shareholders of AuraSound, Inc. on the one hand, and Hemcure, Inc., Bartly J. Loethen and Synergy Business Consulting LLC, on the other hand.(1)
3..1	Articles of Incorporation.(2)
3.2	By-Laws.(1)
4.1	Specimen Certificate of Common Stock.(3)
4.2	Form of Warrant issued to GP Group, LLC.(4)
4.3	Form of Warrant issued to former warrant holders of AuraSound.(4)
4.4	Form of Warrant issued to investors in our Unit Offering closed on June 7, 2007.(1)
4.5	AuraSound, Inc. 12% Promissory Note, dated December 29, 2006, in the amount of $750,000 issued to Mapleridge Insurance Services.(4)
4.6	AuraSound, Inc. 10% Promissory Note, dated January 29, 2007, in the amount of $500,000 issued to Westrec Properties, Inc. & Affiliated Companies 401(k) Plan.(4)
4..7	AuraSound, Inc. 12% Promissory Note, dated February 5, 2007, in the amount of $500,000 issued to Apex Investment Fund, Ltd.(4)
4.8	AuraSound, Inc. 12% Promissory Note, dated April 2, 2007, in the amount of $500,000 issued to Clearview Partners, LLC.(4)
4.9	AuraSound, Inc. 12% Promissory Note, dated February 14, 2007, in the amount of $200,000 issued to YKA Partners, Ltd.(4)
4.10	Warrant issued to Sunny World Associates Limited in conjunction with the completion of the asset purchase on July 31, 2010.(10)
4.11	Warrant issued to GGEC America, Inc. in conjunction with the securities purchase dated July 10, 2010.(10)
4.12	Warrant issued to GGEC America, Inc. in conjunction with the securities purchase dated July 10, 2010.(10)
4.13	Warrant issued to InSeat Solutions, LLC in conjunction with the debt conversion dated July 10, 2010.(10)

4

10.1	$10.0 Accounts Receivable Credit Facility with Bank SinoPac(4)
10.2	$2.0 million Letter of Credit Facility with Bank SinoPac(4)
10.3	Agreement to Convert Debt dated October 15, 2007 between the registrant and Arthur Liu(5)
10.4	Promissory Note dated March 3, 2008 in the amount of $461,080 in favor of InSeat Solutions, Inc.(7)
10.5	Nonbinding letter of intent dated October 7, 2008 between AuraSound, Inc. and GGEC America.(8)
10.6	Asset Purchase Agreement dated July 10, 2010 between AuraSound, Inc., ASI Holdings Limited and ASI Audio Technologies, Inc.(11)
10.7	Amendment No. 1 dated July 31, 2010 to Asset Purchase Agreement dated July 10, 2010 between AuraSound, Inc., ASI Holdings Limited and ASI Audio Technologies, Inc.(10)
10.8	Securities Purchase Agreement dated July 10, 2010 between AuraSound, Inc., GGEC America, Inc. and Guoguang Electric Company Limited.(10)
10.9	Manufacturing Agreement dated July 30, 2010 between AuraSound, Inc. and Guoguang Electric Company Limited.(10)+
10.10	Debt Conversion Agreement dated July 10, 2010 between AuraSound, Inc. and InSeat Solutions, LLC.(10)
10.11	Employment Agreement dated July 31, 2010 between AuraSound, Inc. and Harald Weisshaupt.(10)
10.12	Non-Competition Agreement dated July 31, 2010 between AuraSound, Inc. and Harald Weisshaupt.(10)
10.13	Lock-Up Agreement dated July 31, 2010 among AuraSound, Inc., Sunny World Associates Limited and Faithful Aim Limited.(10)
16.1	Letter from Kabani & Company, Inc., dated May 6, 2011, to the Securities and Exchange Commission regarding the change in certifying accountant.(9)
21	Subsidiaries of Registrant.**
31.1	Certification of Chief Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934.(12)
31.2	Certification of Chief Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934.(12)
32	Certification Pursuant to Rule 13a-14(b)/15d-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350.(12)
101.INS	XBRL Instance Document.(12)
101.SCH	XBRL Taxonomy Schema Document.(12)
101.CAL	XBRL Taxonomy Calculation Linkbase Document.(12)
101.LAB	XBRL Taxonomy Label Linkbase Document.(12)

5

101.PRE XBRL Taxonmy Presentation Linkbase Document.(12)

+ A portion of this document has been redacted in connection with a confidential treatment request.

** Previously filed.

(1) Incorporated by reference to the registrant’s Report on Form 8-K filed with the Securities and Exchange Commission on June 13, 2007.

(2) Incorporated by reference to the registrant’s Annual Report on Form 10-KSB for the period ended June 30, 2006 filed with the Securities and Exchange Commission on September 28, 2006.

(3) Incorporated by reference to Exhibit 3.1 to the registrant’s Form 10-SB12G/A filed with the Securities and Exchange Commission on October 17, 2005.

(4) Incorporated by reference to the registrant’s registration statement on Form SB-2, SEC file no. 333-144861, filed with the Securities and Exchange Commission on July 25, 2007.

(5) Incorporated by reference to the registrant’s Report on Form 8-K filed with the Securities and Exchange Commission on November 20, 2007.

(6) Incorporated by reference to the registrant’s Report on Form 8-K filed with the Securities and Exchange Commission on December 18, 2007.

(7) Incorporated by reference to the registrant’s Report on Form 8-K filed with the Securities and Exchange Commission on March 26, 2008.

(8) Incorporated by reference to the registrant’s Report on Form 8-K filed with the Securities and Exchange Commission on October 9, 2008.

(9) Incorporated by reference to the registrant’s Report on Form 8-K filed with the Securities and Exchange Commission on May 9, 2011.

(10) Incorporated by reference to the registrants Quarterly Report on Form 10-Q/A filed with the Securities and Exchange Commission on March 7, 2011.

(11) Incorporated by reference to the registrant’s Quarterly Report on Form 10-Q/A filed with the Securities and Exchange Commission on October 11, 2011.

(12) Filed herewith.

6

SIGNATURES

In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	AURASOUND, INC.
Dated: October 18, 2011	By:	/s/ Harald Weisshaupt
		Harald Weisshaupt
		President, Chief Executive Officer and Chief Financial Officer
		(Authorized Signatory)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signatures	Title	Date
/s/ Danny Tsui	Director and Chairman of the Board	October 18, 2011
Danny Tsui
/s/ Harald Weisshaupt	Director, Chief Executive Officer, President and Chief Financial Officer (Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer)	October 18, 2011
Harald Weisshaupt
/s/ Robert Tetzlaff	Director	October 18, 2011
Robert Tetzlaff

/s/ Kobe Zhang	Director	October 18, 2011
Kobe Zhang

/s/ William H. Kurtz	Director	October 18, 2011
William H. Kurtz

/s/ Pete Andreyev	Director	October 18, 2011
Pete Andreyev

* By:	/s/ Harald Weisshaupt
	Harald Weisshaupt
	As Attorney-in-Fact

7

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Harald Weisshaupt, certify that:

1           I have reviewed this Amendment No. 1 to the Annual Report on Form 10-K of AuraSound, Inc.;

2.           Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.           Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.           The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

  a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

  b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

  c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

  d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.           The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

  a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

  b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: October 18, 2011

By:	/s/ Harald Weisshaupt
	Harald Weisshaupt
	President and Chief Executive Officer
	(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Harald Weisshaupt, certify that:

1           I have reviewed this Amendment No. 1 to the Annual Report on Form 10-K of AuraSound, Inc.;

2           Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3           Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4           The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.           Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.           Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.           Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.           Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.           The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a.           All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b.           Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: October 18, 2011

By:	/s/ Harald Weisshaupt
	Harald Weisshaupt
	Chief Financial Officer
	(Principal Financial Officer)

EX-32

Exhibit 32

CERTIFICATION

In connection with Amendment No. 1 to the Annual Report on Form 10-K of AuraSound, Inc. (the “Company”) for the fiscal year ended June 30, 2011 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Harald Weisshaupt, President, Chief Executive Officer and Chief Financial Officer of the Company, certify, pursuant to Rule 13a-14(b) or Rule 15d-14(b) under the Securities Exchange Act of 1934 (15 U.S.C. 78m or 780(d)) and 18 U.S.C. Section 1350, that, to the best of my knowledge:

(1)   The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and

(2)   The information contained in the Report fairly presents in all material respects the financial condition and results of operations of the Company.

Dated: October 18, 2011

/s/ Harald Weisshaupt

Harald Weisshaupt

Chief Executive Officer, President and Chief Financial Officer

(Principal Executive Officer and Principal Financial Officer)

This certification is furnished pursuant to Rule 13a-14(b) or Rule 15d-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350 and shall not be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liability of that Section. This certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that the Company specifically incorporates it by reference.

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CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)	Jun. 30, 2011	Jun. 30, 2010
Consolidated Balance Sheets
Trade accounts receivable, allowance for doubtful accounts	$ 578,657	$ 63,690
Preferred stock, par value	$ 0.01	$ 0.01
Preferred stock, shares authorized	3,333,333	3,333,333
Preferred stock, shares outstanding
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	100,000,000	16,666,667
Common stock, shares outstanding	16,629,654	4,678,662

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CONSOLIDATED STATEMENTS OF OPERATIONS (USD $)	12 Months Ended
	Jun. 30, 2011	Jun. 30, 2010
Income Statement [Abstract]
Net revenue	$ 76,175,350	$ 7,503,192
Cost of sales	10,363,580	7,388,488
Cost of sales from related party	58,503,393
Total cost of sales	68,866,973	7,388,488
Gross Profit	7,308,377	114,704
Research and development expenses	727,244	411,779
Selling, general and administrative expenses	4,231,068	1,765,263
Amortization	749,837
Total operating expenses	5,708,149	2,177,042
Income (loss) from operations	1,600,228	(2,062,338)
Interest expenses, net	50,878	176,609
Other Income (Expense)	27,338
Income (loss) before income tax	1,576,688	(2,238,947)
Provision for Income taxes	622,803
Net income (loss)	$ 953,885	$ (2,238,947)
Earnings (loss) per share
Basic	$ 0.07	$ (0.48)
Diluted	$ 0.06	$ (0.48)
Weighted average common shares outstanding
Basic	13,862,712	4,678,662
Diluted	17,217,913	4,678,662

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Document and Entity Information (USD $)	12 Months Ended
	Jun. 30, 2011	Sep. 29, 2011	Dec. 31, 2010
Document And Entity Information
Entity Registrant Name	AuraSound, Inc.
Entity Central Index Key	0000810208
Document Type	10-K
Document Period End Date	Jun. 30, 2011
Amendment Flag	false
Current Fiscal Year End Date	--06-30
Is Entity a Well-known Seasoned Issuer?	No
Is Entity a Voluntary Filer?	No
Is Entity's Reporting Status Current?	Yes
Entity Filer Category	Smaller Reporting Company
Entity Public Float			$ 6,210,507
Entity Common Stock, Shares Outstanding		16,629,654
Document Fiscal Period Focus	FY
Document Fiscal Year Focus	2011

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ACCRUED EXPENSES

12 Months Ended

Jun. 30, 2011

Accrued Liabilities [Abstract]

ACCRUED EXPENSES

NOTE 6 - ACCRUED EXPENSES

Accrued expenses consisted of the following as of June 30, 2011 and 2010:

	2011		2010
Consulting fees		—	$	236,359
Interest		—		344,115
Warranty	$	220,118		—
Deferred Rent		82,780		—
Payroll and others		166,505		219,570
Total	$	469,403	$	800,044

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STOCKHOLDERS’ EQUITY

12 Months Ended

Jun. 30, 2011

Stockholders' Equity Note [Abstract]

STOCKHOLDERS’ EQUITY

NOTE 11 - STOCKHOLDERS' EQUITY

PREFERRED STOCK

The following table summarizes the Company’s preferred stock at June 30, 2011 and June 30, 2010:

Par value $0.01	June 30, 2011	June 30, 2010
Authorized	3,333,333	3,333,333
Issued	—	—
Outstanding	—	—

COMMON STOCK

The following table summarizes the Company’s common stock at June 30, 2011 and June 30, 2010:

	June 30, 2011	June 30, 2010
Par value $0.01
Authorized	100,000,000	16,666,667
Issued	16,629,654	4,678,662
Outstanding	16,629,654	4,678,662

WARRANTS

The following is a summary of the status of the warrants outstanding as of June 30, 2011:

In July 2010, we modified 3,001,945 warrants whereby the anti-dilution provisions were waived in connection for a two year extension of the warrants. There was no fair value adjustment necessary for the warrant adjustment as the fair values before and after the adjustment were approximately equal. The warrant fair values were estimated using the Black-Scholes option-pricing model with the following assumptions; Pre-modification; Expected term 2 years; Volatility 47%; annual dividend per share $ 0.00; and risk-free interest rate 0.6%. Post-modification; Expected term 4 years; Volatility 46%; annual dividend per share $ 0.00; and risk-free interest rate 1.4%.

		Outstanding		Exercisable
Exercise Price		Shares	Weighted Average Contractual Life (Months)	Shares		Intrinsic value
$	0.50	5,445,669	59	5,445,669	$	2,722,834
	0.75	2,697,265	36	2,697,265	$	674,316
	1.00	6,000,000	60	6,000,000	$	—
		14,142,934		14,142,934	$	3,397,151

The following table summarizes the activity for all stock warrants outstanding at June 30, 2011:

	Shares			Weighted Average Exercise Price		Average Remaining Contractual Life		Aggregate Intrinsic Value
Outstanding June 30, 2009		18,001,667		$	8.41		3.01 years		—
Split adjusted Nov 12,2009		(3,001,945	)	$	9.00
Split adjusted Nov 12,2009		3,001,945		$	1.50
Granted		—			—
Exercised		—			—
Cancelled		—			—
Outstanding June 30, 2010		3,001,945		$	1.50		2.00 years		—
Granted		11,140,989		$	0.82
Amended June 10, 2010		(3,001,945	)	$	1.50
Amended June 10, 2011		3,001,945		$	0.50
Exercised		—			—
Cancelled		—			—
Outstanding June 30, 2011		14,142,934		$	0.76		2.9 years	$	3,397,151
Exercisable, June 30, 2011		14,142,934		$	0.76		2.9 years	$	3,397,151

On September 15, 2011, the Warrant for 2,317,265 common shares issued to GGEC on July 10, 2010 was voided and replaced with a warrant for 1,817,265 common shares.

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GOING CONCERN

12 Months Ended

Jun. 30, 2011

Going Concern

GOING CONCERN

NOTE 2 - 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. During the year ended June 30, 2011, the Company realized net income of $953,885. During the year ended June 30, 2010, the Company incurred losses of $2,238,947. The Company had an accumulated deficit of $36,884,905 as of June 30, 2011. Until this year, the Company had never been profitable and there can be no assurances that it will remain profitable or that it will survive as a public company. These issues raise substantial doubt regarding our ability to remain as a going concern.

The Company is taking many measures to improve its operations and ultimate financial position.  As seen by the Fiscal year 2011 results, the ASI acquisition improved our revenue and profit generation opportunities.  Internally, the Company has continued to invest in new product and market development resulting in possible new revenue sources.  The Company is developing alternative production capacity to ultimately lower manufacturing costs and improve our ability to respond to changing customer needs.  Externally, the Company has recently renegotiated an expanded credit agreement and is investigating other alternatives to access additional financing.  However, there are no guarantees that any of these efforts will be successful.  

The financial statements do not include any adjustments relating to the recoverability and classification of liabilities that might be necessary should we be unable to continue as a going concern. Our continuation as a going concern is dependent upon our ability to retain our current short term financing and ultimately to generate sufficient cash flow to meet our obligations on a timely basis in order to obtain additional financing, and ultimately to generate consistent positive net income.

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INTANGIBLE ASSETS

12 Months Ended

Jun. 30, 2011

Finite-Lived Intangible Assets [Abstract]

INTANGIBLE ASSETS

NOTE 8 – INTANGIBLE ASSETS

Intangible assets consisted of the following:

					June 30, 2011
	Average Useful				Accumulated			Net Book
	Life (Years)		Gross		Amortization			Value
Amortizable intangible assets:
Customer relationships		10	$	2,200,000	$	(201,674	)	$	1,998,326
Non-compete Agreement		3		1,600,000		(484,000	)		1,116,000
Trade Name		10		700,000		(64,163	)		635,837
Total			$	4,500,000	$	(749,837	)	$	3,750,163

Amortization expense for the year ended June 30, 2011, and June 30, 2010 totaled $749,837 and $0, respectively. The Company estimates that the total amortization expense for the next five years will be as follows:

2012	$	823,333
2013		823,333
2014		339,333
2015		290,000
2016		290,000
Thereafter		1,184,164
Total	$	3,750,163

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MAJOR CUSTOMERS AND MAJOR VENDORS

12 Months Ended

Jun. 30, 2011

Segment Reporting, Disclosure of Entity's Reportable Segments [Abstract]

MAJOR CUSTOMERS AND MAJOR VENDORS

NOTE 13- MAJOR CUSTOMERS AND MAJOR VENDORS

The Company had one major customer during the year ended June 30, 2011 which accounted for 77% of its sales. The Company had three major customers during the year ended June 30, 2010 which accounted for 85% of its sales. The receivables due from these customers as of June 30, 2011 and 2010 totaled $8,280,260 and $2,901,330 respectively.

The Company had one major vendor during the year ended June 30, 2011 which accounted for 72% of the Company’s purchases. This major vendor was GGEC, a related party. The amount due this vendor as of June 30, 2010 totaled $25,401,346.The Company had one major vendor during the year ended June 30, 2010 which accounted for 100% of the Company’s purchases. The amount due this vendor as of June 30, 2010 totaled $5,581,243.

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DEBT

12 Months Ended

Jun. 30, 2011

Debt Instruments [Abstract]

DEBT

NOTE 9- DEBT

RELATED PARTY NOTES

Arthur Liu Notes

Notes payable to related party at June 30, 2011 and June 30, 2010 equaled $0 and $1,264,791, respectively, and consisted of notes to an entity owned by our former Chief Executive Officer, Arthur Liu.

These notes were of various dates and all bore interest at 8% per annum, with principle and interest due on demand. Interest expense for the year ended June 30, 2011 and June 30, 2010 amounted to $0 and $101,162, respectively. As of June 30, 2011 and June 30, 2010, the accrued interest on the notes payable related to these notes amounted to $0 and $227,814, respectively.

Debt Conversion Agreement

On July 10, 2010, AuraSound entered into and consummated an Agreement to Convert Debt (the “Debt Conversion Agreement”) with Inseat Solutions, LLC (“Inseat”), a California limited liability company controlled by Arthur Liu, AuraSound’s former Chief Executive Officer and Chief Financial Officer. Pursuant to the Debt Conversion Agreement, AuraSound issued 326,173 shares of unregistered Common Stock and a three (3) year warrant to purchase 2,243,724 shares of Common Stock at an exercise price of $0.50 per share (the “Inseat Warrant”), in consideration of the cancellation of $1,904,305 of indebtedness owed by AuraSound to Inseat. The Inseat Warrant is exercisable for cash only. The aggregate fair value of the aforementioned common stock and common stock purchase warrant was determined to be $456,402 as determined by a third party valuation.  As a result of this transaction the company recognized a gain on debt extinguishment of $1,447,907 which was treated as contributed capital.

GGEC Notes

On October 8, 2008, GGEC entered into a non-binding letter of intent directed at a possible transaction whereby GGEC would acquire a 55% interest in AuraSound, Inc. During the evaluation period, GGEC agreed to fund up to $150,000 per month for current operating costs until the transaction is either consummated or terminated. As of June 30, 2010, GGEC had advanced $1,253,558.  Under the terms of that agreement, interest was accrued at 8% and the notes were collateralized by all of the Company’s present and future tangible and intangible assets. Interest expense of $75,213 was related to these notes for the year ended June 30, 2010.  Interest accrued on the notes totaled $116,301 as of June 30, 2010.

GGEC Notes - Securities Purchase Agreement

On July 10, 2010, the Company entered into a securities purchase agreement (the “SPA”) with GGEC America and its parent, GGEC, the primary manufacturer of our products. Pursuant to the SPA, the Company issued to GGEC America: (i) 6,000,000 shares of unregistered Common Stock, (ii) a five (5) year warrant to purchase 6,000,000 shares of Common Stock at an exercise price of $1.00 per share, and (iii) a three (3) year warrant to purchase 2,317,265 shares of Common Stock at an exercise price of $0.75 per share, for an aggregate purchase price of $3,000,000 (the “GGEC Transaction”). Unrelated to the transaction described in this paragraph, the number of shares for the warrant in (iii) was amended September 15, 2011 to 1,817,265 shares of common stock at an exercise price of $0.75 per share. Concurrently therewith, the Company entered into a debt extinguishment agreement, whereby GGEC America agreed to cancel $3,000,000 of notes payable and other liabilities. The aggregate fair value of the aforementioned common stock and common stock purchase warrant was determined to be $2,900,981 as determined by a third party valuation.  As a result of this transaction the company recorded gain on debt extinguishment of $99,019.

BANK DEBT

On February 24, 2011, we opened a revolving credit line with Bank SinoPac with up to $5,000,000 in borrowing availability.  Under the agreement, we assign invoices to SinoPac for a borrowing base and can borrow a percentage of the receivable (60% – 75% of the invoice value depending on historical dilution which is primarily the dollar value of credits for returns against the original invoice value) to use for working capital purposes. There is a factoring fee of 0.2% for each invoice assigned. Payments from the customer go directly to SinoPac. SinoPac receives and applies the payment for the factored invoice to reduce the loan balance. The remaining funds, if any, are available for our use. The revolving credit line’s terms require monthly interest payments based on borrowed amounts at a floating interest rate, calculated as the prime rate of interest (3.25% at June 30, 2011) plus 1.75%.  The credit line matures January 31, 2012. 

As of June 30, 2011, there was $4,950,000 outstanding under the revolving credit line, partially offset by a cash deposit of $913,713 for a net balance of $4,036,287. The cash deposit is the result of the timing of difference of when funds are received and when they are applied to pay down the loan as of June 30, 2011. There was no additional credit available or eligible to borrow based on eligible accounts receivable balances.

On September 28, 2011, we entered into a new revolving credit line with Bank SinoPac with up to $10,000,000 in borrowing availability. This agreement replaces the agreement signed on February 24, 2011. As is in the earlier loan, under the agreement, we assign invoices to SinoPac for a borrowing base and can borrow a percentage of the (60% – 75% depending on historical dilution) receivable to use for working capital purposes. There is a factoring fee of 0.1% for each invoice assigned. Payments go directly to SinoPac. After SinoPac applies the payment to the factored invoice, paying down the loan balance, the remaining funds, if any, are available for our use. The revolving credit line’s terms require monthly interest payments based on borrowed amounts at a floating interest rate, calculated as the prime rate of interest (3.25% at September 30, 2011) plus 1.75%.  The credit line matures September 30, 2012.

The credit line is secured by certain of our assets.  The credit line contains standard financial covenants that require us to comply with minimum quarterly liquidity and profitability thresholds and standard non-financial covenants that include quarterly and annual reporting requirements and certain operational restrictions.

As of June 30, 2011, we were in not in compliance with the financial covenants of the Bank SinoPac asset based loan agreement. We have not received a waiver of our covenant violation as of June 30, 2011 and are still in process of obtaining the waiver.

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LEASES

12 Months Ended

Jun. 30, 2011

Notes to Financial Statements

LEASES

NOTE 7 - LEASES

We lease our office facilities in Santa Ana, California and various locations in Hong Kong, Taiwan, and mainland China. The lease agreements expire in October 2011 for the Taiwan office, various months in 2012 for the mainland China and Hong Kong offices and September 2016 for the Santa Ana office. The leases may require us to pay insurance, taxes, and other expenses related to the leased space. Rent expense in 2011 and 2010 was $232,200 and $67,601, respectively. Minimum lease payments for future fiscal years ending June 30 are:

2012	$	449,656
2013		313,267
2014		303,695
2015		311,926
2016		480,563
	$	1,859,107

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CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)	12 Months Ended
	Jun. 30, 2011	Jun. 30, 2010
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$ 953,885	$ (2,238,947)
Adjustments to reconcile net income (loss) to net cash used in operating activities
Provision for bad debts and sales returns	514,982	18,935
Provision for obsolete inventory	(193,139)
Depreciation	34,791
Loss on disposal of fixed assets	24,410
Amortization	749,837	20,142
Changes in operating assets and liabilities, net of effects from acquisition:
Accounts receivable	(6,410,576)	(2,522,599)
Inventory	(10,793,732)	(372,204)
Other assets	(108,049)	2,291
Accounts payable	12,455,746	4,889,999
Accrued expenses	886,999
Other	(25,000)
Net cash used in operating activities	(1,909,846)	(202,383)
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property and equipment	(486,757)	(36,773)
Cash acquired in acquisition of net assets and liabilities of ASI	154,971
Net cash used in investing activities	(331,786)	(36,773)
CASH FLOWS FROM FINANCING ACTIVITIES
Line of Credit From Sinopac	4,950,000
Line of Credit payment to Sinopac	(913,713)
Restricted Cash	(100,000)
Proceeds from affiliate		47,640
Net cash provided by financing activities	3,936,287	47,640
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	1,694,655	(191,516)
CASH AND CASH EQUIVALENTS, BEGINNING BALANCE	129,939	321,455
CASH AND CASH EQUIVALENTS, ENDING BALANCE	1,824,594	129,939
SUPPLEMENTAL DISCLOSURES:
Cash paid during the year for:Interest	33,657
Cash paid during the year for: Income tax	12,333
Conversion of accounts payable and accrued expenses to equity	3,000,000
Conversion of related party notes payable to equity	1,904,309
Issuance of Common Stock and Warrants for purchase of net assets and liabilities of ASI	$ 6,349,205

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SIGNIFICANT ACCOUNTING POLICIES

12 Months Ended

Jun. 30, 2011

Accounting Policies [Abstract]

SIGNIFICANT ACCOUNTING POLICIES

NOTE 3 – SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION - The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which we refer to throughout this report as US GAAP.

PRINCIPLES OF CONSOLIDATION - The consolidated financial statements include the accounts of AuraSound, Inc. and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated.

FISCAL YEAR END - The Company’s fiscal year ends June 30.

USE OF ESTIMATES - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the financial statement date, and reported amounts of revenue and expenses during the reporting period. Significant estimates primarily relate to the realizable value of accounts receivable, customer programs, vendor programs, inventory, goodwill, intangible and other long-lived assets, income taxes and contingencies and litigation. Actual results could materially differ from these estimates.

CASH, CASH EQUIVALENTS, AND RESTRICTED CASH - 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. We have $100,000 in a restricted cash deposit at a bank in deposit for a letter of credit.

ACCOUNTS RECEIVABLE ALLOWANCE FOR DOUBTFUL ACCOUNTS AND SALES RETURNS - The Company recognizes an allowance for losses on accounts receivable in an amount equal to the estimated probable losses net of recoveries. The allowance is based on an analysis of historical bad debt experience, current receivables aging, and expected future write-offs, as well as an assessment of specific identifiable customer accounts considered at risk or uncollectible. The expense associated with the allowance for doubtful accounts is recognized as selling, general, and administrative expense.

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, 2011 and 2010, the allowance for doubtful accounts amounted to $578,657 and $63,690 respectively.

INVENTORIES - Inventories are valued at the lower of cost (first-in, first-out) or market. We establish inventory reserves for estimated obsolescence, unmarketable, or slow-moving inventory in an amount equal to the difference between the cost of inventory and its estimated realizable value based upon assumptions about future demand and market conditions. If actual demand and market conditions are less favorable than those projected by management, additional inventory reserves could be required.. As of June 30, 2011 and 2010, the allowance for obsolescence amounted to $0 and $193,139 respectively.

PROPERTY, PLANT & EQUIPMENT - Property, plant, and equipment, including leasehold improvements, is 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: 

Machinery and equipment	5 to 10 years
Tooling	2 to 5 years
Computer software and equipment	3 to 5 years
Furniture and fixtures, office equipment	Shorter of remaining life or 7 years

 Improvements to leased property are amortized over the lesser of the life of the lease or the life of the improvements. As of June 30, 2011 and June 30, 2010, the Company had net property, plant and equipment in the amount of $482,503 and $106,465 respectively consisting of the following:

June 30, 2011			June 30, 2010
	Audited			Audited
Machinery and equipment	$	29,479		$	36,281
Tooling		353,172			105,193
Computer software and equipment		10,369			7,411
Leasehold improvements		56,927			—
Furniture and Fixture, office equipment		138,847			—
Total property and equipment		588,794			148,885
Accumulated depreciation		(106,291	)		(42,420	)
Net value of property and equipment	$	482,503			106,465

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

GOODWILL AND INTANGIBLE ASSETS - During 2010, The Company adopted the new guidance from the Financial Accounting Standards Board (“FASB”) on business combinations and non-controlling interests. The Company accounts for business combinations using the acquisition method of accounting and accordingly, the assets and liabilities of the acquired business are recorded at their fair values at the date of acquisition. The excess of the purchase price over the estimated fair values is recorded as goodwill. Any changes in the estimated fair values of the net assets recorded for acquisitions prior to the finalization of more detailed analysis, but not to exceed one year from the date of acquisition, will change the amount of the purchase prices allocable to goodwill. All acquisition costs are expensed as incurred and in-process research and development costs are recorded at fair value as an indefinite-lived intangible asset and assessed for impairment thereafter until completion, at which point the asset is amortized over its expected useful life.

In accordance with ASC 350 (formerly SFAS No. 142, “Intangible—Goodwill and Other”) intangible assets with definite lives are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Impairment indicators include, among other conditions, cash flow deficits, historic or anticipated declines in revenue or operating profit and adverse legal or regulatory developments. We assess potential impairment of our goodwill and intangible assets when there is evidence that recent events or changes in circumstances have made recovery of an asset’s carrying value unlikely.  We also assess potential impairment of our goodwill and intangible assets on an annual basis during our fiscal fourth quarter, regardless if there is evidence or suspicion of impairment. 

If it is determined that such indicators are present and the review indicates that the assets will not be fully recoverable, based on undiscounted estimated cash flow over the remaining amortization periods, the carrying values are reduced to estimated fair market value.  In accordance with ASC 350, a two-step impairment test is required to identify potential goodwill impairment and measure the amount of the goodwill impairment loss to be recognized.

Determining the fair value of a reporting unit (an intangible asset) is judgmental and involves the use of significant estimates and assumptions. We base our fair value estimates on assumptions that we believe are reasonable but are uncertain and subject to changes in market conditions.  

We use the entire company as the reporting unit for purposes of our annual goodwill impairment testing arising from our acquisition of ASI as revenues from this acquisition make up more than 80% or the revenues for the year ended June 30, 2011.

In determining if a triggering event has occurred, we consider not only expectations for growth in the entire US economy, but also expectations for regional growth specific to our sales markets and specific to our industry and product lines.  Declines within the industry’s outlook are reflected in the unit’s revenue projections.

We determined no triggering events occurred that would indicate an impairment of goodwill in fiscal year 2011. In our annual testing for impairment as of June 30, 2011, we determined that no goodwill impairment existed.

The Company recognizes intangible assets 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. Accordingly, intangible assets with definite lives are amortized over their estimated useful life and reviewed for impairment. 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. We recognized intangible assets of customer relationships, a non-compete agreement, and trade names with our ASI acquisition. Intangible assets are amortized over their estimated useful lives from three to ten years.

IMPAIRMENT OF LONG-LIVED ASSETS - The Company assesses the carrying value of long-lived assets, including property and equipment and purchased intangibles subject to amortization, when events or changes in circumstances indicate that the fair value of assets could be less than their net book value. In such event, the Company assesses long-lived assets for impairment by first determining the forecasted, undiscounted cash flows the asset (or asset group) is expected to generate plus the net proceeds expected from the sale of the asset (or asset group). If this amount is less than the carrying value of the asset (or asset group), the Company will then determine the fair value of the asset (or asset group). An impairment loss would be recognized when the fair value is less than the related asset’s net book value, and an impairment expense would be recorded in the amount of the difference. Forecasts of future cash flows are judgments based on the Company’s experience and knowledge of its operations and the industries in which it operates. These forecasts could be significantly affected by future changes in market conditions, the economic environment, including inflation, and purchasing decisions of the Company’s customers.

WARRANTY LIABILITY - Certain of our products are sold with a warranty that provides for repairs or replacement of any defective parts for a period, generally one year, after the sale. At the time of the sale, we accrue an estimate of the cost of providing the warranty based on prior experience with such factors as return rates and repair costs, which factors are reviewed quarterly.

The warranty accrual is based on historical costs of warranty repairs and expected future identifiable warranty expenses, and is included in accrued liabilities in the accompanying consolidated balance sheets. Warranty expenses are included in cost of sales in the accompanying consolidated statements of operations. Changes in estimates to previously established warranty accruals result from current period updates to assumptions regarding repair costs and warranty return rates, and are included in current period warranty expense. As of June 30, 2011 and 2010, the warranty accrual amounted to $220,118 and $0 respectively.

CONCENTRATION OF CREDIT RISK – We have financial instruments that potentially subject the Company to concentrations of credit risk. They 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. At times we may have cash balance above the FDIC insured limits. We do not have a diversified customer base. We control credit risk related to accounts receivable through credit approvals, credit limits when appropriate 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 recognizes revenue when it is realized or realizable and earned. Revenue is considered realized and earned when persuasive evidence of an arrangement exists; delivery has occurred; the fee to its customer is fixed and determinable; and collection of the resulting receivable is reasonably assured; delivery is considered complete when products have been shipped to the customer, title and risk of loss has transferred to the customer, and customer acceptance has been satisfied. The Company records reductions to revenue for estimated customer sales returns, rebates, and certain other customer incentive programs. These reductions to revenue are made based upon reasonable and reliable estimates that are determined by historical experience, contractual terms, and current conditions. The primary factors affecting the Company’s accrual for estimated customer returns include estimated return rates as well as the number of units shipped that have a right of return and those that the customer has an obligation to buy back that has not expired as of the balance sheet date.

SHIPPING AND RECEIVING – Shipping and receiving costs are included as inventory value and relieved when the product is sold.

ADVERTISING COSTS – The Company expenses advertising as incurred.  Total advertising expense was immaterial for the years ended June 30, 2011 and 2010.

VENDOR REBATES - The Company may receive consideration from vendors in the normal course of business in form of cash or product. The Company recognizes a reduction of cost of goods sold when the rebate is received.

RESEARCH AND DEVELOPMENT - Research and development costs are expensed as incurred.

INCOME TAXES - The Company recognizes 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.

The accounting guidance for uncertainties in income tax 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. The Company recognizes a tax benefit from an uncertain tax position in the financial statements only when it is more likely than not that the position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits and a consideration of the relevant taxing authority’s administrative practices and precedents.

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, 2011 and June 30, 2010.

FASB ASC 740 also addresses the determination of whether tax claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under ASC 740, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. ASC 740 also provide guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. During the years ended June 30, 2011 and 2010, the Company did not recognized any tax liabilities related to uncertain tax positions and does not have a balance for such liabilities as of June 30, 2011. 

FAIR VALUE OF FINANCIAL INSTRUMENTS - Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants at the measurement date.

Under the provisions of the Accounting Standards Codification (“ASC”) 820, Fair Value Measurements and Disclosures, there are three levels of inputs that may be used to measure fair value:

Level 1 Quoted prices in active markets for identical assets or liabilities. The carrying value of cash and cash equivalents, trade receivables and payables, prepaid expenses and other current assets, accounts payable, and other payables and liabilities is considered to be representative of their fair values based on the short term nature of these instruments. As such, cash and cash equivalents are classified within Level 1 of the valuation hierarchy.

Level 2 Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets with insufficient volume or infrequent transactions (less active markets), or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated with observable market data for substantially the full term of the assets or liabilities. The Company had no Level 2 assets or liabilities during any period presented.

Level 3 Unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of assets or liabilities. The Company valued the warrants at their time of issue assets or liabilities during any period presented. In determining fair value of the warrants outside valuation firms were used to help assess the value of the warrants under ASC 820. Levels 1, 2 and 3 inputs to the approaches listed below were considered in determining the fair value of the warrants issued. Due to the lack of volume in AuraSound, Inc. stock, the last trading price was not considered representative of fair value. Other valuation factors were considered to determine Fair Value such as:

·Discounted Cash Flow Model

·Market Approach using Guideline Companies

·Cost Approach

·AuraSound Market Indication

·Option Pricing Models to determine marketability discount.

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. Based upon our review and analysis, the Company consists of one reportable business segment as of June 30, 2011 and 2010. 

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.

The Company’s operations in the PRC are subject to specific considerations and significant risks not typically associated with companies in the North America and Western Europe. These include risks associated with, among others, the political, economic and legal environments and foreign currency exchange. The Company’s results may be adversely affected by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things.

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. 

BASIC AND DILUTED NET INCOME/(LOSS) 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.

Potentially dilutive securities, consisting of warrants to purchase shares of our common stock, are not included in the fiscal year 2010 diluted loss per share calculation due to their anti-dilutive effect on the diluted loss per share calculations for that year. Accordingly, there is no difference between the basic and diluted per share calculations for fiscal year 2010. At June 30, 2011 the Company had 14,142,934 potentially dilutive warrant shares outstanding.   

The difference in the weighted average shares outstanding used in the calculation of basic and diluted earnings per share for fiscal year 2011 is as follows:

Net income	$	953,885
Basic:
Weighted average common shares outstanding		13,862,712
Shares used in the computation of basic net income per share		13,862,712
Net income per share—basic	$	0.07
Diluted:
Shares used in the computation of basic net income per share		13,862,712
Net shares assumed issued using the treasury stock method for outstanding common stock warrants		3,355,201
Shares used in the computation of diluted net income per share		17,217,913
Net income per share—diluted	$	0.06

 Warrants having exercise prices that are greater than the per share market price for our common stock have also been excluded from the diluted per share calculation for fiscal year 2011. There were 6,000,000 shares represented by such warrants.

STOCK-BASED COMPENSATION - We use the Black-Scholes option-pricing model to determine the fair value of stock options and the closing market price of our common stock on the date of the grant to determine the fair value of our restricted stock and restricted stock units. Stock-based compensation expense is recorded for all stock options, restricted stock and warrants that are ultimately expected to vest as the requisite service is rendered. We recognize these compensation costs, net of an estimated forfeiture rate, on a straight-line basis over the requisite service period of the award, which is the vesting term of outstanding stock-based awards. As there has been no historical experience to establish a forfeiture rate specific to our company, we would estimate the forfeiture rate based on comparable companies forfeiture experience.

The Company authorized no stock options or other equity based compensation for any employees during the fiscal years ended June 30, 2011 and 2010. 

NEW ACCOUNTING PRONOUNCEMENTS - In August 2009, the Financial Accounting Standards Board (“FASB”) amended guidance related to the measurement of liabilities at fair value, which was effective upon issuance. These amendments clarify that in circumstances in which a quoted price in an active market for the identical liability is not available, we are required to use the quoted price of the identical liability when traded as an asset, quoted prices for similar liabilities, or quoted prices for similar liabilities when traded as assets. If these quoted prices are not available, we are required to use another valuation technique, such as an income approach or a market approach. The adoption of these amendments did not have a material impact on the Company’s consolidated financial statements.

In October 2009, the FASB amended guidance related to revenue recognition that will be effective for the Company beginning July 1, 2010. Under the new guidance on arrangements that include software elements, tangible products that have software components that are essential to the functionality of the tangible product will no longer be within the scope of the software revenue recognition guidance, and software-enabled products will now be subject to other relevant revenue recognition guidance. Additionally, the FASB amended guidance on revenue arrangements with multiple deliverables that are outside the scope of the software revenue recognition guidance. Under the new guidance, when vendor specific objective evidence or third party evidence for deliverables in an arrangement cannot be determined, a best estimate of the selling price is required to separate deliverables and allocate arrangement consideration using the relative selling price method. The new guidance includes new disclosure requirements on how the application of the relative selling price method affects the timing and amount of revenue recognition. The adoption of these amendments is not expected to have a material impact on the Company’s consolidated financial statements.

In December 2009, the FASB amended guidance related to fair value measurements and Disclosures, which was effective beginning the 2^nd quarter of the Company’s 2010 fiscal year, December 31, 2009. These amendments prescribe new disclosures and clarify certain existing disclosure requirements related to fair value measurements. The objective of the amendments was to improve these disclosures and, thus, increase the transparency in financial reporting. The adoption of these amendments did not have a material impact on the Company’s consolidated financial statements.

In February 2010, the FASB amended guidance related to disclosure of subsequent events, which was effective upon issuance. These amendments prescribe that entities that are SEC filers are required to evaluate subsequent events through the date that the financial statements are issued. The adoption of these amendments did not have a material impact on the Company’s consolidated financial statements.

RECLASSIFICATIONS - Certain items related to fiscal year 2010 in the accompanying consolidated financial statements have been reclassified from the prior year to conform to the current year presentation.

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ACQUISITION

12 Months Ended

Jun. 30, 2011

Business Acquisition, Entity Acquired and Reason for Acquisition [Abstract]

ACQUISITION

 NOTE 4 - ACQUISITION

On July 10, 2010, the Company entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) with ASI Holdings Limited (“ASI Holdings”) and ASI Holdings’ wholly-owned subsidiary, ASI Audio Technologies, LLC (“ASI Arizona” and collectively with ASI Holdings, “ASI”). The total purchase price was a fair value of $6,366,775 determined by an outside valuation expert. Pursuant to the Asset Purchase Agreement, the Company agreed to acquire substantially all of the business assets and certain liabilities of ASI, in exchange for the issuance of an aggregate of 5,988,005 shares (the “ASI Transaction Shares”) of unregistered common stock of the Company (“Common Stock”) to the two shareholders of ASI Holdings, and the issuance to Sunny World Associates Limited (“Sunny World”), the owner of 90% of the outstanding shares of ASI Holdings, which is controlled by Harald Weisshaupt, our President and Chief Executive Officer, a five (5) year warrant to purchase an aggregate of 3,000,000 shares of Common Stock (the “ASI Warrant Shares”) at an exercise price of $1.00 per share (the “ASI Warrant”) with vesting based on certain milestones. These milestones were not met in the fiscal year ended June 30, 2011. If the milestones are not met, the warrants expire with no additional adjustments to paid in capital. Of the 5,988,005 shares from the transaction 348,801 remain unissued with a value of $310,696.

Pursuant to the Asset Purchase Agreement, Sunny World was to receive 90% of the ASI Transaction Shares, and Faithful Aim Limited (“Faithful Aim”), the owner of 10% of the outstanding shares of ASI Holdings, was to receive 10% of the ASI Transaction Shares. 

Certain intangible assets of customer relationships with a value of $2,200,000, a non-compete agreement with a value of $1,600,000 and a trade name with a value of $700,000 is included in the ASI purchase.

The following table summarizes the estimated fair values of the assets acquired and the liabilities assumed in the ASI acquisition:

	Amount
Purchase price	$	6,366,775
Fair Value of assets acquired
Current assets		8,885,729
Property & equipment		18,957
Intangible Assets		4,500,000
		13,404,686
Less:
Fair value of liabilities acquired
Current liabilities		13,462,225
Net liabilities acquired		57,539
Goodwill	$	6,424,314

PROFORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION

The following unaudited pro forma condensed combined financial information presents the results of operations of the Company as they may have appeared if the closing of the ASI acquisition, presented in the aggregate, had been completed on July 1, 2010 and July 1, 2009.

	For the year ended
	June 30, 2011		June 30, 2010
Net sales	$	81,614,366	$	31,046,241
Income (Loss) from operations	$	857,026	$	(2,186,675	)
Net Income (Loss)	$	210,685	$	(2,581,584	)

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INCOME TAXES

12 Months Ended

Jun. 30, 2011

Income Taxes Paid, Net [Abstract]

INCOME TAXES

NOTE 12 - INCOME TAXES

The provision for income taxes consists of the following for the year ended June 30, 2011:

	2011
Current
Federal	$	482,585
State		140,218
Total Current	$	622,803

The Company did not record any income tax expense due to net loss during the year ended June 30, 2010. The actual tax benefit differs from the expected tax benefit computed by applying the United States corporate tax rate of 40% to income or loss before income taxes as follows for the years ended June 30, 2011 and 2010:

	2011			2010
Expected tax(expense) benefit		34	%		34	%
State income taxes, net of federal (expense) benefit		6			6
Other changes in valuation allowance		(-	)		(40	)
Total		40	%		—	%

The following table summarizes the significant components of the Company's deferred tax asset at June 30, 2011, and 2010: 

	2011			2010
Deferred tax asset due to:
Net operating loss:	$	5,246,860		$	5,361,680
Trade Accounts receivable		230,505			—
Inventory		87,683			—
Intangibles		184,169			—
Goodwill		(163,498	)		—
Property & Equipment		(141,022	)		—
State Income taxes		47,674			—
Net deferred tax asset	$	5,492,371		$	5,361,680
Valuation allowance	$	(5,492,371	)	$	(5,361,680	)

Aurasound has significant federal and state income tax net operating losses that expires through June 30, 2030. The net operating loss carryforward is subject to certain annual limitations imposed under Section 382 of the Internal Revenue Code of 1986. A full valuation allowance is recorded against the net operating losses carryforwards due to uncertainty regarding their utilization. 

We filed income tax return in the U.S. federal jurisdiction and various state and foreign jurisdictions. As of June 30, 2011, the tax returns for AuraSound, Inc. for the years ending June 30, 2007 to June 30, 2011 remain open to examination by the Internal Revenue Service and various state tax authorities.

Our policy is to recognize any interest related to unrecognized tax benefits in interest expense or interest income. We recognize penalties as additional income tax expense. As of June 30, 2011, we had no uncertain tax positions and therefore accrued no interest or penalties related to uncertain tax positions.

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INVENTORIES

12 Months Ended

Jun. 30, 2011

Inventory Disclosure [Abstract]

INVENTORIES

NOTE 5 - INVENTORIES

Inventories consisted of the following as of June 30, 2011 and 2010:

	2011		2010
Raw materials	$	2,153,802	$	11,230
Finished goods		13,397,158		719,107
Provision for obsolescence		—		(193,139	)
Total	$	15,550,960	$	537,198

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CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY(DEFICIT) (USD $)	Common Stock	Additional Paid-In Capital	Accumulated Deficit	Total
Balance at Jun. 30, 2009	$ 280,720	$ 31,044,476	$ (35,599,842)	$ (4,274,646)
Balance, shares at Jun. 30, 2009	28,071,972
To record reverse stock split, shares	(23,393,310)
Net loss for the year	(2,238,947)			(2,238,947)
Balance at Jun. 30, 2010	46,787	31,278,409	(37,838,789)	(6,513,593)
Balance, shares at Jun. 30, 2010	4,678,662			4,678,662
Shares and warrants issued for acquisition of ASI	56,392	5,999,687		6,059,079
Shares issued for acqusition of ASI, shares	5,639,204
Shares issued for extinguishment of debt of GGEC	60,000	2,940,000		3,000,000
Shares issued for extinguishment of debt of GGEC	6,000,000
Shares issued for extinguishment of debt of Inseat	3,262	1,901,047		1,904,309
Shares issued for extinguishment of debt of Inseat, shares	326,173
Warrant issued for in-lieu settlement of placement agent fees		236,359		236,359
Shares reconciliation	(144)	144
Shares reconciliation, shares	(14,385)
Net loss for the year			953,885	953,885
Balance at Jun. 30, 2011	$ 166,297	$ 42,355,647	$ (36,884,905)	$ 5,637,039
Balance, shares at Jun. 30, 2011	16,629,654			16,629,654

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ORGANIZATION AND OPERATIONS

12 Months Ended

Jun. 30, 2011

Organization, Consolidation and Presentation of Financial Statements [Abstract]

ORGANIZATION AND OPERATIONS

NOTE 1 – ORGANIZATION AND OPERATIONS

DESCRIPTION OF BUSINESS - AuraSound, Inc. (the “Company”, “AuraSound”, “we”, “us” or “our”) specializes in the design, manufacture and sale of high-fidelity loudspeakers and complete audio solutions. Our headquarters is in Santa Ana, California, our manufacturing is sourced from mainland China, and we have sales and support offices in Hong Kong, Taiwan and mainland China. We have almost 25 years of experience delivering industry leading audio solutions to the professional and consumer markets. With our acquisition of ASI in July 2010 we moved from being an audio component supplier to a provider of complete audio solutions which has helped fuel our growth over the past year. We believe we have been widely recognized worldwide via exceptional product reviews, and we differentiate ourselves by offering superior products based on patented technologies. We believe we have an impressive portfolio of customer and technology partners, including many of the leading worldwide brands. We believe our leadership team and internal management processes are among the best in our industry. Our mantra is to deliver the “Ultimate Vision in Sound”.

COMPANY BACKGROUND - Hemcure, Inc. was incorporated under the laws of the state of Minnesota in 1986. On September 8, 2006, Hemcure 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, Hemcure acquired AuraSound, Inc. Aura Sound, a California corporation, was incorporated on July 28, 1999 to engage in the development, commercialization, and sales of audio products, sound systems, and audio components using electromagnetic technology. On February 12, 2008 the Company changed its name from Hemcure, Inc. to AuraSound, Inc.

On July 10, 2010, AuraSound, Inc. entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) with ASI Holdings Limited, a Hong Kong corporation (“ASI Holdings”), and its wholly-owned subsidiary ASI Audio Technologies, LLC, an Arizona limited liability company (“ASI Arizona”), pursuant to which AuraSound agreed to acquire substantially all of the business assets and certain liabilities of ASI Holdings and ASI Arizona (the “ASI Transaction”). This acquisition added the television soundbar product line that is the majority of our current business. See Notes 4 and 13 for additional information.

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RELATED PARTY TRANSACTIONS AND COMMITMENT

12 Months Ended

Jun. 30, 2011

Notes to Financial Statements

RELATED PARTY TRANSACTIONS AND COMMITMENT

NOTE 10 - RELATED PARTY TRANSACTIONS AND COMMITMENT

For the first three months of the year ended June 30, 2010, the Company paid $20,000 per month as a management fee to an entity owned by our former Chairman of the board of directors, Mr. Arthur Liu, for the services provided such as accounting, shipping and receiving, and general administrative. The Company also 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 was 40% of the rent payable by the related entity to the landlord.   Beginning October 1, 2009, the Company entered into a new agreement with the related entity whereby AuraSound provided its own management services and paid 23% of the rent paid to the landlord and certain allocable expenses.  A total of $53,997 was paid to the related party for rent and allocable expenses during the year ended June 30, 2010.

As of June 30, 2010, the total amount of $460,198 was due to the affiliate for various costs and expenses.

We ended the management services and rent in the year ended June 30, 2011, with no expenses recognized for either, and have no further commitment to Mr. Liu or any other related party.

GGEC provides manufacturing services to AuraSound and in the year ending June 30, 2011 we purchased $58,503, 393 in goods and services from them, representing approximately 85% of our cost of sales.

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SUBSEQUENT EVENTS

12 Months Ended

Jun. 30, 2011

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

NOTE 14 - SUBSEQUENT EVENTS

·On July 27, 2011, the Board of Directors (the “Board”) of AuraSound, Inc. (the “Company”) approved and adopted the Company’s 2011 Stock Incentive Plan (the “2011 Plan”).

The 2011 Plan is an “omnibus” stock plan consisting of a variety of equity vehicles to provide flexibility in implementing equity awards, including incentive stock options, non-qualified stock options, restricted stock grants and stock appreciation rights.  Participants in the 2011 Plan may be granted any one of the above equity awards or any combination thereof, as determined by the Board.  A maximum of 5,000,000 shares of common stock may be issued and sold under all awards granted under the 2011 Plan.  The maximum number of shares of common stock with respect to one or more awards that may be granted to any one participant during any calendar year shall be 200,000.

The Board may delegate administration of the 2011 Plan to a committee comprised of no fewer than two members of the Board, which shall have such powers and authority as may be necessary or appropriate to administer the 2011 Plan.  Any person who is an employee of or a consultant or other service provider to the Company or any affiliate thereof, or any person who is a non-employee director of the Company is eligible to be designated by the administrator of the 2011 Plan to receive awards and become a participant under the 2011 Plan.

Unless previously terminated by the Board, the 2011 Plan will terminate on July 27, 2021, which is the tenth anniversary of the date of its adoption by the Board.

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CONSOLIDATED BALANCE SHEETS (USD $)	Jun. 30, 2011	Jun. 30, 2010
CURRENT ASSETS:
Cash and cash equivalents	$ 1,824,594	$ 129,939
Restricted Cash	100,000
Trade accounts receivable, net of allowance for doubtful accounts and sales returns of $578,657 in 2011 and $63,690 in 2010	14,031,596	3,432,135
Inventory	15,550,960	537,198
Other current assets	108,049
TOTAL CURRENT ASSETS	31,615,199	4,099,272
Property and Equipment, net	482,503	106,465
Intangible Assets, net	3,750,163
Goodwill	6,424,314
TOTAL ASSETS	42,272,179	4,205,737
CURRENT LIABILITIES
Accounts payable	2,940,602	6,916,004
Related party payables	28,255,349
Accrued expenses	469,403	800,044
Accrued tax	622,803
Due to officer		25,000
Due to Bank Sinopac	4,036,287
Notes payable		2,978,282
Shares to be issued	310,696
TOTAL CURRENT LIABILITIES	36,635,140	10,719,330
COMMITMENTS AND CONTINGENCIES (NOTES 7 and 10))
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Preferred stock - $0.01 par value, 3,333,333 shares authorized and none outstanding at June 30, 2011 and June 30, 2010.
Common stock - $0.01 par value, 100,000,000 shares authorized at June 30, 2011 and 16,666,667 shares authorized at June 30, 2010; 16,629,654 and 4,678,662 outstanding at June 30, 2011 and June 30, 2010.	166,297	46,787
Additional paid in capital	42,355,647	31,278,409
Accumulated Deficit	(36,884,905)	(37,838,789)
Total Stockholder’s Equity (Deficit)	5,637,039	(6,513,593)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)	$ 42,272,179	$ 4,205,737