-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BUTJCDBkmS7LPePPTSrbX9Cwd7LraQOpb8/zj1NzVOekKLrG33qbzHnyYWHO5Gb0 U/UU6595zKa/LMtBg1yc9A== 0000826253-00-000014.txt : 20000211 0000826253-00-000014.hdr.sgml : 20000211 ACCESSION NUMBER: 0000826253-00-000014 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990831 FILED AS OF DATE: 20000210 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AURA SYSTEMS INC CENTRAL INDEX KEY: 0000826253 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-COMPUTER & PERIPHERAL EQUIPMENT & SOFTWARE [5045] IRS NUMBER: 954106894 STATE OF INCORPORATION: DE FISCAL YEAR END: 0228 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-17249 FILM NUMBER: 531909 BUSINESS ADDRESS: STREET 1: 2335 ALASKA AVE CITY: EL SEGUNDO STATE: CA ZIP: 90245 BUSINESS PHONE: 3106435300 MAIL ADDRESS: STREET 1: 2335 ALASKA AVE CITY: EL SEGUNDO STATE: CA ZIP: 90245 10-Q 1 QUARTERLY REPORT FOR AURA SYSTEMS SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarter Ended August 31, 1999 Commission File Number 0-17249 AURA SYSTEMS, INC. (Exact name of Registrant as specified in its charter) Delaware 95-4106894 (State or other jurisdiction (I.R.S. Employer Identification No.) of incorporation or organization) 2335 Alaska Ave. El Segundo, California 90245 (Address of principal executive offices) Registrant's telephone number, including area code: (310) 643-5300 Former name, former address and former fiscal year, if changed since last report: None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: YES NO X Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at February 4, 2000 Common Stock, par value 177,249,203 Shares $.005 per share AURA SYSTEMS, INC. AND SUBSIDIARIES INDEX Page No. PART I. FINANCIAL INFORMATION ITEM 1. Financial Statements Statement Regarding Financial Information 2 Condensed Consolidated Balance Sheets as of August 31, 1999 3 and February 28, 1999 Condensed Consolidated Statement of Operations for the Three Months and Six 4 Months Ended August 31, 1999 and 1998 Condensed Consolidated Statements of Cash Flows for the Six Months Ended 5 August 31, 1999 and 1998 Notes to Condensed Consolidated Financial Statements 6 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9 PART II. OTHER INFORMATION ITEM 1. Legal Proceedings 12 ITEM 6. Exhibits and Reports on Form 8-K 12 SIGNATURES 13 AURA SYSTEMS, INC. AND SUBSIDIARIES QUARTER ENDED AUGUST 31, 1999 PART I. FINANCIAL INFORMATION The financial statements included herein have been prepared by Aura Systems, Inc. (the "Company"), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC"). As contemplated by the SEC under Rule 10-01 of Regulation S-X, the accompanying financial statements and footnotes have been condensed and therefore do not contain all disclosures required by generally accepted accounting principles. However, the Company believes that the disclosures are adequate to make the information presented not misleading. These financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's Form 10-K for the year ended February 28, 1999 as filed with the SEC (file number 0-17249). AURA SYSTEMS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
August 31, February 28, Assets 1999 1999 ------------- --------------- Current assets Cash and equivalents $ -- $ 3,822,210 Receivables-net 1,301,967 8,380,414 Inventories 11,963,602 18,477,058 Notes Receivable 2,416,776 250,000 Prepayments -- 3,435,645 Other current assets 129,279 2,124,535 --------------- --------------- Total current assets 15,811,624 36,489,862 Property and equipment, at cost 42,941,669 47,976,699 Less accumulated depreciation and amortization (12,354,613) (10,994,734) ---------------- --------------- Net property and equipment 30,587,056 36,981,965 Long-Term investments 2,373,835 2,923,835 Long-Term receivables 3,901,774 2,500,000 Patents and trademarks, net 4,949,772 5,293,278 Goodwill, net -- 5,383,208 Other assets 3,524,283 571,244 --------------- ---------------- Total $ 61,148,344 $ 90,143,392 ========== ================ Liabilities and Stockholder's Equity Current liabilities: Notes payable $ 3,606,701 $ 8,787,113 Convertible note-unsecured 2,000,000 2,000,000 Accounts payable 15,216,251 22,515,842 Accrued expenses 8,652,298 8,056,783 --------------- ---------------- Total current liabilities 29,475,250 41,359,738 Notes payable and other liabilities 20,221,918 25,955,529 --------------- ---------------- Convertible notes 36,481,782 36,481,782 --------------- ---------------- COMMITMENTS AND CONTINGENCIES Stockholders' equity Common stock par value $.005 per share paid in capital. Issued and outstanding 107,822,043 and 107,752,043 shares respectively. 218,702,545 218,693,245 Cumulative currency translation adjustment (365,932) (365,932) Accumulated deficit (243,367,219) (231,980,970) --------------- ------------------- Total stockholders' equity (25,030,606) (13,653,657) ---------------- ---------------- Total $ 61,148,344 $ 90,143,392 ============== =================
See accompanying notes to condensed consolidated financial statements. AURA SYSTEMS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS THREE AND SIX MONTHS ENDED AUGUST 31, 1999 AND 1998 (Unaudited)
Three Months Six Months 1999 1998 1999 1998 ---- ---- ---- ---- Net Revenues $2,644,388 $39,103,054 $5,225,081 $ 71,555,592 Cost of goods and overhead 3,622,715 31,132,222 8,268,383 55,550,241 --------- ---------- --------- ---------- Gross Profit (978,327) 7,970,832 (3,043,302) 16,005,351 Expenses Selling, general and administrative 2,723,850 9,236,673 6,021,276 16,334,154 Research and development 128,494 525,387 244,621 821,733 -------------- -------------- --------------- -------------- Total costs and expenses 2,852,344 9,762,060 6,265,897 17,155,887 -------------- -------------- -------------- ---------- Income (loss) from operations (3,830,671) (1,791,228) (9,309,199) (1,150,536) Other (income) and expense Equity in losses of unconsolidated joint ventures -- 175,000 -- 500,000 (Gain) loss on sale of subsidiary -- -- (877,512) Loss on disposition of assets 1,405,049 -- 1,405,049 Other income 110,701 (170,906) (22,659) (1,740,729) Legal settlements and legal costs -- 6,300,000 -- 6,300,000 Interest expense-net 774,350 3,005,190 1,572,172 5,744,663 ------------ ------------ ------------- ------------- Income (loss) before income taxes and minority interests (5,899,369) (11,100,512) (11,386,249) (11,954,470) Provision for taxes -- 314,000 -- 942,000 Minority interests in income of consolidated subsidiaries -- 264,863 -- 765,860 ------------ ------------ ------------- ------------- Net income (loss) $ (5,899,369) $(11,679,375) $ (11,386,249) $(13,662,330) ============== ========== ============ ============ Net income (loss) per common share-basic (.06) $ (.14) $ (.11) $ (.17) =============== ====== ============== ====== Weighted average shares used to compute net income (loss) per share 107,822,043 82,630,599 107,804,271 81,328,557 ================ ========== ================ ==========
See accompanying notes to condensed consolidated financial statements. AURA SYSTEMS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED AUGUST 31, 1999 AND 1998 (Unaudited)
1999 1998 ----------- ------------- Net cash (used) in operations $ (6,074,253) $ (8,196,839) --------------- --------------- Cash flows from investing activities: Proceeds from sale of subsidiary 1,000,000 -- Equity investments -- (5,000,000) Additions to property and equipment (70,704) (10,736,873) Note Receivable 1,329,204 -- Net cash provided by (used) in investing activities 2,258,000 (15,736,873) -------------- --------------- Cash flows from financing activities: Net proceeds (repayment) from short-term borrowing -- 5,419,324 Proceeds from issuance of convertible debt -- 8,000,000 Net proceeds (repayment) of debt (15,757) 1,505,300 Proceeds from exercise of stock options -- 103,000 Proceeds from exercise of warrants 9,300 7,574,358 --------------- --------------- Net cash provided by financing activities: (6,457) 22,601,982 --------------- --------------- Net increase (decrease) in cash (3,822,210) (1,331,730) Cash and cash equivalents at beginning of year 3,822,210 6,079,411 --------------- --------------- Cash and cash equivalents at end of period $ 0 $ 4,747,681 ================ =============== Supplemental disclosures of cash flow information Cash paid during the period for: Interest $ 145,188 $ 2,975,814 Income Tax 0 949,200 ============== ==============
Supplemental disclosure of noncash investing and financing activities: In the six months ended August 31, 1999, the Company sold its MYS subsidiary for $4.2 million in the form of a note receivable in the amount of $3.2 million and a cash down payment of $1 million. The Company also sold the assets of its AuraSound subsidiary for a note receivable of $2 million. See accompanying notes to condensed consolidated financial statements. AURA SYSTEMS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1) Management Opinion The condensed consolidated financial statements include the accounts of Aura Systems, Inc. ("the Company") and subsidiaries from the effective dates of acquisition. All material inter-company balances and inter-company transactions have been eliminated. In the opinion of management, the accompanying condensed consolidated financial statements reflect all adjustments (which include only normal recurring adjustments) and reclassifications for comparability necessary to present fairly the financial position and results of operations as of and for the three and six months ended August 31, 1999. 2) Capital In the six months ended August 31, 1999, warrants to purchase 70,000 shares of common stock of the Company were exercised. In the six months ended August 31, 1998, the Company received proceeds of $7,677,358 from the exercise of warrants and options to purchase the Company's common stock. 3) Significant Customers Sales of communication and multimedia products to three major mass merchandisers accounted for approximately $34.5 million in the six months ended August 31, 1998. None of the above customers are related or affiliated with the Company or any customers of the Company. 4) Contingencies The Company is engaged in various legal actions See the Company's Form 10-K, Item 3 - Legal Proceedings, for the year ended February 28, 1999 as filed with the SEC (file number 0-17249) for a description of the legal actions. To the extent that judgment has been rendered, appropriate provision has been made in the financial statements. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This Report may contain forward-looking statements, which involve risks and uncertainties. The Company's actual results may differ materially from the results discussed in such statements. Certain factors could also cause actual results to differ materially from those discussed in such forward-looking statements, including factors discussed in the Company's Form 10-K for the period ended February 28, 1999, and factors discussed in this Report. Results of Operations Revenue for the three and six month periods ended August 31, 1999 decreased by $36,458,666 and $66,330,511 to $2,644,388 and $5,225,081 from the corresponding periods in the prior year. The decrease in revenue is primarily attributable to the cessation of operations by the Company's previously majority owned subsidiary, NewCom, and the sale of the Company's wholly owned subsidiary MYS. Approximately 88% of the sales in the proceeding year six months were attributable to these two subsidiaries. The Company's NewCom subsidiary sold computer related products to three significant customers during the six months ended August 31, 1998. Sales of communication and multimedia products to these three major mass merchandisers accounted for approximately $34.5 million in the six months ended August 31, 1998. There are no such sales in the current year period. None of the above customers are related or affiliated with the Company or any customers of the Company. Cost of goods and overhead for the three and six months ended August 31, 1999 decreased by $27,509,507 and $47,281,858 in comparison with the corresponding periods in the prior year as a result of the decrease in sales discussed above. General and administrative costs decreased for the three and six month periods by $6,512,823 and $10,312,878 due primarily to the decrease in personnel and support services related to the disposition of the two subsidiaries noted above. Included in cost of goods and overhead and general and administrative costs for the three and six months ended August 31, 1999, is depreciation and amortization of $1,800,002 and $3,672,016, respectively. Research and development costs for the three and six months ended August 31, 1999 decreased by $396,893 and $577,112 as the Company focused its reduced resources on marketing and sales of the Company's product, the AuraGen. In the period ended August 31, 1999, the Company recorded a gain on the sale of its MYS subsidiary of $887,512, and a loss on the disposition of assets from the sale of its sound assets of $1,405,049. In the six months ended August 31, 1998, the Company recorded a gain on the sale of stock in its then majority owned subsidiary NewCom of approximately $1.4 million. Net interest expense decreased by $2,230,840 to $774,350 and $4,172,491 to $1,572,172 in the three and six months ended August 31, 1999. Interest expense in the prior year periods included a quarterly fee being charged to interest expense, and higher borrowing rates associated with the two subsidiaries disposed of in the current year. Liquidity and Capital Resources At August 31, 1999, the Company had no cash as compared to a cash balance of $3,822,210 at February 28, 1999. Accounts payable and accrued expenses decreased by $6,704,076 from February 28, 1999. Inventories decreased by $6,513,456, and accounts receivable decreased by $7,078,447. Cash flows used in operations decreased by $2,122,586 compared to the prior year six months. Working capital was a negative $13,663,626 at August 31, 1999 compared to a negative $4,869,876 at the Fiscal year ended February 28, 1999, with the current ratio declining to .54:1 from .88:1 at the Fiscal year end. In the six months ended August 31, 1999, the Company received proceeds of $9,300 from the exercise of warrants. In the six months ended August 31, 1998, the Company received proceeds of $7,677,358 from the exercise of warrants and options to purchase the Company's stock. In the past the Company's cash flow generated from operations has not been sufficient to completely fund its working capital needs. Accordingly, the Company has also relied upon external sources of financing to maintain its liquidity. In order to finance continued growth it will be necessary for the Company to obtain additional working capital from external sources. The Company is presently seeking additional sources of financing, including bank and equity financing. No assurances can be provided that these funding sources will be available at the times and in the amounts required. The inability of the Company to obtain sufficient working capital at the times and in the amounts required would have a material adverse effect on the Company's business and operations. For additional information regarding the Company's financial condition, see the Company's Form 10-K, Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations for the year ended February 28, 1999 as filed with the SEC (file number 0-17249). Forward Looking Statements The Company wishes to caution readers that important factors, in some cases, have affected, and in the future could affect, the Company's actual results and could cause the Company's actual consolidated results for the third quarter of Fiscal 2000, and beyond, to differ materially from those expressed in any forward-looking statements made by, or on behalf of the Company. Such factors include, but are not limited to, the following risks and contingencies: Changed business conditions in the consumer electronic and automotive industries and the overall economy; increased marketing and manufacturing competition and accompanying prices pressures; contingencies in initiating production at new factories along with their potential underutilization, resulting in production inefficiencies and higher costs and start-up expenses and; inefficiencies, delays and increased depreciation costs in connection with the start of production in new plants and expansions. Relating to the above are potential difficulties or delays in the development, production, testing and marketing of products, including, but not limited to, a failure to ship new products and technologies when anticipated. There might exist a difficulty in obtaining raw materials, supplies, power and natural resources and any other items needed for the production of Company and another products, creating capacity constraints limiting the amounts of orders for certain products and thereby causing effects on the Company's ability to ship its products. Manufacturing economies may fail to develop when planned, products may be defective and/or customers may fail to accept them in the consumer marketplace. In addition to the above, risks and contingencies may exist as to the amount and rate of growth in the Company's selling, general and administrative expenses, and the impact of unusual items resulting from the Company's ongoing evaluation of its business strategies, asset valuations and organizational structures. Furthermore, any financing or other financial incentives by the Company under or related to major infrastructure contracts could result in increased bad debt or other expenses or fluctuation of profit margins from period to period. The focus by some of the Company's businesses on any large system order could entail fluctuating results from quarter to quarter. The effects of, and changes in, trade, monetary and fiscal policies, laws and regulations, other activities of governments, agencies and similar organizations, and social and economic conditions, such as trade restrictions impose yet other constraints on any company statements. The cost and other effects of legal and administrative cases and proceedings present another factor which may or may not have an impact. PART II - OTHER INFORMATION ITEM 1 Legal Proceedings For information regarding pending legal proceedings, see Note 4 to the Company's Condensed Consolidated Financial Statements appearing elsewhere herein. ITEM 6 Exhibits and Reports on Form 8-K a) Exhibits: See Exhibit Index b) Reports On Form 8-K: Form 8-K Filed on June 16, 1999 regarding Item 5 - Other Events SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. AURA SYSTEMS, INC. (Registrant) Date: February 10, 2000 By: /s/Steven C. Veen ------------------------------ ---------------------------------- Steven C. Veen Senior Vice President Chief Financial Officer (Principal Financial and Accounting Officer) INDEX TO EXHIBITS Exhibit Sequential Number Page No. EX-27 Financial Data Schedule EX-27 2 FINANCIAL DATA SCHEDULE
5 6-MOS FEB-29-2000 MAR-01-1999 AUG-31-1999 0 0 1,301,967 0 11,963,602 15,811,624 42,941,669 (12,354,613) 61,148,344 29,475,250 0 218,702,545 0 0 0 61,148,344 5,225,081 5,225,081 8,268,383 14,534,280 504,878 0 1,572,172 (11,386,249) 0 (11,386,249) 0 0 0 (11,386,249) (.11) (.11)
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