-----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, BxTDDQorEh4qNT7my5+vZmCF8V+vgorlSkaje6KTUV2C+5DkKY0jvB90/fOJDvfB B8Gm+/ttS46PQMBPu63ROQ== 0000826253-00-000016.txt : 20000214 0000826253-00-000016.hdr.sgml : 20000214 ACCESSION NUMBER: 0000826253-00-000016 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19991130 FILED AS OF DATE: 20000211 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: 532485 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 November 30, 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 X NO Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at 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 3 November 30, 1999 and February 28, 1999 Condensed Consolidated Statement of Operations for the Three Months and Nine 4 Months Ended November 30, 1999 and 1998 Condensed Consolidated Statements of Cash Flows for the 5 Nine Months Ended November 30, 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 13 ITEM 6. Exhibits and Reports on Form 8-K 13 SIGNATURES 14 AURA SYSTEMS, INC. AND SUBSIDIARIES QUARTER ENDED NOVEMBER 30, 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)
November 30, February 28, Assets 1999 1999 ------------- --------------- Current assets Cash and equivalents $ 291,116 $ 3,822,210 Receivables-net 1,948,082 8,380,414 Inventories 11,769,052 18,477,058 Note Receivable 1,443,323 250,000 Prepayments -- 3,435,645 Other current assets 506,302 2,124,535 --------------- --------------- Total current assets 15,957,875 36,489,862 Property and equipment, at cost 43,195,159 47,976,699 Less accumulated depreciation and amortization (13,979,824) (10,994,734) ---------------- --------------- Net property and equipment 29,215,335 36,981,965 Long-Term investments 2,223,835 2,923,835 Long-Term receivables 2,500,000 2,500,000 Patents and trademarks, net 4,791,628 5,293,278 Goodwill, net -- 5,383,208 Other assets 2,935,968 571,244 --------------- ---------------- Total $ 57,624,641 $ 90,143,392 =============== ================ Liabilities and Stockholder's Equity Current liabilities: Notes payable $ 3,506,701 $ 8,787,113 Convertible note-unsecured 2,000,000 2,000,000 Accounts payable 15,334,386 22,515,842 Accrued expenses 8,619,909 8,056,783 --------------- ---------------- Total current liabilities 29,460,996 41,359,738 Notes payable and other liabilities 20,580,142 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. 219,024,519 218,693,245 Cumulative currency translation adjustment (365,932) (365,932) Accumulated deficit (247,556,866) (231,980,970) ----------------- ------------------- Total stockholders' equity (28,898,279) (13,653,657) ---------------- ------------------ Total $ 57,624,641 $ 90,143,392 =============== =================
See accompanying notes to condensed consolidated financial statements. AURA SYSTEMS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS THREE AND NINE MONTHS ENDED NOVEMBER 30, 1999 AND 1998 (Unaudited)
Three Months Nine Months 1999 1998 1999 1998 ---- ---- ---- ---- Net Revenues $ 1,089,984 $ 33,931,756 $ 6,315,065 $ 105,487,348 Cost of goods and overhead 3,042,232 44,808,406 11,310,615 100,358,647 --------- ---------- --------------- --------------- Gross Profit (1,952,248) (10,876,650) (4,995,550) 5,128,701 Expenses Selling, general and administrative 1,310,316 15,291,137 7,331,592 31,625,291 Research and development 128,594 283,638 373,215 1,105,371 ------------- -------------- -------------- -------------- Total costs and expenses 1,438,910 15,574,775 7,704,807 32,730,662 -------------- -------------- -------------- ---------- Income (loss) from operations (3,391,158) (26,451,425) (12,700,357) (27,601,961) Other (income) and expense Equity in losses of unconsolidated -- joint ventures -- 175,000 675,000 (Gain) loss on sale of subsidiary -- -- (877,512) -- Loss on disposition of assets 144,248 -- 1,549,297 -- Gain on sale and issuance of subsidiary stock and other assets -- -- -- (1,432,627) Other income (249,801) (906,428) (272,460) (1,214,530) Legal settlements and costs -- 1,300,000 -- 7,600,000 Interest expense-net 904,042 3,021,611 2,476,214 8,766,274 -------------- -------------- -------------- -------------- Income (loss) before income taxes and minority interests (4,189,647) (30,041,608) (15,575,896) (41,996,078) Provision (benefit) for taxes -- (1,589,200) -- (647,200) Minority interest in income (loss) of consolidated subsidiary -- (5,317,533) -- (4,551,673) ------------- ----------- --------------- ---------------- Net income (loss) $ (4,189,647) $(23,134,875) $(15,575,896) $ (36,797,205) =============== ============ ============ ============== Net income (loss) per common share-basic $ (.04) $ (.27) $ (.14) $ (.44) =============== ================ =============== =============== Weighted average shares used to compute net income (loss) per share 107,822,043 86,413,616 107,810,152 83,011,249 ============= ========== ================ ==========
See accompanying notes to condensed consolidated financial statements. AURA SYSTEMS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED NOVEMBER 30, 1999 AND 1998 (Unaudited)
1999 1998 ------------ ------------- Net cash (used) in operations $ (6,796,443) $ (13,970,789) ----------------- ------------ Cash flows from investing activities: Proceeds from sale of subsidiary 1,000,000 -- Additions to property and equipment (324,194) (11,896,567) Note receivable 2,696,000 -- Equity investments -- (5,000,000) Proceeds from sale of subsidiary stock -- 1,611,873 -------------- -------------- Net cash provided by (used) in investing activities 3,371,806 (15,284,694) Cash flows from financing activities: Net proceeds (repayment) from short-term borrowing -- 5,360,734 Proceeds from issuance of convertible debt -- 12,000,000 Net proceeds (repayment) of debt (115,757) 1,450,000 Proceeds from exercise of stock options -- 103,000 Proceeds from exercise of warrants 9,300 7,574,358 ---------------- ---------------- Net cash provided (used) by financing activities: (106,457) 26,488,092 --------------- --------------- Net increase (decrease) in cash and cash equivalents (3,531,094) (2,767,391) Cash and cash equivalents at beginning of year 3,822,210 6,079,411 --------------- --------------- Cash and cash equivalents at end of period $ 291,116 $ 3,312,020 ================ =============== Supplemental disclosures of cash flow information Cash paid during the period for: Interest $ 231,098 $ 3,746,051 Income Tax 0 942,000 ============== ==============
Supplemental disclosure of noncash investing and financing activities: In the nine months ended November 30, 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. In the nine months ended November 30, 1998, $3,741,878 of convertible notes payable were converted into common stock. 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 nine months ended November 30, 1998. 2) Capital In the nine months ended November 30,1999, warrants to purchase 70,000 shares of common stock were exercised. In the nine months ended November 30, 1998, $3,741,878 of convertible notes were converted into common stock of the Company. 3) Significant Customers The Company sold sound related products and computer related products to four significant customers during the nine months ended November 30, 1998. Sales of speakers to a single major electronics retailer accounted for approximately $7.6 million in the period ended November 30, 1998 as compared to approximately $11.1 million in the prior year comparable period. Sales of communication and multimedia products to three major mass merchandisers accounted for approximately $49.9 million in the nine months ended November 30, 1998 as compared to approximately $39.6 million in the prior year period. 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. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 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. Net revenue for the three and nine month periods ended November 30, 1999 decreased by $33,822,758 and $99,172,283 to $1,089,984 and $6,315,065 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, the sale of the Company's wholly owned subsidiary MYS, and the sale of the assets of AuraSound. These subsidiaries accounted for approximately 92% of sales in the prior year nine month period. The Company sold sound related products and computer related products to four significant customers during the nine months ended November 30, 1998. Sales of speakers to a single major electronics retailer accounted for approximately $7.6 million in the period ended November 30, 1998 as compared to approximately $11.1 million in the prior year comparable period. Sales of communication and multimedia products to three major mass merchandisers accounted for approximately $49.9 million in the nine months ended November 30, 1998 as compared to approximately $39.6 million in the prior year period. None of the above customers are related or affiliated with the Company or any customers of the Company. Neither of the above two subsidiaries are included in the current year financial statements. Cost of goods and overhead for the three and nine months ended November 30, 1999 decreased by $41,766,174 and $89,048,032 in comparison with the corresponding periods in the prior year due primarily to the disposition of the Company's NewCom, MYS and AuraSound subsidiaries. General and administrative costs decreased for the three and nine month periods by $13,980,821 and $24,293,699 respectively primarily due to the decrease in personnel and support services resulting from the sale of the Company's MYS subsidiary, the assets of the Company's AuraSound subsidiary and the cessation of business of the Company's previously majority owned subsidiary, NewCom. Included in cost of goods and overhead and general and administrative costs for the three and nine months ended November 30, 1999, is depreciation and amortization of $1,800,281 and $5,472,297, respectively. Research and development costs for the three and nine months ended November 30, 1999 decreased by $155,044 and $732,156 as the Company focused its reduced resources on the sales and marketing of the Company's AuraGen product. In the nine months ended November 30, 1999, the Company recorded a gain of $877,512 on the sale of its MYS subsidiary and a loss on the disposition of the assets of the AuraSound subsidiary of $1,405,049. In the nine months ended November 30, 1998, the Company recorded a gain on the sale of stock in its majority owned subsidiary NewCom of approximately $1.4 million. Net interest expense decreased by $2,117,569 to $904,042 and $6,290,060 to $2,476,214 in the three and nine months ended November 30, 1999 due to a quarterly fee being charged to interest expense in the prior year period and the inclusion of the Company's MYS and NewCom subsidiary in the prior year period. Liquidity and Capital Resources In the nine months ended November 30, 1999, cash decreased by $3,531,094 to $291,116 from $3,822,210 at February 28, 1999. Accounts payable and accrued expenses decreased by $6,618,330 from February 28, 1999. Inventories decreased by $6,708,006 and accounts receivable decreased by $6,432,332. Cash flows used in operations decreased by $7,174,346 compared to the prior year nine months. Working capital was a negative $13,503,121 as compared to a negative $4,869,876 at the fiscal year end level, with the current ratio declining to .54:1 from .88:1. In the nine months ended November 30, 1999, the Company received proceeds of $9,300 from the exercise of warrants. In the nine months ended November 30, 1998, the Company received proceeds of $12,000,000 from the sale of convertible notes payable. In this same period $3,741,878 of previously issued convertible notes were converted into common stock of the Company. 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 its existing operations 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 debt 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 fourth 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: None 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 9-MOS FEB-29-2000 MAR-01-1999 NOV-30-1999 291,116 0 1,948,082 0 11,769,052 15,957,875 43,195,159 (13,979,824) 57,624,641 29,460,996 0 219,024,519 0 0 0 57,624,641 6,315,065 6,315,065 11,310,615 19,015,922 399,325 0 2,476,214 (15,575,896) 0 (15,575,896) 0 0 0 (15,575,896) (.14) (.14)
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