10-Q/A 1 may10qa.txt MAY 10Q/A SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q/A QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarter Ended May 31, 2000 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 June 14, 2000 Common Stock, par value 250,228,540 Shares $.005 per share AURA SYSTEMS, INC. AND SUBSIDIARIES INDEX
Page No. < PART I. FINANCIAL INFORMATION ITEM 1. Financial Statements Statement Regarding Financial Information 1 Condensed Consolidated Balance Sheets as of May 31, 2000 and February 29, 2000 2 Condensed Consolidated Statement of Operations for the three Months Ended May 31, 2000 and 1999 3 Condensed Consolidated Statements of Cash Flows for the Three Months Ended May 31, 2000 and 1999 4 Notes to Condensed Consolidated Financial Statements 5 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 6 PART II. OTHER INFORMATION ITEM 1. Legal Proceedings 9 ITEM 4. Submission of Matters to Vote by Security Holders 9 ITEM 6. Exhibits and reports on Form 8-K 9 SIGNATURES 11
2 3 AURA SYSTEMS, INC. AND SUBSIDIARIES QUARTER ENDED MAY 31, 2000 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 29, 2000 as filed with the SEC (file number 0-17249).
AURA SYSTEMS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) May 31, February 29, Assets 2000 2000 * ------------- ---------------- Current assets Cash and equivalents $ 406,175 $ 260,437 Receivables-net 1,722,797 2,459,200 Inventories 10,004,240 11,189,227 Notes receivable 3,653,476 3,557,007 Other current assets 900,096 360,177 --------------- --------------- Total current assets 16,686,784 17,826,048 --------------- ---------------- Property and equipment, at cost 41,075,400 42,219,417 Less accumulated depreciation and amortization (16,219,505) (15,184,362) ----------------- --------------- Net property and equipment 24,855,895 27,035,055 Long term investments 2,123,835 2,123,835 Long term receivables 3,684,189 1,250,000 Patents and trademarks, net 4,553,995 4,615,769 Other assets 3,261,586 3,271,831 --------------- ---------------- Total $ 55,166,284 $ 56,122,538 ================ ================ Liabilities and Stockholders' Equity Current liabilities: Notes payable $ 8,742,983 $ 9,899,531 Accounts payable 3,935,704 4,216,004 Accrued expenses 4,703,300 1,634,300 Convertible note, unsecured 250,000 1,250,000 ---------------- ---------------- Total current liabilities 17,631,987 16,999,835 ---------------- ---------------- Notes payable and other liabilities 37,219,555 37,606,695 COMMITMENTS AND CONTINGENCIES Stockholders' equity Common stock par value $.005 per share and additional paid in capital. Issued and outstanding 239,067,065 and 196,975,392 shares respectively. 244,737,866 234,196,092 Common stock not issued - 9,132,774 Cumulative currency translation adjustment (CTA) (365,932) (365,932) Accumulated deficit (244,057,192) (241,446,926) ----------------- ----------------- Total stockholders' equity 314,742 1,516,008 ---------------- ---------------- Total $ 55,166,284 $ 56,122,538 ================ ================
See accompanying notes to condensed consolidated financial statements. * Amounts at February 29, 2000 have been derived from audited financial statements.
AURA SYSTEMS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THREE MONTHS ENDED MAY 31, 2000 AND 1999 (Unaudited) 2000 1999 ---------------- --------------- Net Revenues $ 381,521 $ 1,540,729 Cost of goods and overhead 2,514,357 3,225,375 --------- ------------ Gross Profit (2,132,836) (1,684,646) ----------- ------------ Expenses Selling, general and administrative 2,203,516 2,506,257 Research and development 32,048 108,557 -------------- ------------- Total expenses 2,235,564 2,614,814 -------------- ------------ (Loss) from operations (4,368,400) (4,299,460) -------------- ------------- Other (income) and expense (Gain) on sale of assets (1,756,746) - Other (income) expense (563,401) 88,214 Interest expense -net 562,013 797,184 ----------- ------------- Loss from continuing operations (2,610,266) (5,184,858) --------------- ---------------- Loss from discontinued operations - (302,022) -------------- ---------------- Net (loss) $ (2,610,266) $ (5,486,880) ============== ============= Net (loss) per common share-basic $ (.01) $ (.05) ============== =============== Weighted average shares used to compute net (loss) per share 237,107,199 107,786,500 =========== ============
See accompanying notes to condensed consolidated financial statements.
AURA SYSTEMS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MAY 31, 2000 AND 1999 (Unaudited) 2000 1999 ------------ ------------- Net cash (used) in operations $ (29,064) $ (5,277,473) --------------- ---------------- Cash flows from investing activities: Proceeds from sale of subsidiary and assets 64,311 1,000,000 Notes receivable 905,092 516,667 Purchase of property and equipment - (70,704) --------------- ---------------- Net cash provided by investing activities 969,403 1,445,963 --------------- --------------- Cash flows from financing activities: Net proceeds (repayments) from borrowings (100,000) - Proceeds from exercise of warrants - 9,300 Repayment of debt (978,601) - Net proceeds from sale of stock 284,000 - --------------- --------------- Net cash provided (used) by financing activities: (794,601) 9,300 ---------------- --------------- Net increase (decrease) in cash and equivalents 145,738 (3,822,210) Cash and equivalents at beginning of period 260,437 3,822,210 --------------- ---------------- Cash and equivalents at end of period $ 406,175 $ 0 =============== ================= Supplemental disclosures of cash flow information Cash paid during the period for: Interest $ 303,817 $ 71,568 Income Tax 0 0 ---------------- --------------
Supplemental disclosure of non-cash investing and financing activities: Effective March 1, 1999, the Company sold its MYS subsidiary for $4.2 million in the form of a note receivable of $3.2 million and a cash down payment of $1 million, included above. In the quarter ended May 31, 1999, the Company satisfied a liability of $20,000 through the exercise of 40,000 warrants. In the quarter ended May 31, 2000, $1,000,000 of convertible debt was converted into 3,000,000 shares of the Company's Common Stock. The Company also issued 462,963 shares of its common stock to satisfy a liability in the amount of $125,000. Effective March 1, 2000, the Company sold the assets of its Ceramics subsidiary for $3.5 million in the form of a note receivable of $2.5 million, a cash down payment of $64,311 included above, and the payment of $800,000 to third parties in satisfaction of liabilities and an additional $100,000 payment on June 1, 2000. 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" or "Aura") and subsidiaries from the 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 at May 31, 2000 and results of operations and cash flows for the three months ended May 31, 2000 and 1999. 2) Capital In the quarter ended May 31, 2000, common stock outstanding increased by a total of 42,091,673 shares as follows: 34,425,463shares were issued in the first quarter that were not issued at February 29, 2000 due to insufficient stock being authorized; 3,000,000 shares were issued upon conversion of a $1 million note payable, 462,963 shares were issued to satisfy a liability in the amount of $125,000, 4,032,941 shares were issued as finders fees relating to private placements in the prior year, 150,000 shares were sold for gross proceeds of $300,000, and 20,306 shares were issued to adjust a prior issuance. In the quarter ended May 31, 1999, warrants to purchase 70,000 shares of common stock of the Company were exercised. 3) Inventories Inventories, stated at the lower of cost (first in, first out) or market, consist of the following:
May 31 February 28, 2000 2000 ---- ---- Raw materials $ 3,043,822 $ 4,205,828 Finished goods 7,287,354 7,310,335 Reserved for potential product obsolescence (326,936) (326,936) -------------- --------- $ 10,004,240 $ 11,189,227 ========== =============
Inventories consist primarily of components and completed units for the Company's AuraGen product. The reserve for potential product obsolescence consists solely of parts for the Company's actuator products. 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 29, 2000 as filed with the SEC (file number 0-17249) for a discussion of the legal activities. In the case of a judgment or settlement, appropriate provisions have 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 29, 2000, and factors discussed in this Report. Results of Operations For the three months ended May 31, 2000, the Company had a net loss of $2,610,266 on net revenue of $381,521 compared to a loss from continuing operations of $5,184,858 on net revenue of $1,540,729 in the prior year period. The decrease in revenue is primarily attributable to the sale of the assets of the Company's wholly owned subsidiary, Aura Ceramics. Approximately 56%, or $860,000 of the sales in the comparable prior fiscal year quarter were attributable to this subsidiary with the balance primarily attributed to the Company's AuraGen product. Revenues in the current year period are solely AuraGen related. Cost of goods and overhead decreased from $3.2 million in the quarter ended May 31, 1999 to $2.5 million in the quarter ended May 31, 2000, due primarily to the disposition of the assets of the Company's Aura Ceramics subsidiary. Approximately 13% of the cost of goods and overhead in the comparable prior fiscal year quarter was attributable to this subsidiary. Selling, general and administrative expenses decreased from $2.5 million in the quarter ended May 31, 1999 to $2.2 million in the quarter ended May 31, 2000 as a result of the sale of the assets of the ceramics facility and the reduction of employees at the headquarters facility. Research and development expense decreased from $108,557 in the quarter ended May 31, 1999 to $32,048 in the quarter ended May 31, 2000, as the Company focused its reduced resources on the sales and marketing of the Company's product, the AuraGen(TM). Depreciation and amortization for the quarter ended May 31, 2000 totaled approximately $1.6 million. The Company recorded a gain of $1,756,746 on the sale of assets of its ceramics facility in the quarter ended May 31, 2000. Other income and expense for the quarter ended May 31, 2000 consists primarily of forgiveness of debt of approximately $190,000, reimbursement of prior period legal expenses of approximately $180,000, and insurance claims and refunds of approximately $90,000. Net interest expense for the quarter ended May 31, 2000, decreased to $562,013 from $797,184 in the prior year quarter due primarily to the conversion of approximately $10 million of debt into equity and the forgiveness of approximately $19 million of debt, partially offset by approximately $11 million in accounts payable being converted into long term debt and accruing interest at 8%. Liquidity and Capital Resources At May 31, 2000, the Company had cash of $406,175 as compared to a cash level of $260,437 at February 29, 2000. Inventories decreased by $1,184,987 due primarily to the disposition of assets of the Company's ceramics subsidiary. Cash flows used in operations decreased by $5,148,409 as compared to the fiscal quarter ended May 31, 1999. This is primarily a result of the reduction in the loss from operations of $2.6 million coupled with the reduction in receivables of approximately $700,000, the reduction in inventory of approximately $1.2 million and the increase in accrued liabilities of approximately $3.1 million. The Company's working capital was a negative $945,203 at May 31, 2000 as compared to $826,213 at the fiscal year ended February 29, 2000 while the current ratio declined to .95:1 at May 31, 2000 from 1.05:1 at February 29, 2000. In the fiscal quarter ended May 31, 2000, the Company received net proceeds of $284,000 from the sale of 150,000 shares of the Company's common stock. The Company also satisfied a liability of $125,000 through the issuance of 462,963 shares of common stock. In the fiscal quarter ended May 31, 1999, the Company received proceeds of $9,300 from the exercise of warrants. The Company also satisfied a liability of $20,000 through the exercise of 40,000 warrants. 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 10K, Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations for the year ended February 29, 2000 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 second quarter of Fiscal 2001, 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 automotive industry 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 impose 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 Financial Consolidated Financial Statements appearing elsewhere herein. Item 2: Changes in Securities During the first quarter of Fiscal 2001 the Company issued 3,000,000 shares of Common Stock to a single person upon conversion of a $1,000,000 convertible note payable and received $300,000 from the sale to such person of 150,000 shares. During the first quarter of Fiscal 2001 462,963 shares of Common Stock were issued to a single person in satisfaction of a liability of $125,000. During the first quarter of Fiscal 2001 4,032,941 shares were issued to five persons as finders fees for private placements in the prior fiscal year. All of the foregoing transactions were exempt from registration pursuant to Section 4(2) of the Securities Act of 1933 as these offerings were a private placement to a limited number of accredited investors." Item 4: Submission of Matters to Vote by Security Holders The Company's 1999 Annual Meeting of Shareholders was held on March 6, 2000. At the Annual Meeting each of the Company's nominees were elected to serve as directors of the Company. The election results are as follows:
. NAME For Withheld Abstain Zvi "Harry" Kurtzman 91,684,018 9,827,982 2,763,422 Harvey Cohen 92,864,439 8,647,561 2,763,422 Salvador Diaz-Verson, Jr. 93,007,303 8,504,697 2,763,422 Sanford R. Edlein 92,067,732 9,444,268 2,763,422 Norman Reitman 91,906,240 9,605,760 2,763,422 Stephen A. Talesnick 93,416,650 8,095,350 2,763,422 David F. Hadley 92,099,913 9,412,087 2,763,422
The shareholders in addition, approved the following proposals: 1. To increase the number of authorized shares from 200,000,000 to 500,000,000. For Withheld Abstain 102,455,535 3,586,711 284,666 2. To approve an amendment to the Company's Certificate of Incorporation to authorize 10,000,000 shares of Preferred Stock. For Withheld Abstain 98,424,057 7,655,739 180,539 3. To adopt the Company's 2000 Stock Option Plan. For Withheld Abstain 98,276,911 4,566,007 3,706,937 4. To adopt a proposal to effect a reverse split of the Company's common stock. For Withheld Abstain 89,935,298 18,184,528 251,457 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: May 11, 2001 By: /s/Steven C. Veen ---------------------------- ----------------------------- Steven C. Veen Senior Vice President Chief Financial Officer (Principal Financial and Accounting Officer and Duly Authorized Officer)