-----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, MFz6FXEM+yN1TMK0omXs+9yafIFQzzCoRR59Gp4QiQov1KeE1QpDfit+fUlzvfUq 88hrcKVmM3IUFmZkPdLj5w== 0000898430-97-002902.txt : 19970715 0000898430-97-002902.hdr.sgml : 19970715 ACCESSION NUMBER: 0000898430-97-002902 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970531 FILED AS OF DATE: 19970714 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: AURA SYSTEMS INC CENTRAL INDEX KEY: 0000826253 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRONIC COMPONENTS, NEC [3679] IRS NUMBER: 954106894 STATE OF INCORPORATION: DE FISCAL YEAR END: 0228 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-17249 FILM NUMBER: 97640313 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 FOR THE QUARTER ENDED MAY 31, 1997 ================================================================================ 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 May 31, 1997 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 July 14, 1997 ----- ---------------------------- Common Stock, par value 78,994,516 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, 1997 and February 28, 1997 2 Condensed Consolidated Statement of Operations for the Three Months Ended May 31, 1997 and 1996 3 Condensed Consolidated Statements of Cash Flows for the Three Months Ended May 31, 1997 and 1996 4 Notes to Consolidated Financial Statements 5 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7 PART II. OTHER INFORMATION ITEM 1. Legal Proceedings 10 ITEM 6. Exhibits and Reports on Form 8-K 10 SIGNATURES 11
AURA SYSTEMS, INC. AND SUBSIDIARIES QUARTER ENDED MAY 31, 1997 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 in annual financial statements. 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 and any amendments thereto for the year ended February 28, 1997 as filed with the SEC (file number 0-17249). 1 AURA SYSTEMS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
MAY 31, FEBRUARY 28, ASSETS 1997 1997 - ------ ------- ------------ CURRENT ASSETS Cash and equivalents $ 3,379,600 $ 7,112,354 Receivables, net 57,068,406 53,743,698 Inventories and contracts in process 37,516,373 33,847,296 Prepayments and deposits 9,839,137 7,695,268 Other current assets 164,798 391,361 ------------ ------------ TOTAL CURRENT ASSETS 107,968,314 102,789,977 ------------ ------------ Property and equipment, at cost 57,795,342 52,867,243 Less accumulated depreciation and amortization (10,291,947) (9,676,454) ------------ ------------ NET PROPERTY AND EQUIPMENT 47,503,395 43,190,789 Joint Ventures 10,347,560 10,210,872 Long-Term investments 6,923,641 6,534,498 Long-Term receivables 7,230,988 6,974,242 Patents, net 2,834,568 2,905,870 Deferred charges, net 417,102 503,545 Goodwill, net 6,341,298 6,540,990 Other assets 2,959,644 2,877,616 ------------ ------------ Total $192,526,510 $182,528,399 ============ ============ LIABILITIES AND STOCKHOLDER'S EQUITY - ------------------------------------ CURRENT LIABILITIES: Notes payable $ 11,403,243 $ 14,859,567 Accounts payable 24,637,400 23,716,251 Accrued expenses 2,028,231 1,903,444 ------------ ------------ TOTAL CURRENT LIABILITIES 38,068,874 40,479,262 Notes payable and other liabilities 4,024,388 4,458,650 ------------ ------------ Convertible notes-secured 3,662,900 3,662,900 ------------ ------------ Convertible notes-unsecured 17,397,200 8,450,000 ------------ ------------ COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY Common stock par value $.005 per share paid in capital. Issued and outstanding 78,443,117 and 76,481,666 shares respectively. 199,752,404 196,039,793 Accumulated deficit (70,379,256) (70,562,206) ------------ ------------ Total stockholders' equity 129,373,148 125,477,587 ------------ ------------ Total $192,526,510 $182,528,399 ============ ============
See accompanying notes to condensed consolidated financial statements. 2 AURA SYSTEMS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE THREE MONTHS ENDED MAY 31, ---------------------------------- 1997 1996 -------- -------- NET REVENUES $27,415,997 $22,124,432 Cost of goods and overhead 20,065,830 15,630,526 ----------- ----------- GROSS PROFIT 7,350,167 6,493,906 ----------- ----------- EXPENSES General and administrative 5,422,254 4,385,327 Research and development 878,914 1,462,288 ----------- ----------- Total costs and expenses 6,301,168 5,847,615 ----------- ----------- INCOME FROM OPERATIONS 1,048,999 646,291 OTHER (INCOME) AND EXPENSE Interest income (19,884) (105,598) Interest expense 885,933 146,153 ----------- ----------- NET INCOME $ 182,950 $ 605,736 ----------- ----------- NET INCOME PER SHARE $.002 $.01 =========== =========== WEIGHTED AVERAGE SHARES USED TO COMPUTE NET INCOME PER SHARE 77,089,293 62,720,093 =========== ===========
See accompanying notes to condensed consolidated financial statements. 3 AURA SYSTEMS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE THREE MONTHS ENDED MAY 31, ---------------------------------- 1997 1996 -------- --------- NET CASH (USED) IN OPERATIONS $(7,514,069) $(13,566,652) ----------- ------------ CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property and equipment (4,928,099) (740,477) ----------- ------------ NET CASH PROVIDED BY (USED) IN INVESTING ACTIVITIES (4,928,099) (740,477) ----------- ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Net proceeds from borrowings (3,456,324) 1,016,758 Proceeds from issuance of convertible notes payable 15,000,000 1,000,000 Repayment of debt (2,834,262) (297,190) Net proceeds from sale of stock -- 1,501,500 Proceeds from exercise of stock options -- 35,000 ----------- ------------ NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES 8,709,414 3,256,068 ------------ NET INCREASE (DECREASE) IN CASH (3,732,754) (11,051,061) Cash and cash equivalents at beginning of year 7,112,354 21,900,364 ----------- ------------ CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 3,379,600 $ 10,849,303 =========== ============ Supplemental disclosures of cash flow information: Cash paid during the period for: Interest $ 760,123 $ 80,153 Income tax 6,400 800 =========== ============
Supplemental disclosure of noncash investing and financing activities: During the quarter ended May 31, 1996, the Company acquired MYS Corp. for stock valued at $2,000,000. In the quarter ended May 31, 1997, $3,652,800 of convertible notes payable were converted into common stock. See accompanying notes to condensed consolidated financial statements. 4 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 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 months ended May 31, 1997. 2) CAPITAL In the quarter ended May 31, 1997, $3,652,800 of convertible notes were converted into common stock of the Company. In the quarter ended May 31, 1996, options to purchase 10,000 shares of common stock were exercised resulting in proceeds of $35,000. Additionally in the quarter ended May 31, 1996 the Company received proceeds of $1,501,500 from the sale of common stock. 3) SIGNIFICANT CUSTOMERS The Company sold sound related products and computer related products to four significant customers during the quarter ended May 31, 1997. Sales of speakers to Radio Shack accounted for approximately $4.5 million in the quarter ended May 31, 1997 as compared to approximately $4.1 million in the prior year comparable quarter. Sales of communication and multimedia products to major mass merchandisers Best Buy, Circuit City and Computer City accounted for approximately $7.0 million in the quarter ended May 31, 1997. There were no sales to the above customers in the prior year comparable quarter. Sales of computer monitors to a single unrelated party in the three months ended May 31, 1996 totalled approximately $5.8 million. There were no sales to this customer in the current year. None of the above customers are related or affiliated with the Company or any other customers of the Company. The Company has no reason to believe that sales to any of the current year customers will not continue. 4) CONTINGENCIES The Company is engaged in various legal actions listed below. To the extent that judgment has been rendered, appropriate provision has been made in the financial statements. Barovich/Chiau v. Aura ---------------------- In May, 1995 two lawsuits naming Aura, certain of its directors and executive officers and a former executive officer as defendants, were filed in the United States District Court for the Central District of California (Case Nos. CV-95-3296). Both complaints (the "Complaints") purported to be securities class actions on behalf of all 5 persons who purchased common stock of Aura during the period from May 28, 1993 through January 17, 1995, inclusive (the "Class Period"). The Complaints alleged that as a result of false and misleading information disseminated by the defendants, the market price of Aura's common stock was artificially inflated during the Class Period. On February 16, 1996, the Company filed its motion for summary judgment which was granted on April 15, 1996. Judgment in favor of the Company and all defendants was entered on April 16, 1996, thereby dismissing the action. Plaintiff's thereafter filed a Notice of Appeal to the judgment on May 16, 1996 which is pending before the United States Court of Appeals. Morganstein v. Aura ------------------- On April 28, 1997, a lawsuit naming Aura, certain of its directors and executive officers, and the Company's independent accounting firm, was filed in the United States District Court for the Central District of California (Case No. 97-3103). It purports to be a securities class action on behalf of all persons who purchased common stock of Aura during the period from January 18, 1995 and April 25, 1997, inclusive (the "Class Period"). The complaint alleges that as a result of false and misleading information disseminated by the defendants, the market price of Aura's common stock was artificially inflated during the Class Period. It contains allegations which assert that the Company violated federal securities laws by selling Aura Common stock at discounts to the prevailing U.S. market price under Regulation S without informing Aura's shareholders or the public at large. The Company believes the complaint is frivolous and is moving to dismiss the action. Further, the Company intends to pursue all of its available remedies in this matter, and sanctions if warranted against the plaintiff and the attorneys, one of whom filed such a strike suit against the Company in the past. Securities and Exchange Commission Settlement --------------------------------------------- In October, 1996, the Securities and Exchange Commission ("Commission") issued an order (Securities Act Release No. 7352) instituting an administrative proceeding against Aura Systems, Zvi Kurtzman, and an Aura former officer. The proceeding was settled on consent of all the parties, without admitting or denying any of the Commission's findings. In its order, the Commission found that Aura and the others violated the reporting, recordkeeping and anti-fraud provisions of the securities laws in 1993 and 1994 in connection with its reporting on two transactions in reports previously filed with the Commission. The Commission's order directs that each party cease and desist from committing or causing any future violation of these provisions. The Commission did not require Aura to restate any of the previously issued financial statements or otherwise amend any of its prior reports filed with the Commission. Also, the Commission did not seek any monetary penalties from Aura, Mr. Kurtzman or anyone else. Neither Mr. Kurtzman nor anyone else personally benefited in any way from these events. For a more complete description of the Commission's Order, see the Commission's release referred to above. Other Litigation ---------------- The Company is also engaged in other legal actions arising in the ordinary course of business. In the opinion of management based upon the advice of counsel, the ultimate resolution of these matters will not have a material adverse effect. Therefore, no provision for these matters has been made in the Company's consolidated financial statements. 6 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS For the three months ended May 31, 1997, the Company earned $182,950 on revenue of $27,415,997 as compared to earnings of $605,736 on revenue of $22,124,432 in the comparable prior year period. The increase in revenue is attributable primarily to an increase in sales from the Company's NewCom subsidiary as a result of their expanding customer base which includes the major electronics retailers such as Circuit City, Best Buy, Computer City and others. Sales of speakers to Radio Shack accounted for approximately $4.5 million or 16.4% in the quarter ended May 31, 1997 as compared to approximately $4.1 million or 18.6% in the prior year comparable quarter. Sales of communication and multimedia products to major mass merchandisers Best Buy, Circuit City and Computer City accounted for approximately $7.0 million or 25.5% in the quarter ended May 31, 1997. There were no sales to the above customers in last year comparable quarter. Sales of computer monitors to a single unrelated party in the three months ended May 31, 1996 totalled approximately $5.8 million or 26.2%. There were no sales to this customer in the current year. None of the above customers are related or affiliated with the Company or any other customers of the Company. The Company has no reason to believe that sales to any of the current year customers will not continue. Cost of goods and overhead increased by $4.4 million to $20.1 million or 73% for the three months ended May 31, 1997 as compared to $15.6 million or 70.6% for the three months ended May 31, 1996. This increase was mostly due to price fluctuation in products bought by the Company. The increase in general and administrative expenses of $1.0 million to $5.4 million or 19.8% as compared to $4.4 million or 19.8% in the prior year equivalent quarter results primarily from an increase in personnel and an increased level of advertising support for the distributors and retail customers of the Company's NewCom subsidiary. As a percentage general and administrative expenses remained constant. Research and development expense decreased by $583,374 to $878,914 in the three months ended May 31, 1997, as the Company focused its attention in the sales area and in readying its new products for manufacturing. Interest expense increased by $739,780 to $885,933 from $146,153 in the prior year period due to a premium of $600,000 paid on the repurchase of convertible notes in the current year quarter, and to higher levels of borrowing over the prior year. LIQUIDITY AND CAPITAL RESOURCES In the quarter ended May 31, 1997, the level of cash decreased to $3,379,600 from $7,112,354 at February 28, 1997. Inventories increased by $3,324,708 as the Company built inventory to prepare for increasing shipments of the Company's speakers, Bass Shakers, multimedia kits, modems and sound cards. 7 Cash flows used in operations decreased by $6,052,583 as compared to the prior year quarter. The Company's working capital increased by $7,588,725 to $69,899,440 from the fiscal year end level, while the current ratio improved to 2.84:1 from 2.54:1. In the quarter ended May 31, 1997, the Company received proceeds of $15,000,000 from the issuance of convertible notes payable. The Company also redeemed $2,400,000 of previously issued convertible notes. In the quarter ended May 31, 1996, financing activities contributed $35,000 from the exercise of options to purchase 10,000 shares of stock, additionally, the Company received proceeds of $1,501,500 from the sale of common stock and also received proceeds of $1,000,000 from the issuance of convertible notes payable. 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, principally private and bank indebtedness and equity financing. No assurances can be provided that these funding sources will be available in the future. The Company expects that, with the increasing shipments of the Bass Shakers, speakers, multimedia kits, modems and sound cards, cash flows and results of operations should be favorably impacted in the future. ITEM 3. CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 The Company desires to take advantage of the new "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995 and hereby invokes such provisions. 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 first quarter of Fiscal 1997, 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 8 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. 9 PART II - OTHER INFORMATION ITEM 1 Legal Proceedings For information regarding pending legal proceedings, see Note 8 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 10 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: JULY 14, 1997 By: /s/Steven C. Veen ------------- ----------------------------------------- STEVEN C. VEEN Senior Vice President Chief Financial Officer (Principal Financial and Accounting Officer) 11 INDEX TO EXHIBITS Exhibit Sequential Number Page No Article 5, Financial Data Schedule EX-27 EX-27 2 FINANCIAL DATA SCHEDULE
5 3-MOS FEB-28-1997 MAR-01-1997 MAY-31-1997 3,379,600 0 57,068,406 0 37,516,373 107,968,314 57,795,342 (10,291,947) 192,526,510 38,068,874 0 0 0 199,752,404 0 192,526,510 27,415,997 27,415,997 20,065,830 0 6,301,168 0 866,049 182,950 0 0 0 0 0 182,950 .002 0
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