<PAGE> 1
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------------
FORM 10-Q
(MARK ONE)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
OR
/ / 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: 0-9725
AURORA ELECTRONICS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 75-1539534
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2030 MAIN STREET, SUITE 1120, IRVINE, CALIFORNIA 92614
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (714) 660-1232.
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
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 / /
Indicated below is the number of shares outstanding of each class of the
registrant's common stock, as of August 9, 1996:
<TABLE>
<CAPTION>
Title of Each Class of Common Stock Number Outstanding
- ----------------------------------- ------------------
<S> <C>
Common Stock, $0.03 par value 5,742,524 shares
</TABLE>
================================================================================
<PAGE> 2
INDEX
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of June 30, 1996 and September
30, 1995 3
Consolidated Statements of Operations for the Three and Nine
Months Ended June 30, 1996 and July 2, 1995 4
Consolidated Statements of Cash Flows for the Three and Nine Months 5
Ended June 30, 1996 and July 2, 1995
Notes to Unaudited Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition 7
and Results of Operations
PART II. OTHER INFORMATION 11
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 13
Index to Exhibits 14
</TABLE>
2
<PAGE> 3
<TABLE>
<CAPTION>
AURORA ELECTRONICS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
June 30, September 30,
1996 1995
-------- -------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 76 $ 81
Trade receivables, net 8,092 15,828
Inventories 4,494 4,021
Deferred income taxes 500 1,532
Other current assets 940 516
- -----------------------------------------------------------------------------------------------------------
Total current assets 14,102 21,978
Property, plant and equipment, net 5,971 5,752
Deferred income taxes -- 2,202
Intangible and other assets 49,569 50,784
- -----------------------------------------------------------------------------------------------------------
$ 69,642 $ 80,716
===========================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 1,256 $ 6,700
Accounts payable 7,574 8,105
Accrued compensation 1,691 2,021
Accrued interest 515 920
Current portion of reserve for discontinued operations 959 1,569
Other current liabilities 3,352 2,467
- -----------------------------------------------------------------------------------------------------------
Total current liabilities 15,347 21,782
Reserve for discontinued operations 2,310 2,504
Long-term debt 23,681 44,092
Redeemable convertible preferred stock 40,700 --
Stockholders' equity:
Common stock, 10,486 shares issued (8,062 shares at September 30, 1995) 315 242
Additional paid-in capital 60,430 61,932
Accumulated deficit (56,502) (44,683)
Treasury stock, at cost, 4,743 shares (561 shares at September 30, 1995) (16,639) (5,153)
- -----------------------------------------------------------------------------------------------------------
Total stockholders' equity (12,396) 12,338
- -----------------------------------------------------------------------------------------------------------
$ 69,642 $ 80,716
===========================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 4
AURORA ELECTRONICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
----------------------- ------------------------
June 30, July 2, June 30, July 2,
1996 1995 1996 1995
------- -------- -------- --------
<S> <C> <C> <C> <C>
Net revenues $20,767 $ 31,865 $ 78,938 $107,332
Cost of sales 16,141 25,341 59,010 81,616
- --------------------------------------------------------------------------------------------------------------------------
Gross profit 4,626 6,524 19,928 25,716
Selling, general and administrative expenses 7,047 7,785 20,491 21,573
Amortization of intangible assets 366 7,857 1,097 8,712
Restructuring charges and other -- 4,699 -- 4,699
- --------------------------------------------------------------------------------------------------------------------------
Operating loss (2,787) (13,817) (1,660) (9,268)
Interest expense (738) (1,424) (5,474) (4,152)
Other income (expense), net (4) (728) (4) (817)
- --------------------------------------------------------------------------------------------------------------------------
Loss before provision for income taxes (3,529) (15,969) (7,138) (14,237)
Provision (benefit) for income taxes (76) 529 3,373 1,135
- --------------------------------------------------------------------------------------------------------------------------
Net loss (3,453) (16,498) (10,511) (15,372)
Dividends on preferred stock (700) -- (700) --
- --------------------------------------------------------------------------------------------------------------------------
Net loss applicable to common stockholders $(4,153) $(16,498) $(11,211) $(15,372)
==========================================================================================================================
Net loss per share of common stock $ (0.68) $ (1.90) $ (1.50) $ (1.86)
==========================================================================================================================
Weighted average number of common and common equivalent shares 6,087 8,686 7,461 8,280
==========================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 5
AURORA ELECTRONICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine months ended
-------------------------
June 30, July 2,
1996 1995
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(10,511) $(15,372)
Adjustments to reconcile net loss to
net cash flows from continuing operations:
Depreciation and amortization 3,655 10,154
Write-down of investment in subsidiary -- 711
Loss on disposal of equipment 5 94
Changes in assets and liabilities, net of acquisitions:
Trade receivables, inventories and other assets 6,994 6,979
Accounts payable and other liabilities 128 (107)
Accrued interest and income taxes deferred, receivable or payable 2,771 415
- ---------------------------------------------------------------------------------------------------------------
Net cash flows from continuing operations 3,042 2,874
Net cash flows from discontinued operations (804) (784)
- ---------------------------------------------------------------------------------------------------------------
Net cash flows from operating activities 2,238 2,090
- ---------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property, plant and equipment (1,518) (1,061)
Proceeds from sales of marketable securities -- 1,171
- ---------------------------------------------------------------------------------------------------------------
Net cash flows from investing activities (1,518) 110
- ---------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on debt (19,382) (3,053)
Sale of redeemable preferred shares 37,746 --
Purchases of treasury stock (12,271) --
Changes in borrowings under line of credit (6,818) (674)
- ---------------------------------------------------------------------------------------------------------------
Net cash flows from financing activities (725) (3,727)
- ---------------------------------------------------------------------------------------------------------------
Net change in cash and cash equivalents (5) (1,527)
Cash and cash equivalents at beginning of period 81 1,539
- ---------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 76 $ 12
===============================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE> 6
AURORA ELECTRONICS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
NOTE A. BASIS OF PRESENTATION
In the opinion of management, the accompanying balance sheets and
related interim statements of operations and cash flows include all adjustments
(consisting only of normal recurring items) necessary for their fair
presentation. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets, liabilities,
revenues, and expenses. Actual results could differ from those estimates.
Interim results are not necessarily indicative of results for a full year.
Certain information in footnote disclosure normally included in
financial statements has been condensed or omitted in accordance with the rules
and regulations of the Securities and Exchange Commission. The information
included in this Form 10-Q should be read in conjunction with Management's
Discussion and Analysis and financial statements and notes thereto included in
the Aurora Electronics, Inc. 1995 Annual Report on Form 10-K (as amended).
NOTE B. EARNINGS PER SHARE OF COMMON STOCK
Earnings per share of common stock is based upon the weighted average
number of common and common equivalent shares outstanding, less cumulative
dividends to holders of the Company's preferred stock. Outstanding stock options
and warrants are treated under the treasury stock method as common stock
equivalents when dilution results from their assumed exercise. The Company's
Redeemable Convertible Preferred Stock, 7-3/4% Convertible Subordinated
Debentures due April 15, 2001, and 7% Subordinated Convertible Promissory Notes
(the "7% Notes") due September 30, 1997, were not common stock equivalents at
the time of issuance and are therefore not included in the calculation of
primary earnings per share. Fully diluted net earnings per share is not
presented as it is anti-dilutive.
NOTE C. INVENTORIES
Inventories consisted of the following:
<TABLE>
<CAPTION>
JUNE 30, 1996 SEPTEMBER 30, 1995
------------- ------------------
<S> <C> <C>
Spare and repair parts $ 588 $ 535
Work in process 359 253
Finished goods and purchased product 3,547 3,233
------- -------
Total inventories $4,494 $4,021
====== ======
</TABLE>
NOTE D. RECAPITALIZATION
On March 29, 1996, the Company completed its comprehensive plan to
recapitalize the Company (the "Recapitalization"), pursuant to which the Company
(a) sold (i) 400,000 shares of Redeemable Convertible Preferred Stock, $.01 par
value (the "Convertible Preferred Stock"), to Welsh, Carson, Anderson & Stowe
VII, L.P. ("WCAS VII") and certain other investors for an aggregate purchase
price of $40,000 and (ii) 607,211 shares of Common Stock, along with a $10,000
10% Senior Subordinated Note
6
<PAGE> 7
due September 2001, to WCAS Capital Partners II, L.P. ("WCAS CP II") for an
aggregate purchase price of $10,000, (b) established a new $35,000 senior credit
facility pursuant to a Credit Agreement dated March 29, 1996, and (c)
repurchased 4,268,334 shares of the Company's Common Stock, $.03 par value (the
"Common Stock") at $2.875 per share pursuant to a tender offer for up to
6,500,000 shares of Common Stock. New funds raised as part of the
Recapitalization were used to provide financing for the tender offer, to repay
in full the Company's existing senior bank indebtedness of approximately
$26,000, and to redeem its 9-1/4% Senior Subordinated Notes of approximately
$9,300. After giving effect to the Recapitalization transactions, including the
tender offer, and assuming conversion of the Convertible Preferred Stock, as of
June 30, 1996, the Company would have had 24,560,891 shares of Common Stock
outstanding, 17,496,470 of which is beneficially owned by WCAS VII and WCAS
Information Partners on an "as-converted" basis and 607,211 of which is
beneficially owned by WCAS CP II. In the aggregate, WCAS VII, WCAS Information
Partners, WCAS CP II and their affiliates beneficially own approximately 76.4%
of the Company's issued and outstanding Common Stock on an "as-converted basis."
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(In thousands)
OVERVIEW
Aurora Electronics, Inc. (the "Aurora" or "Company") provides spare
parts distribution and electronics recycling and asset recovery services,
assisting major computer manufacturers and field service organizations in
supporting the worldwide computer installed base. Aurora operates worldwide,
with facilities in the United States, Canada, United Kingdom and the
Netherlands.
In the third quarter of fiscal 1995, the Company initiated and
substantially completed a corporate reorganization focusing the Company on the
businesses which were determined to have the highest growth and profit potential
- -- spare parts distribution, electronics recycling and asset recovery -- in an
effort to eliminate unprofitable or non-strategic business activities. The
Company operates through two divisions: its Parts Support Services ("Parts
Support") Division (formerly the Century Division), which is a leading provider
of spare parts distribution and outsourcing services to major personal computer
manufacturers and field service organizations; and through its Asset Recovery
Services ("Asset Recovery") Division, which is a leading supplier of electronic
recycling and asset recovery services.
In the second quarter of fiscal 1996, the Company completed the
Recapitalization (see Note D to Unaudited Consolidated Financial Statements --
Recapitalization).
COMPARATIVE RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 1996 AND
JULY 2, 1995
Net revenues for the third quarter of fiscal 1996 were $20,767 as
compared to $31,865 in net revenues for the third quarter of fiscal 1995. The
Company's decline in revenues is primarily due to the discontinuation of the
Premier Division ($6,472) during the third quarter of fiscal 1995 and the
significant decline in revenues in the Asset Recovery Division ($4,136). The
decline of revenues in the Asset Recovery Division is due to a substantial
industry wide decline in selling prices in dynamic random access memory ("DRAM")
chips. This decline was partially offset by a 14% increase in DRAM unit volume
over the same period a year ago. The Parts Support Division revenue was
essentially unchanged in the third quarter as compared to third quarter of
fiscal 1995.
Gross profit for the third quarter of fiscal 1996 was $4,626 (22.3% of
net revenues), as compared to $6,524 in gross profit (20.5% of net revenues) for
the third quarter of fiscal 1995. The dollar decrease in gross profit was due
primarily to the discontinued operation of the Premier Division ($1,165) and a
7
<PAGE> 8
decrease in the Asset Recovery Division of approximately $2,138 as compared to
the same quarter a year ago due to the decline in the DRAM prices as discussed
above.
Selling, general and administrative ("SG&A") expenses for the third
quarter of fiscal 1996 were $7,047 (33.9% of net revenues), as compared to
$7,785 (24.4% of net revenues) for the third quarter of fiscal 1995. While SG&A
declined in absolute terms, its increase as a percent of revenue is due to the
significant net revenue declines discussed above. Amortization expense for the
third quarter of fiscal 1996 was $366 compared to $7,857 for the third of fiscal
1995. The decrease was due to the write-off in the third quarter of fiscal 1995
of goodwill related to the acquisition of FRS, Inc.
Net interest expense for the third quarter of fiscal 1996 was $738 or
3.6% of net revenues as compared to $1,424 or 4.5% of net revenues for the third
quarter of fiscal 1995. The decrease in interest expense is due to the reduced
debt levels which resulted from the Recapitalization.
Provision (benefit) for income taxes for the third quarter of fiscal
1996 was ($76) as compared to $529 or 1.7% of net revenues for the third quarter
of fiscal 1995.
Net loss applicable to common stockholders for the third quarter was
$4,153, as compared to a net loss of $16,498 for the third quarter of fiscal
1995. The net loss in the third quarter of 1996 is the result of reduced
operating income from the Asset Recovery Division and essentially unchanged
revenues in the Parts Support Division when compared to the third quarter of
fiscal 1995. The reduction in loss for the quarter compared to the same quarter
a year ago is primarily due to the restructuring charges taken during the third
quarter of fiscal 1995 when the Company discontinued the Premier Division.
COMPARATIVE RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED JUNE 30, 1996 AND
JULY 2, 1995
Net revenues for the nine months ended June 30, 1996, were $78,938 as
compared to $107,332 for the comparable fiscal 1995 period. The Company's
decline in revenues is due to the discontinuation of the Premier Division
($32,580) during the third quarter of fiscal 1995. Excluding the Premier
Division, net revenues for the nine months ended June 30, 1996 increased 5.6%
over the comparable fiscal 1995 period. The increase was due to the 13.2%
revenue growth in the Parts Support Division partially offset by the decline in
revenue in the Asset Recovery Division of approximately 8.8%.
Gross profit for the nine months ended June 30, 1996 was $19,928 (25.2%
of net revenues) as compared to $25,716 in gross profit for the comparable
fiscal 1995 period (24.0% of net revenues). The dollar decrease in gross profit
was due primarily to the discontinuation of the Premier Division and the
decrease in gross profit generated by the Asset Recovery Division of
approximately $3,072 over the comparable fiscal 1995 period due to the decline
in DRAM prices discussed above.
SG&A expenses for the nine months ended June 30, 1996 were $20,491 or
26.0% of net revenues, as compared to $21,573 or 20.1% for the comparable fiscal
1995 period. Included in the SG&A expenses for the nine months ended June 30,
1996 were approximately $725 in one time charges related to the
Recapitalization. The increase of the SG&A expenses as a percentage of net
revenues was due to the discontinuation of the Premier Division and the decline
in revenue in the Asset Recovery Division.
Amortization expense for the nine months ended June 30, 1996 was
$1,097, or 1.4% of net revenues, as compared to $8,712, or 8.1% for the
comparable fiscal 1995 period. The decrease was due to the write-off in the
third quarter of fiscal 1995 of goodwill related to the acquisition of FRS, Inc.
8
<PAGE> 9
Net interest expense for the nine months ended June 30, 1996 was $5,474
or 6.9% of net revenues as compared to $4,152 or 3.9% of net revenues for the
comparable fiscal 1995 period. The interest expense for the first nine months
includes approximately $2,242 of charges related to the Recapitalization
completed on March 29, 1996. This amount includes approximately $1,070 of
previously capitalized financed charges, $917 of interest, fees and expenses due
to the Company's previous lenders and $256 relating to the repayment of the
9-1/4% Senior Subordinated Notes.
Provision for income taxes for the nine months ended June 30, 1996 was
$3,373 or 4.3% of net revenues as compared to $1,135 or 1.1% for the comparable
fiscal 1995 period. This provision includes the increase of the deferred income
tax valuation allowance in the amount of $3,652 due to management's
determination that the deferred tax asset will not be fully realized. Management
reached this conclusion as a result of the limitation in the utilization of the
Company's net operating loss carryforwards caused by the change of ownership
pursuant to the Recapitalization.
Net loss applicable to common stockholders for the nine months ended
June 30, 1996 was $11,211 as compared to a net loss of $15,372 for the
comparable fiscal 1995 period. The loss for the first three quarters primarily
consisted of $6,620 of charges incurred in the second quarter of fiscal 1996 due
to the Recapitalization completed on March 29, 1996, and $3,390 of reduced
operating income from the Asset Recovery Division when compared to the
comparable fiscal 1995 period. The loss for the fiscal 1995 period is due to the
restructuring and reorganization of the Company's businesses during the third
quarter of 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary requirements for capital are directly related to
its levels of accounts receivable, inventories, additions to its property and
equipment, and required debt principal payments. The Company's working capital
deficit was $1,245 as of June 30, 1996 compared to positive working capital of
$196 as of September 30, 1995. The primary reason for the working capital
deficit is that the deferred income tax asset was reduced because the Company is
limited in its ability to use NOL carryforwards. This event was caused by the
change of ownership pursuant to the Recapitalization (see Note D to Unaudited
Consolidated Financial Statements -- Recapitalization). Separately, the Company
has focused on applying all available cash to the repayment of the long-term
working capital revolving credit facility.
On March 29, 1996, the Company completed the Recapitalization of the
Company. In conjunction with the Recapitalization, the Company entered into a
Credit Agreement providing for a $35,000 senior credit facility. The facility
consists of a $15,000 Senior Secured Asset Based Revolving Credit ("Working
Capital Revolving Credit") and a $20,000 Senior Secured Reducing Revolving
Credit ("Reducing Revolving Credit"). The purpose of the Working Capital
Revolving Credit is to fund ongoing working capital needs. Funds are available
based on a percentage of eligible accounts receivables and inventory. The
Reducing Revolving Credit is to be used for (i) approved acquisitions, (ii)
regularly scheduled payments due under the Subordinated Notes, and (iii) other
payments as mutually agreed upon in the Credit Agreement. As of June 30, 1996,
the Company had drawn down $1,325 on the Working Capital Revolving Credit and
$2,000 on the Reducing Revolving Credit. The facilities bear interest at a rate
of either LIBOR + 2.75% or prime rate + 1.25%, at the Company's option. All
indebtedness of the Company under the Credit Agreement is secured by
substantially all of the assets of the Company, and the Company is subject to a
number of restrictions, including covenants relating to the Company's financial
performance and various other limitations on the Company's activities.
9
<PAGE> 10
As of June 30, 1996, the Company was not in compliance with certain
financial covenants under the Credit Agreement. The primary reasons for
non-compliance were the decline in operating income from the Asset Recovery
Division due to the decline in DRAM prices discussed above. Management is
currently in discussions with its lenders to amend the financial covenants of
the Credit Agreement and to allow the Company to use both credit facilities. The
major shareholder of the Company has agreed in principle to support the
Company's efforts by providing certain limited guarantees of the two facilities.
In consideration for the limited guarantees provided by the major shareholder,
the Company expects to issue warrants to the shareholder to buy additional
shares of Common Stock of the Company. The Company expects the warrants to be
five-year warrants to purchase a number of shares equal in value to 20% of the
amount of guaranteed indebtedness divided by the current stock price. If the
guarantees remain outstanding after nine months from issuance, an additional 20%
warrant would be issued, and if the guarantees remain outstanding after eighteen
months from issuance, an additional 20% warrant would be issued. If the
guarantees were ever called, the shareholder would have a warrant to purchase
100% of the guaranteed amount at the current stock price. The other terms and
conditions of the warrants remain to be finalized. The guarantees would be
released if and when the Company returns to full compliance with the original
financial covenants under the Credit Agreement.
On March 29, 1996, the Company repaid in full the Company's prior
senior bank indebtedness of approximately $26,000 and redeemed its 9-1/4% Senior
Subordinated Notes of approximately $9,300.
Other than the funds required to wind down the remaining discontinued
operations, the Company had no material capital commitments at June 30, 1996.
Management believes existing cash on hand, funds generated from
operations, and funds available under its credit facilities will be sufficient
to meet the operating requirements for the next twelve months, assuming it is
able to finalize the amendments to its Credit Agreement, which management is
confident the Company will be able to do. The Company's cash and credit
facilities are managed in order to be available for strategic investment
opportunities.
10
<PAGE> 11
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Inapplicable.
ITEM 2. CHANGES IN SECURITIES
Inapplicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Inapplicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its annual meeting of shareholders on May 21, 1996. At
the May meeting, shareholders were requested to vote on two proposals and the
election of Directors.
The results of the vote on the election of directors were as follows:
<TABLE>
<CAPTION>
DIRECTORS VOTES FOR AUTHORITY WITHHELD
--------- ---------- ------------------
<S> <C> <C>
Harvey B. Cash 20,162,698 604,816
Jim C. Cowart 20,162,698 604,816
Amin J. Khoury 20,162,698 604,816
David A. Lahar 20,162,698 604,816
Thomas E. McInerney 20,162,698 604,816
Richard H. Stowe 20,162,698 604,816
William H. Watkins, Jr. 20,162,698 604,816
</TABLE>
The second proposal considered at the May meeting was the adoption of
Aurora Electronics, Inc. 1996 Stock Option Plan. This proposal received
20,032,271 votes for the adoption, 713,352 votes against, and 21,891
abstentions.
The third proposal considered at the May meeting was the amendment of
Aurora Electronics, Inc. Restated Certificate of Incorporation to increase the
number of authorized shares of Common Stock from 25,000,000 to 50,000,000. This
proposal received 20,013,011 votes for the amendment, 715,106 votes against, and
39,397 abstentions.
There were present at the annual meeting, in person or by proxy,
shareholders holding 2,468,691 shares of Common Stock and 400,000 shares of
Preferred Stock. The Preferred stock votes on an "as converted basis" and thus
represented 18,298,823 votes at the meeting. In the aggregate, then 20,767,514
votes were represented at the annual meeting in person or by proxy, or
approximately 84.39% of the eligible number of votes.
11
<PAGE> 12
ITEM 5. OTHER INFORMATION
Inapplicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
Item Page
---- ----
<S> <C>
(a)(1) Exhibit 10.19 -- 1996 Stock Option Plan 15
(a)(2) Exhibit 11 -- Computation of Per Share Earnings (Loss) 23
(a)(3) Exhibit 27 -- Financial Data Schedule 24
</TABLE>
12
<PAGE> 13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AURORA ELECTRONICS, INC.
August 14, 1996 By: /s/ John P. Grazer
------------------------------------------------
John P. Grazer,
Senior Vice President-Finance and Administration
and Chief Financial Officer
(Principal Accounting and Financial Officer)
13
<PAGE> 14
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Item Description of Exhibits Page
- ------------- ------------------------------------------------------ ----
<S> <C> <C>
Exhibit 10.19 1996 Stock Option Plan 15
Exhibit 11 Computation of Per Share Earnings (Loss) 23
Exhibit 27 Financial Data Schedule -- Article 5 of Regulation S-X 24
</TABLE>
14
<PAGE> 1
EXHIBIT 10.19
AURORA ELECTRONICS, INC.
1996 STOCK OPTION PLAN
1. Purpose of the Plan. This Plan shall be known as the Aurora
Electronics, Inc. 1996 Stock Option Plan. The purpose of the Plan is to attract
and retain the best available personnel for positions of substantial
responsibility and to provide incentives to such personnel to promote the
success of the business of Aurora Electronics, Inc., and its subsidiaries.
Certain options granted under this Plan are intended to qualify as
"incentive stock options" pursuant to Section 422 of the Internal Revenue Code
of 1986, as amended from time to time, while certain other options granted under
the Plan will constitute nonqualified options.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Board" shall mean the Board of Directors of the
Corporation.
(b) "Closing Date" shall mean the date of the closing of the
Corporation's tender offer to purchase from its stockholders up to 6,500,000
shares of Common Stock pursuant to the Offer to Purchase dated February 23,
1996.
(c) "Common Stock" shall mean the Common Stock, $.03 par value
per share, of the Corporation. Except as otherwise provided herein, all Common
Stock issued pursuant to the Plan shall have the same rights as all other issued
and outstanding shares of Common Stock, including but not limited to voting
rights, the right to dividends, if declared and paid, and the right to pro rata
distributions of the Corporation's assets in the event of liquidation.
(d) "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
(e) "Committee" shall have the meaning set forth in Section
18(a) of this Plan.
(f) "Corporation" shall mean Aurora Electronics, Inc., a
Delaware corporation.
(g) "Date of Grant" shall mean the date on which an Option is
granted pursuant to this Plan or, if the Committee so determines, the date
specified by the Committee as the date the award is to be effective.
(h) "Disinterested Director" shall mean a director who is not,
during the one year prior to service as an administrator of the Plan, or during
such service, granted an Option pursuant to the Plan or any other plan of the
Corporation or any of its affiliates (except as may be permitted by Rule 16b-3
promulgated under the Exchange Act).
(i) "Employee" shall mean any officer or other key employee of
the Corporation or one of its Subsidiaries (including any director who is also
an officer or key employee of the Corporation or one of its Subsidiaries).
(j) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
15
<PAGE> 2
(k) "Exercise Price" shall mean the Option price for a share
of Common Stock subject to an Option.
(l) "Fair Market Value" shall mean the closing sale price (or
average of the quoted closing bid and asked prices if there is no closing sale
price reported) of the Common Stock on the date specified as reported by the
American Stock Exchange or the principal national stock exchange on which the
Common Stock is then listed, or if the Common Stock is not listed on the
American Stock Exchange or a national stock exchange, as reported by the
National Association of Securities Dealers Automated Quotation System (NASDAQ).
If there is no reported price information for the Common Stock on an exchange or
by NASDAQ, the Fair Market Value will be determined by the Committee, in its
sole discretion. In making such determination, the Committee may, but shall not
be obligated to, commission and rely upon an independent appraisal of the Common
Stock.
(m) "Non-electing Unvested Amount" shall mean the total number
of shares of Common Stock as of the Closing Date subject to unvested Prior
Options with respect to which employees holding the Prior Options do not agree
to accept the Corporation's offer to exchange their Prior Options for Options.
(n) "Non-electing Vested Amount" shall mean the total number
of shares of Common Stock as of the Closing Date subject to vested Prior Options
with respect to which employees holding the Prior Options do not agree to accept
the Corporation's offer to exchange their Prior Options for Options.
(o) "Nonqualified Option" shall mean any Option that is not a
Qualified Option.
(p) "Option" shall mean a stock option granted pursuant to
Section 6 of this Plan.
(q) "Optionee" shall mean any Employee or director who
receives an Option.
(r) "Participant" shall mean an Employee or director who
receives an Option pursuant to this Plan.
(s) "Plan" shall mean the Aurora Electronics, Inc. 1996 Stock
Option Plan, as amended from time to time.
(t) "Prior Option" shall mean any option or warrant issued by
the Corporation (or its predecessor) to acquire Common Stock of the Corporation
which is held by an existing Employee and which was outstanding immediately
prior to the Closing Date.
(u) "Qualified Option" shall mean any Option that is intended
to qualify as an "incentive stock option" within the meaning of Section 422 of
the Code.
(v) "Rule 16b-3" shall mean Rule 16b-3 of the rules and
regulations under the Exchange Act as Rule 16b-3 may be amended from time to
time, and any successor provisions to Rule 16b-3 under the Exchange Act.
(w) "Subsidiary" shall mean any now existing or hereinafter
organized or acquired company of which at least fifty percent (50%) of the
issued and outstanding voting stock is owned or
16
<PAGE> 3
controlled directly or indirectly by the Corporation or through one or more
Subsidiaries of the Corporation.
(x) "Tranche A Amount" shall mean 1,786,247 shares of Common
Stock.
(y) "Tranche B Amount" shall mean 1,488,539 shares of Common
Stock.
(z) "Tranche C Amount" shall mean 1,935,101 shares of Common
Stock.
3. Term of Plan. The Plan has been adopted by the Board and, to qualify
for the benefits of Rule 16b-3 and to permit the granting of Qualified Options,
shall be submitted for approval by the shareholders of the Corporation at the
next annual meeting thereof. The Plan shall be deemed approved by the
shareholders upon the affirmative vote of the holders of a majority of the
shares of the Corporation present or represented and entitled to vote at a
meeting duly held in accordance with Delaware law, and shall continue in effect
until terminated pursuant to Section 18(a) of this Plan.
4. Shares Subject to the Plan. Except as otherwise provided in Section
18 of this Plan, the aggregate number of shares of Common Stock issuable upon
the exercise of Options pursuant to this Plan shall not exceed 5,209,886. Such
shares may either be authorized but unissued shares or treasury shares. The
Corporation shall, during the term of this Plan, reserve and keep available a
number of shares of Common Stock sufficient to satisfy the requirements of this
Plan.
5. Eligibility. Qualified Options may be granted under Section 6 of
this Plan to such Employees of the Corporation or its Subsidiaries as shall be
determined by the Committee. Nonqualified Options may be granted under Section 6
of this Plan to such Employees and directors of the Corporation or its
Subsidiaries as shall be determined by the Committee. Subject to the limitations
and qualifications set forth in this Plan, the Committee shall also determine
the number of Options to be granted, the number of shares subject to each
Option, the exercise price or prices of each Option, the vesting and exercise
period of each Option, whether an Option may be exercised as to less than all of
the Common Stock subject thereto, and such other terms and conditions of each
Option, if any, as are consistent with the provisions of this Plan. In
connection with the granting of Qualified Options, the aggregate Fair Market
Value (determined at the Date of Grant of a Qualified Option) of the shares with
respect to which Qualified Options are exercisable for the first time by an
Optionee during any calendar year (under all such plans of the Optionee's
employer corporation and its parent and subsidiary corporations as defined in
Section 424(e) and (f) of the Code, or a corporation or a parent or subsidiary
corporation of such corporation issuing or assuming an Option in a transaction
to which Section 424(a) of the Code applies (collectively, such corporations
described in this sentence are hereinafter referred to as "Related
Corporations")) shall not exceed $100,000 or such other amount as from time to
time may be provided in Section 422(d) of the Code or any successor provision.
In connection with the granting of any Options under the Plan, the maximum
number of shares of Common Stock issuable to any single Employee shall not
exceed the number of shares subject to the Plan referred to in Section 4 hereof.
6. Grant of Options.
(a) Tranche A Options. The total amount of Common Stock to be
subject to Options under this Section 6(a) ("Tranche A Options") shall be equal
to the Tranche A Amount. Each Tranche A Option (other than Tranche A1 Options
(defined below)) shall vest immediately on the date of grant thereof; provided,
however, that one-half of the Tranche A Options granted to each of Jim C.
Cowart, David A. Lahar and John P. Grazer (such Tranche A Options are
hereinafter referred to as
17
<PAGE> 4
"Tranche A1 Options") shall each vest ratably on the first day of each month for
the 24 months following the first anniversary of the Closing Date. Each Tranche
A1 Option shall expire, and shall not be exercisable, with respect to any
unvested portion, on the date that the holder of the Tranche A1 Option leaves
the Corporation voluntarily (which shall not include termination of a result of
death or disability) or is terminated for cause. If a holder of a Tranche A1
Option is terminated by the Corporation for any other reason, his unvested
Tranche A1 Options shall vest upon termination.
(b) Tranche B Options. The maximum amount of Common Stock to
be subject to Options under this Section 6(b) ("Tranche B Options") shall be
equal to the Tranche B Amount. Each Tranche B Option shall vest at the rate of
12.5% semi-annually over a four-year period. With respect to each Tranche B
Option having a Date of Grant on or prior to April 30, 1996, the vesting dates
shall be September 30, 1996, and each March 31 and September 30 thereafter
through March 31, 2000. With respect to each Tranche B Option having a Date of
Grant after April 30, 1996, the first vesting date shall be the last day of the
calendar quarter immediately following six months after the Date of Grant (the
"First Vesting Date"), with the remaining vesting dates being the next seven
six-month anniversaries of the First Vesting Date. Each Tranche B Option shall
expire, and shall not be exercisable, with respect to any unvested portion, on
the date that the holder of the Tranche B Option is no longer an employee of the
Corporation.
(c) Tranche C Options. The maximum amount of Common Stock to
be subject to Options under this Section 6(c) ("Tranche C Options") shall be
equal to the Tranche C Amount. Each Tranche C Option shall vest at the rate of
25% each year over a four-year period commencing on the fifth anniversary of the
Closing Date or the Date of Grant of the Tranche C Option (whichever is later);
provided, however, some or all Tranche C Options may, in the discretion of the
Committee, be subject to accelerated vesting according to annual
performance-based targets based on the Corporation's actual and projected
earnings before interest, taxes, depreciation and amortization less capital
expenditures. Notwithstanding the foregoing, the vesting of no more than 25% of
the Tranche C Options may accelerate in any given annual period (the "Subject
Year"); provided, however, that the vesting of 50% of a Tranche C Option may
accelerate in the Subject Year if, in the immediately prior annual period,
vesting of the Tranche C Option was not accelerated as a result of failure to
meet the relevant performance-based target and the relevant performance-based
target applicable to the Subject Year is met. Each Tranche C Option shall
expire, and shall not be exercisable, with respect to any unvested portion, on
the date that the holder of the Tranche C Option is no longer an employee of the
Corporation.
(d) Reissued Options. If an Option should expire or become
unexercisable for any reason without having been exercised in full, then the
shares that were subject thereto shall, unless the Plan shall have terminated,
be available for the grant of additional Options (hereinafter referred to as a
"Reissued Option"). A Reissued Option shall contain such terms and provisions as
are approved by the Committee and executed on behalf of the Corporation by an
appropriate officer, and is not required to be a Tranche A, Tranche A1, Tranche
B or Tranche C Option. To the extent there are sufficient shares of Common Stock
available to issue an Option as a Reissued Option, a Tranche A Option, Tranche
A1 Option, Tranche B Option or a Tranche C Option, the Committee shall determine
in its sole discretion whether the Option is a Reissued Option or a Tranche A
Option, Tranche A1 Option, Tranche B Option or a Tranche C Option.
(e) Provisions Applicable to All Options. Each Option shall be
evidenced by an Option agreement. Subject to the limitations set forth in this
Section 6, each Option agreement shall contain such terms and provisions as are
approved by the Committee and executed on behalf of the Corporation by an
appropriate officer.
18
<PAGE> 5
7. Time of Grant of Options. The Date of Grant for each Option shall be
the date on which the Committee awards the Option or, if the Committee so
determines, the date specified by the Committee as the date the award is to be
effective. Notice of the grant shall be given to each Participant to whom an
Option is granted promptly after the date of such grant.
8. Price. The Exercise Price for each Tranche A Option and any other
Option whose Date of Grant is on or before April 30, 1996 shall be $2.125. The
Exercise Price for any other Option granted pursuant to Section 6 of this Plan
shall be determined by the Committee at the Date of Grant; provided, however,
that (a) the Exercise Price for any Qualified Option shall not be less than 100%
of the Fair Market Value of the Common Stock at the Date of Grant, and (b) if
the Optionee owns on the Date of Grant more than 10 percent of the total
combined voting power of all classes of stock of the Corporation or its parent
or any of its subsidiaries, as more fully described in Section 422(b)(6) of the
Code or any successor provision (such shareholder is referred to herein as a
"10-Percent Stockholder"), the Exercise Price for any Qualified Option granted
to such Optionee shall not be less than 110% of the Fair Market Value of the
Common Stock at the Date of Grant.
9. Vesting. Each Option shall vest in accordance with the vesting
provisions set forth in the applicable Option agreement, provided that the
vesting provisions set forth in each Option agreement shall comply with Section
6 of this Plan. The Committee may, but shall not be required to, permit
acceleration of vesting upon any sale of the Corporation or similar transaction.
10. Exercise. A Participant may pay the Exercise Price of the shares of
Common Stock as to which an Option is being exercised by the delivery of cash,
check or, at the Corporation's option, by the delivery of shares of Common Stock
having a Fair Market Value on the date immediately preceding the exercise date
equal to the Exercise Price; provided, however, that to the extent necessary for
an Option to be accounted for as a fixed plan pursuant to generally accepted
accounting principles, the Common Stock used to pay the Exercise Price shall be
either shares (x) acquired by the Optionee in the public market, or (y) which
have been held by the Optionee for more than six months and which were not
acquired by the Optionee in the public market.
If the shares to be purchased are covered by an effective registration
statement under the Securities Act of 1933, as amended, any Option granted under
the Plan may be exercised by a broker-dealer acting on behalf of an Optionee if
(a) the broker-dealer has received from the Optionee or the Corporation a fully-
and duly-endorsed agreement evidencing such Option, together with instructions
signed by the Optionee requesting the Corporation to deliver the shares of
Common Stock subject to such Option to the broker-dealer on behalf of the
Optionee and specifying the account into which such shares should be deposited,
(b) adequate provision has been made with respect to the payment of any
withholding taxes due upon such exercise, and (c) the broker-dealer and the
Optionee have otherwise complied with Section 220.3(e)(4) of Regulation T, 12
CFR Part 220, or any successor provision.
11. When Qualified Options May be Exercised. No Qualified Option shall
be exercisable at any time after the expiration of ten (10) years from the Date
of Grant; provided, however, that if the Optionee with respect to a Qualified
Option is a 10-Percent Stockholder on the Date of Grant of such Qualified
Option, then such Option shall not be exercisable after the expiration of five
(5) years from its Date of Grant. In addition, if an Optionee of a Qualified
Option ceases to be an employee of the Corporation or any Related Corporation
for any reason, such Optionee's vested Qualified Options shall not be
exercisable after (a) three months following the date such Optionee ceases to be
an employee of the Corporation or any Related Corporation, if such cessation of
service is not due to the death or permanent and total disability (within the
meaning of Section 22(e)(3) of the Code) of the Optionee, or
19
<PAGE> 6
(b) twelve months following the date such Optionee ceases to be an employee of
the Corporation or any Related Corporation, if such cessation of service is due
to the death or permanent and total disability (as defined above) of the
Optionee. Upon the death of an Optionee, any vested Qualified Option exercisable
on the date of death may be exercised by the Optionee's estate or by a person
who acquires the right to exercise such Qualified Option by bequest or
inheritance or by reason of the death of the Optionee, provided that such
exercise occurs within both the remaining option term of the Qualified Option
and twelve months after the date of the Optionee's death. This Section 11 only
provides the outer limits of allowable exercise dates with respect to Qualified
Options; the Committee may determine that the exercise period for a Qualified
Option shall have a shorter duration than as specified above.
12. Option Financing. Upon the exercise of any Option granted under the
Plan, the Corporation may, but shall not be required to, make financing
available to the Participant for the purchase of shares of Common Stock pursuant
to such Option on such terms as the Committee shall specify.
13. Withholding of Taxes. The Committee shall make such provisions and
take such steps as it may deem necessary or appropriate for the withholding of
any taxes that the Corporation is required by any law or regulation of any
governmental authority to withhold in connection with any Option including, but
not limited to, withholding the issuance of all or any portion of the shares of
Common Stock subject to such Option until the Participant reimburses the
Corporation for the amount it is required to withhold with respect to such
taxes, canceling any portion of such issuance in an amount sufficient to
reimburse the Corporation for the amount it is required to withhold or taking
any other action reasonably required to satisfy the Corporation's withholding
obligation.
14. Conditions Upon Issuance of Shares. The Corporation shall not be
obligated to sell or issue any shares upon the exercise of any Option granted
under the Plan unless the issuance and delivery of shares shall comply with all
provisions of applicable federal and state securities laws and the requirements
of any stock exchange upon which shares of the Common Stock may then be listed.
As a condition to the exercise of an Option, the Corporation
may require the person exercising the Option to make such representations and
warranties as may be necessary to assure the availability of an exemption from
the registration requirements of applicable federal and state securities laws.
The Corporation shall not be liable for refusing to sell or
issue any shares covered by any Option if the Corporation cannot obtain
authority from the appropriate regulatory bodies deemed by the Corporation to be
necessary to lawfully sell or issue such shares. In addition, the Corporation
shall have no obligation to any Participant, express or implied, to list,
register or otherwise qualify the shares of Common Stock covered by any Option.
No Participant will be, or will be deemed to be, a holder of
any Common Stock subject to an Option unless and until such Participant has
exercised his or her Option and paid the purchase price for the subject shares
of Common Stock. Each Option under this Plan shall be transferable only by will
or the laws of descent and distribution and shall be exercisable during the
Participant's lifetime only by such Participant.
To the extent required to comply with Rule 16b-3, any Common
Stock issued pursuant to the exercise of an Option to a person who would be
deemed an officer or director of the Corporation under Rule 16b-3 shall not be
transferred until at least six months have elapsed from the Date of Grant to the
date of disposition of the Common Stock.
20
<PAGE> 7
15. Restrictions on Shares. Shares of Common Stock issued pursuant to
this Plan shall be subject to restrictions on transfer under applicable federal
and state securities laws. The Board may impose such additional restrictions on
the ownership and transfer of shares of Common Stock issued pursuant to this
Plan as it deems desirable; any such restrictions shall be set forth in any
Option agreement entered into hereunder.
16. Modification of Options. Subject to Section 6 of this Plan, at any
time and from time to time, the Committee may execute an instrument providing
for modification, extension or renewal of any outstanding Option, provided that
no such modification, extension or renewal shall impair the Option without the
consent of the holder of the Option or conflict with the provisions of Rule
16b-3. Notwithstanding the foregoing, in the event of such a modification,
substitution, extension or renewal of a Qualified Option, the Committee may
increase the exercise price of such Option if necessary to retain the qualified
status of such Option.
17. Effect of Change in Stock Subject to the Plan. In the event that
each of the outstanding shares of Common Stock (other than shares held by
dissenting stockholders) shall be changed into or exchanged for a different
number or kind of shares of stock of the Corporation or of another corporation
(whether by reason of merger, consolidation, reclassification, split-up,
combination of shares or similar event), or in the event a stock split or stock
dividend shall have occurred, then there shall be substituted for each share of
Common Stock then subject to Options or available for Options the number and
kind of shares of stock into which each outstanding share of Common Stock (other
than shares held by dissenting stockholders) shall be so changed or exchanged,
or the number of shares of Common Stock as is equitably required in the event of
a stock split or stock dividend, together with an appropriate adjustment of the
Exercise Price.
18. Administration.
(a) Notwithstanding anything to the contrary herein, to comply
with the requirements of Rule 16b-3, the Plan shall be administered by the
Board, if each member is a Disinterested Director, or by a committee of two or
more Disinterested Directors appointed by the Board (the group responsible for
administering the Plan is referred to herein as the "Committee"). Options may be
granted under this Plan only by majority agreement of the members of the
Committee. Option agreements, in the forms as approved by the Committee, and
containing such terms and conditions consistent with the provisions of this Plan
as shall have been determined by the Committee, may be executed on behalf of the
Corporation by the Chairman of the Board, the President or any Vice President of
the Corporation. Except with respect to Section 18(b) of this Plan, the
Committee shall have complete authority to construe, interpret and administer
the provisions of this Plan and the provisions of the Option agreements entered
into hereunder; to prescribe, amend and rescind rules and regulations pertaining
to this Plan; to amend the Plan; to suspend, terminate or discontinue this Plan
(subject to Section 18(d) of this Plan); and to make all other determinations
necessary or deemed advisable in the administration of the Plan. In addition,
the Board may amend or terminate this Plan at any time. The determinations,
interpretations and constructions made by the Committee shall be final and
conclusive. No member of the Committee shall be liable for any action taken, or
failed to be taken, made in good faith relating to the Plan or any award
thereunder, and the members of the Committee shall be entitled to
indemnification and reimbursement by the Corporation in respect of any claim,
loss, damage or expense (including attorneys' fees) arising therefrom to the
fullest extent permitted by law.
(b) Members of the Committee shall be specified by the Board,
and shall consist solely of Disinterested Directors. Disinterested Directors
shall not be eligible to receive any Options.
21
<PAGE> 8
(c) Notwithstanding Section 18(a) of this Plan, to the extent
necessary to comply with Rule 16b-3, no amendment may be made without the
approval of the shareholders of the Corporation by the affirmative votes of the
holders of a majority of the shares of the Corporation present or represented
and entitled to vote at a meeting duly held in accordance with Delaware law,
which amendment would materially (i) increase the benefits accruing to
Participants, (ii) increase the number of securities which may be issued under
the Plan, other than in accordance with Section 17 of this Plan, or (iii) modify
the requirements as to eligibility for participation in the Plan.
(d) Although this Plan may be suspended, terminated or
discontinued at any time, all Qualified Options must be granted within ten (10)
years from the effective date of the Plan or the date the Plan is approved by
the shareholders of the Corporation, whichever is earlier.
19. Continued Employment Not Presumed. Nothing in this Plan or any
document describing it nor the grant of any Option shall give any Participant
the right to continue in the employment of the Corporation or affect the right
of the Corporation to terminate the employment of any such person with or
without cause.
20. Liability of the Corporation. Neither the Corporation, its
directors, officers or employees or the Committee, nor any Subsidiary which is
in existence or hereafter comes into existence, shall be liable to any
Participant or other person if it is determined for any reason by the Internal
Revenue Service or any court having jurisdiction that any Qualified Option
granted hereunder does not qualify for tax treatment as an incentive stock
option under Section 422 of the Code.
21. GOVERNING LAW. THE PLAN SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF STATE OF DELAWARE AND THE UNITED STATES, AS
APPLICABLE, WITHOUT REFERENCE TO THE CONFLICT OF LAWS PROVISIONS THEREOF.
22. Severability of Provisions. If any provision of this Plan is
determined to be invalid, illegal or unenforceable, such invalidity, illegality
or unenforceability shall not affect the remaining provisions of the Plan, but
such invalid, illegal or unenforceable provision shall be fully severable, and
the Plan shall be construed and enforced as if such provision had never been
inserted herein.
22
<PAGE> 1
EXHIBIT 11
AURORA ELECTRONICS, INC. AND SUBSIDIARIES
COMPUTATION OF PER SHARE EARNINGS
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
----------------------- -------------------------
June 30, July 2, June 30, July 2,
1996 1995 1996 1995
----------------------- -------------------------
<S> <C> <C> <C> <C>
Net loss applicable to common stockholders $(4,153) $(16,498) $(11,211) $(15,372)
======= ======== ======== ========
Adjusted Number of Common Shares
Weighted average shares outstanding 5,707 7,445 6,937 7,445
Incremental shares for exercise of stock
options and warrants and common stock
issuable 380 1,241 524 835
Adjusted number of common shares 6,087 8,686 7,461 8,280
======= ======== ======== ========
Net loss per common share $ (0.68) $ (1.90) $ (1.50) $ (1.86)
======= ======== ======== ========
</TABLE>
23
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> JUN-30-1996
<CASH> 76
<SECURITIES> 0
<RECEIVABLES> 8,092
<ALLOWANCES> 1,496
<INVENTORY> 4,494
<CURRENT-ASSETS> 14,102
<PP&E> 10,014
<DEPRECIATION> 4,043
<TOTAL-ASSETS> 69,642
<CURRENT-LIABILITIES> 15,347
<BONDS> 0
40,700
0
<COMMON> 315
<OTHER-SE> (12,711)
<TOTAL-LIABILITY-AND-EQUITY> 69,642
<SALES> 20,767
<TOTAL-REVENUES> 20,767
<CGS> 16,141
<TOTAL-COSTS> 7,413
<OTHER-EXPENSES> (4)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 738
<INCOME-PRETAX> (3,529)
<INCOME-TAX> 76
<INCOME-CONTINUING> (3,453)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,453)
<EPS-PRIMARY> (.68)
<EPS-DILUTED> (.68)
</TABLE>
