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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, 1995 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 13, 1995
----- ----------------------------
Common Stock, par value 50,056,634 Shares
$.005 per share
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AURA SYSTEMS, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page No.
<S> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Statement Regarding Financial Information 1
Condensed Consolidated Balance Sheets
as of May 31, 1995 and February 28, 1995 2
Condensed Consolidated Statement of Operations
for the Three Months Ended May 31, 1995 and 1994 3
Condensed Consolidated Statements of Cash Flows
for the Three Months Ended May 31, 1995 and 1994 4
Notes to Condensed Consolidated Financial
Statements 5
ITEM 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations 10
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings 12
ITEM 6. Exhibits and Reports on Form 8-K 12
SIGNATURES 13
</TABLE>
<PAGE>
AURA SYSTEMS, INC. AND SUBSIDIARIES
QUARTER ENDED MAY 31, 1995
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, 1995 AS FILED WITH THE SEC
(FILE NUMBER 0-17249).
1
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AURA SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
MAY 31, FEBRUARY 28,
ASSETS 1995 1995
- ------ ------------ ------------
<S> <C> <C>
CURRENT ASSETS
Cash and equivalents $ 9,102,891 $ 3,827,500
Trade receivables and other 31,620,622 28,333,898
Insurance proceeds in escrow for
class action settlement 1,720,000 1,720,000
Inventories and Contracts in progress 15,447,538 13,039,030
Other current assets 4,932,614 1,960,279
------------ ------------
TOTAL CURRENT ASSETS 62,823,665 48,880,707
------------ ------------
Property and equipment, at cost 23,770,881 22,471,598
Less accumulated depreciation
and amortization (5,626,360) (5,151,073)
------------ ------------
NET PROPERTY AND EQUIPMENT 18,144,521 17,320,525
Patents-net 2,078,880 2,039,881
Investments and Joint Ventures 726,108 645,626
Deferred charges 2,921,041 3,123,552
Other assets 1,635,672 1,456,712
------------ ------------
$ 88,329,887 $ 73,467,003
============ ============
Liabilities and Stockholders' Equity
- ------------------------------------
CURRENT LIABILITIES:
Current installments of notes payable $ 426,517 $ 545,006
Class action settlement 5,720,000 5,720,000
Accounts payable and accrued expenses 8,306,800 8,819,520
------------ ------------
TOTAL CURRENT LIABILITIES 14,453,317 15,084,526
Secured 7% Convertible Notes 3,662,900 3,662,900
Notes payable and other liabilities 427,520 466,158
STOCKHOLDERS' EQUITY
Common stock, issued and out-
standing 48,603,634 and 43,073,634
shares, respectively 112,119,260 95,826,986
Accumulated deficit (42,333,110) (41,573,567)
------------ ------------
Net stockholders' equity 69,786,150 54,253,419
------------ ------------
$ 88,329,887 $ 73,467,003
============ ============
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
2
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AURA SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED MAY 31,
---------------------------------
1995 1994
----------- -----------
<S> <C> <C>
GROSS REVENUES $ 9,525,368 $ 4,448,266
Cost of revenues 7,272,034 3,496,041
----------- -----------
GROSS PROFIT 2,253,334 952,225
----------- -----------
EXPENSES
General and administrative 2,473,563 2,068,829
Research and development 462,063 299,722
Equity loss from investment
in AMS - 1,652
----------- -----------
Total costs and expenses 2,935,626 2,370,203
----------- -----------
LOSS FROM OPERATIONS (682,292) (1,417,978)
OTHER (INCOME) AND EXPENSE
Interest income (21,812) (34,405)
Interest expense 99,063 90,908
----------- -----------
NET LOSS $ (759,543) $(1,474,481)
=========== ===========
NET LOSS PER SHARE $(.02) $(.04)
=========== ===========
WEIGHTED AVERAGE SHARES USED TO
COMPUTE NET LOSS PER SHARE 45,430,156 33,851,783
=========== ===========
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
3
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AURA SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED MAY 31,
----------------------------------
1995 1994
----------- -----------
<S> <C> <C>
NET CASH (USED) IN OPERATIONS $(9,779,574) $(4,675,078)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (1,353,283) (851,616)
----------- -----------
NET CASH PROVIDED BY (USED) IN INVESTING
ACTIVITIES (1,353,283) (851,616)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash released from escrow - 5,000,000
Proceeds from borrowings 233,295 -
Repayment of debt (381,422) (22,862)
Net proceeds from sale of stock 16,332,330 -
Proceeds from exercise of stock options 20,000 21,420
----------- -----------
NET CASH PROVIDED (USED) BY FINANCING
ACTIVITIES 16,204,203 4,998,558
----------- -----------
NET INCREASE (DECREASE) IN CASH 5,071,346 (528,136)
Cash and cash equivalents at beginning of year 4,031,545 4,559,681
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 9,102,891 $ 4,031,545
=========== ===========
Supplemental disclosures of cash flow
information:
Cash paid during the period for:
Interest $ 35,671 $ 6,908
Income tax 0 0
=========== ===========
</TABLE>
Supplemental disclosure of noncash investing and financing activities:
There were no noncash investing or financing activities entered into.
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
4
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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, 1995.
2) 7% CONVERTIBLE SECURED NOTES
In Fiscal 1993, the Company issued its 7% Secured Convertible Debentures
due 2002 in the total amount of $5,500,000. The notes are secured by a first
lien on the Company's headquarters facility and are convertible at the holder's
option into Aura's common stock at an average conversion price of $3.38 per
share. The loan agreement also provides for mandatory conversion into common
stock in the event the market price of the common stock exceeds $10.00 per share
for ten consecutive trading days.
The balance outstanding at May 31, 1995 of $3,662,900 reflects voluntary
conversions of $1,837,100 by holders who have elected to receive 550,281 shares
of common stock in exchange for their Notes.
3) AURA CERAMICS, INC.
In June 1993, the Company formed Aura Ceramics, Inc. to acquire the assets
of the Ceramics Center of Alliant Techsystems solely for the assumption of
liability for environmental cleanup with no current cash payments required. The
cost of environmental cleanup necessary has been estimated to be $750,000 and
would be payable upon vacancy of the leased premises. The estimated cleanup
cost was determined after consultation with an engineering firm that has dealt
with environmental cleanups at these types of facilities. The lease has a term
of 5 years, with options for renewal for two additional 5 year periods. It is
anticipated that the Company will occupy the premises for 10 years and as such
the Company has recorded a value of $300,000 for the assets involved and a
corresponding liability representing the amortized present value, included in
Notes payable and other liabilities, after application of a 9.25% discount rate,
of the future payment which may be required upon vacancy. Aura Ceramics, Inc.
began operations shortly after formation.
4) JOINT VENTURES AND OTHER AGREEMENTS
(a) Daewoo Agreement
----------------
In August 1992, the Company entered into a definitive joint development and
licensing agreement with Daewoo Electronics Co., Ltd. to exploit certain of the
Company's AMA technology as it applies to the development of a high resolution
projection system for use in television sets. The agreement as modified
provides for the payment of a $1,500,000 licensing fee and approximately
$2,000,000 of reimbursement to Aura for development costs. Further, Aura is to
receive royalties on a scheduled basis per television set manufactured upon the
commencement of commercial production which is estimated to begin in calendar
1995. The entire license fee has been received by the Company and recognized as
income as all technical milestones delineated in the agreement have been
achieved by the Company.
5
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In December 1993, the Company entered into a long term supply agreement
with Daewoo Electronics, Co., Ltd. Pursuant to this agreement, the Company will
produce speakers solely for Daewoo (or a company designated by Daewoo) using the
Company's patented technology in accordance with specifications supplied by
Daewoo, and Daewoo will have the exclusive right in Korea for the sale of such
speakers and the non-exclusive right in the Asian Zone (except for the ASEAN
territories). Under the agreement, Daewoo will use its best efforts for
marketing to other users in the Korean market. For Daewoo to maintain its
exclusive selling right in Korea, Daewoo must place firm purchase orders for at
least 2,000,000 speakers by December 31, 1994, and 4,000,000 speakers per year
after 1994. The Company has granted Daewoo the exclusive selling right in Korea
for the current year,
(b) Malaysian Joint Venture
-----------------------
On September 23, 1993, the Company entered into an agreement with
Burlington Technopole SDN. BHD., a Malaysian corporation ("Burlington"), for the
formation of a joint venture to manufacture and sell speakers using Aura's
proprietary technology. The joint venture, which has been named Audiora Sound
SDN. BHD and was established under Malaysian law to operate in Malaysia, has the
exclusive right to sell speakers using Aura technology in the ASEAN countries
and the non-exclusive right to sell such speakers in the United States. Under
the terms of the agreement, the Company owns 49% of the joint venture and
Burlington owns 51%. The capitalization of the joint venture involves a total of
$500,000 ($250,000 from each party) in initial investments by the Company and
Burlington. In addition Burlington intends to borrow $8 million. The Company has
granted all licenses as necessary to enable the joint venture to manufacture the
speakers, and in return may receive up to $1 million in license fee, of which
$500,000 was collected in January 1994 and included in revenues. There is no
further obligation on the Company's part with regards to the license fee
recorded as income. The Company further agreed to purchase a minimum of 3
million speakers per year (at an estimated cost of $5 million to $7 million) for
the five years following the start of production of the speakers at prices equal
to the wholesale market prices to the end users of the speakers. Payment for
these speakers will be made with a revolving letter of credit based on 30 day
revolving terms for each monthly purchase of speakers (based on the previous
month's shipment). The Company has not entered into any contracts specifically
for the sale of these speakers. The production facility has been completed and
test production runs began in the first quarter of Fiscal 1996. At May 31, 1995,
the Company's investment is $371,392, representing the initial investment plus
other costs.
(c) Intergroup Joint Venture
------------------------
In February 1994, the Company entered into an agreement with Intergroup
Corporation ("Intergroup") for the formation of a joint venture, to manufacture
and sell platform motion simulators using Aura's proprietary technology. The
joint venture known as Magforce is 50% owned by Aura and 50% owned by
Intergroup. Under the terms of the agreement, Aura granted to Intergroup an
exclusive, worldwide right to Aura's technology regarding platform motion
simulators in consideration of a license fee of $740,000, all of which has been
received by the Company. The joint venture will be capitalized by a
contribution of $10,000 in cash by each of the parties, the contribution to the
joint venture of Intergroup's exclusive, worldwide license regarding the
platform motion simulator, and the contribution by Aura of a platform motion
simulator.
The Company also entered into a separate agreement with Intergroup for the
sale of an additional license for $1,000,000, related to the Companys' actuator
technology as used in vibration isolation. $500,000 of this license fee has
been received by the Company. (See also Note 8).
6
<PAGE>
(d) Industrial Equipment Agreement
------------------------------
In May 1994, the Company entered into an agreement with an unrelated group
of investors to exploit machine tool, robotic and industrial hand tool
applications of the Company's electromagnetic technology. Concurrently, the
Company granted these investors a license for the exclusive rights under Aura's
patents and proprietary technology for use in such applications. Consideration
for the license was a nonrefundable $1,000,000 fee, all of which has been
received by the Company. The Company has no further obligation with respect to
this license. In exchange for providing a working prototype of an initial
product, the Company will also have a 50% participation in future operating
results of an entity established to manufacture and market products. The
investor group has agreed to provide that entity up to $2,000,000 in the form of
a working capital loan and the use of their exclusive rights under the license
agreement.
(e) Zylux Acoustic Joint Venture
----------------------------
On February 22, 1995, the Company entered into an agreement with Zylux
Acoustic for the formation of a joint venture to manufacture and sell speakers
using Aura's proprietary technology. The joint venture has the exclusive right
to build and sell speakers using Aura's technology in the republic of Taiwan and
the European market. The Company owns 49% of the joint venture and Zylux owns
51%. As consideration for this license, the Company will receive a $1,000,000
fee. In addition, the joint venture could, at Aura's discretion, build speakers
for Aura's needs in other parts of the world. The Company has already placed an
order with the joint venture for approximately 2.4 million speakers to be
delivered in equal monthly quantities over a one year period beginning July
1995. The speakers ordered are needed to meet the Company's demand for
multimedia applications.
(f) Thailand Joint Venture
----------------------
On February 20,1995 the Company entered into an agreement with Kunland
Company, Ltd., and now held by Twilight Electric, Ltd., a Thailand Corporation,
and Narit Pungkanonda, an individual and citizen of Thailand, for the formation
of a joint venture to manufacture Aura's bass shaker, an audio enhancement sound
system incorporating Aura's proprietary electromagnetic transducer technology.
The joint venture, established to operate and manufacture within the Royal
Kingdom of Thailand, is owned 45% by the Company, 45% by Twilight Electric, and
10% by Mr. Pungkanonda. In connection with the agreement, Aura granted to
Twilight Electric an exclusive license in February, 1995, to use Aura's patented
and proprietary technology. Twilight Electric agreed to pay Aura quarterly
installments, for the life of Aura's patent, and Aura has received the first
payment of $125,000.
The Company has agreed to purchase one hundred forty thousand bass shakers
in the first year increasing to two hundred twenty thousand and two hundred
eighty thousand in years two and three. Thereafter, manufacturing commitments
are now set at seventy five thousand bass shakers per quarter. Pursuant to the
agreement: (i) Aura will contribute to the new joint venture a working prototype
of an exemplary product of the type to be manufactured; (ii) Twilight Electric
will contribute a sublicense of the rights and obligations under the exclusive
license; (iii) Aura and Twilight Electric will contribute $104,167 each as paid
in capital for the share certificates to be issued and; (iv) Aura will provide
training to Twilight Electric personnel with reimbursement to Aura at cost.
5) AURA MEDICAL SYSTEMS, INC.
As a result of a series of stock purchase transactions entered into as of
and subsequent to November 30, 1991 the Company reduced its ownership in AMS to
49.7% of total shares outstanding by February 28, 1993.
Gross proceeds from the stock sale transactions aggregated $4,000,000 of
which $3,000,000 was paid in cash prior to February 28, 1993 with the remaining
$1,000,000
7
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paid in Fiscal 1995. Included in this $4,000,000 was the sale to a then director
of the Company for $1,000,000. The $4,000,000 gross amount, less costs of
$560,000 for shares purchased from other AMS shareholders as part of this
transaction, have been included in proceeds from sale of stock in AMS and
deferred on previously presented balance sheets. The agreements under which the
sale occurred contained provisions whereby the shares purchased by these
individuals are exchangeable for the Company's shares during the period from
November 30, 1993 through November 30, 1998, subject to certain "acceleration
events" as defined in the stock purchase agreements.
In November 1994, the individuals exercised their right to exchange their
stock in AMS for stock in the Company. AMS is consolidated in the Company's
financial statements as of February 28, 1995 since the exchange resulted in the
Company owning a majority of the outstanding shares of AMS as of February 28,
1995. The Company has elected not to restate the consolidated financial
statements for the prior years, due to the immateriality of the amounts.
6) CAPITAL
In the quarter ended May 31, 1995, options to purchase 5,000 shares of
common stock were exercised resulting in proceeds of $20,000. Additionally the
Company received proceeds of $16,332,330 from the sale of 5,530,000 shares of
common stock. In the prior year quarter, options to purchase 7,000 shares of
common stock were exercised, resulting in proceeds of $21,420.
7) SIGNIFICANT CUSTOMERS
For the three months ended May 31, 1995, sales of computer related
components to a single unrelated customer accounted for $3,039,005 or 32% of the
Company's revenues. This was an increase from $1,263,030 or 28% of the
Company's revenues in the three months ended May 31, 1994.
8) 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.
Trademark Litigation (Settled)
------------------------------
On August 10, 1994, the Company was served with a complaint which was filed
in the United States District Court for the Central District of California
(Everview, Inc. v. Korea Data Systems, et al., CV-94-3376) relating to the use
- --------------------------------------------
of the trademark "EVERVIEW" when applied to computer video monitors which the
Company has previously sold.
The Company on January 6, 1995 entered into a settlement agreement and
mutual release of all claims with the plaintiff Everview. Under the settlement,
Aura shall not be liable for any monetary damages, costs or fees. In addition,
the Company did not incur any outside legal expense in this action. The Court
entered its Order of Dismissal upon Settlement of Case on March 20, 1995.
InterGroup Arbitration
----------------------
On March 14, 1995, the InterGroup Corp. filed against the Company a Demand
for Arbitration (Case No. 72 133 00276 95) before the American Arbitration
Association (AAA) in Los Angeles, California, under its commercial arbitration
rules. The Company filed its general denial, affirmative defenses and
counterclaim to the Demand on March 27, 1995. The claim of Intergroup, and the
defenses and counterclaims of the Company were disclosed in the Company's 10-K
filed May 30, 1995.
The Company does not believe that the outcome of the arbitration will have
a material adverse effect on the financial condition of the Company. The AAA is
8
<PAGE>
currently in the process of selecting the arbitration panel which will decide
this dispute. Once the panel has been chosen, a preliminary hearing will be
held to assess the scope of the issues to be decided and the extent of the
discovery to be conducted. The Company intends to vigorously defend this action
and pursue its counterclaims.
Shareholder Litigation
----------------------
On May 17, 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-95-3295 and CV-95-3296). Both complaints (the "Complaints") purport to
be class actions on behalf of all persons who purchased common stock of Aura
during the period from May 28, 1993 through January 17, 1995, inclusive (the
"Class Period"). The Complaints allege 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. Specifically, the
Complaints allege that (i) in its periodic reports filed with the SEC during the
Class Period and/or in certain public announcements made during that period, the
Company increased its reported revenues by overstating product sales and certain
licensing fees and (ii) the Company misstated the sophistication and quality of,
and commitments for the Company's "Interactor Vest." The Complaints request
damages in an unspecified amount under certain federal securities laws. The
Company believes that this action is frivolous and that it has meritorious
defenses to all these claims and intends to seek immediate dismissal of the
complaint and defend against these claims vigorously. The Company believes the
filing of this complaint is sanctionable and will seek all appropriate remedies.
Other Litigation.
-----------------
The Company is also engaged in other legal actions arising in the ordinary
course of business. In the opinion of management based in part 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.
9
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MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
For the three months ended May 31, 1995, the Company lost $759,543 on
revenue of $9,525,368 as compared to a loss of $1,474,481 on revenue of
$4,448,266 for the comparable prior year period. The loss as a percentage of
revenue declined to 8% from 33% in the prior year quarter. Included in the loss
figure for the three months ended May 31, 1995, is depreciation and amortization
of approximately $1.1 million.
Revenue for the period ended May 31, 1995 increased by $5,077,102 or 114%
compared to the corresponding period in the prior year. This was primarily due
to the shipments of various products.
Sales of computer related components to a single unrelated party in the
three months ended May 31, 1995, increased to $3,039,005 or 32% of revenues
compared to $1,263,030 or 28% of revenues in the comparable prior year period.
The Company has also begun shipments of multi-media kits, modems, sound
cards and speakers to be used in conjunction with, and integrated into, computer
monitors and systems.
No license fee revenue was recorded in the three months ended May 31, 1995.
License fee revenues for the three months ended May 31, 1994 totaled $1,000,000,
or 22.5% of revenues, from the Company's industrial equipment agreement as set
forth in Note 4 to the financial statements. The prior years license agreement
had a pronounced effect on operating results in the prior year quarter because
associated direct costs are insignificant. The Company believes that revenues
from licensing of its technology may increase as more applications of the
Company's technology are licensed to third parties.
The following table summarizes and compares the revenue contributors for
the first quarter of Fiscal 1996 and Fiscal 1995:
In Thousands
<TABLE>
<CAPTION>
- ------------------------------------------------------------------
1996 % 1995 %
- ------------------------------------------------------------------
<S> <C> <C> <C> <C>
. U.S. Gov't $ 10 .1% $ 50 1%
. Product Development $ 0 0% $ 0 0%
. Computer Related Hardware $5,310 55.6% $1,263 28.5%
. License Fees $ 0 0% $1,000 22.5%
. Electromagnetic Principle
Products $4,205 44.3% $2,135 48%
- ------------------------------------------------------------------
TOTAL $9,525 100% $4,448 100%
- ------------------------------------------------------------------
</TABLE>
Cost of revenues for the three months ended May 31, 1995 increased by
$3,775,993 or 108%, primarily as a result of the increase in purchased parts
associated with the increase in the sales of the Company's products.
General and administrative costs increased by $404,734 due primarily to the
addition of the Company's two new subsidiaries, Electrotec Productions, Inc. and
NewCom, Inc.
Research and development expense increased by $162,341 or 54% as the
Company increased its attention on finding new applications for its patented
technologies.
Interest expense for the quarter increased by $8,155 over the prior year.
This was due primarily to the initiation of lines of credit, partially offset by
the continued conversion of the Company's Secured 7% Convertible Notes into
common stock.
10
<PAGE>
Interest income decreased by $12,593 as a result of lower levels of investable
cash being available in the current year quarter.
LIQUIDITY AND CAPITAL RESOURCES
In the first quarter of Fiscal 1996, the level of cash increased to
$9,102,891 from $3,827,500 at February 28, 1995. Inventories increased by
$2,408,508 as the Company built inventory to prepare for increasing shipments of
the Company's Speakers, Bass Shakers(TM), Interactive Cushion(TM),
Interactor(TM), multimedia kits, modems and sound cards.
The increase in receivables of $3,286,724 is comprised of the following: 1)
an increase in receivables and accruals due on long term contracts of $459,799
(these typically are collected over a longer period of time than trade
receivables), and 2) an increase in trade receivables of approximately $9.1
million and collections of approximately $6.4 million.
Cash flows used in operations increased by $5,104,496 as compared to the
prior year quarter. The Company's working capital increased by $14,574,167 to
$48,370,348 from the fiscal year end level, while the current ratio improved to
4.35:1 from 3.24:1.
In the first quarter of Fiscal 1996, financing activities contributed $20,000
from the exercise of options to purchase 5,000 shares of stock. Additionally,
the Company received proceeds of $16,332,330 from the sale of common stock. In
the first quarter of Fiscal 1995 financing activities contributed $21,420 from
the exercise of options to purchase 7,000 shares of common stock.
In the past, the Company's cash flow generated from operations has not been
sufficient to completely fund its working capital needs. Accordingly, the
Company has also relied upon external sources of financing to maintain its
liquidity, 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
Interactor(TM), Bass Shakers(TM), Interactive Cushion(TM), Speakers, multimedia
kits, modems and sound cards, cash flows and results of operations should be
favorably impacted in the future.
11
<PAGE>
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
12
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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, 1995 By: /s/ Steven C. Veen
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STEVEN C. VEEN
Vice President
Chief Financial Officer
(Principal Financial and
Accounting Officer)
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