SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): JUNE 16, 1999
AURA SYSTEMS, INC.
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 0-17249 95-4106894
(State or other Jurisdiction (Commission (I.R.S. Employer
of Incorporation or Organization) File Number) Identification No.)
2335 Alaska Avenue
El Segundo, California 90245
(Address of principal executive offices)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (310) 643-5300
FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT: N/A
Item 5. Other Events.
Inability to Timely File Form 10-K
Aura Systems, Inc. ("Aura" or the "Company") is unable to file its Form
10-K for the year ended February 28, 1999, by the due date, June 16, 1999, as
its auditors have not yet prepared audited financial statements. The Company
intends to file Form 10-K as soon as it is able to obtain sufficient funds to
pay its auditors to complete the audit. However, in the interest of providing
current information to Aura's shareholders, the following information is being
furnished in order to provide information regarding certain material
developments which have occurred in Aura's business since it filed its Form
10-Q for the quarter ended November 30, 1998.
Recent Material Events
During the past year Aura devoted substantial financial and human
resources in furtherance of its plan to manufacture and sell its patented,
proprietary product, the AuraGen. This involved, among other things, the
establishment of manufacturing facilities and building a sales and marketing
organization to support the introduction of this new product to the marketplace.
As is often the case with the introduction of a capital intensive product
launch, it was anticipated that in order to implement Aura's business plan,
working capital would be required in an amount that would exceed cash flow
generated from initial sales of the AuraGen.
Aura anticipated that its working capital needs would be met from a
number of sources, including the repayment by NewCom, Inc. ("NewCom") of
approximately $20 million of indebtedness which was due in September 1998
and proceeds from external debt and equity financing. NewCom was unable to
meet its obligations to Aura in September 1998, creating a significant cash
shortfall to Aura. NewCom's operations in the third quarter of fiscal 1999
were severely impacted by an industry-wide slump in the computer peripherals
industry, causing a buildup in inventory and difficulty in collecting
receivables from mass merchants. NewCom's business reached a critical juncture
in January 1999 when Deutsche Financial Services, which maintained NewCom's
principal working capital line, announced that it was unwilling to continue to
advance working capital to NewCom under its credit facility. Ultimately, this
resulted in NewCom ceasing its day-to-day operations.
NewCom's inability to meet its obligations to Aura had a material
adverse impact on Aura's operations. Payments to Aura suppliers were slowed. As
a result, needed parts and components were not available when scheduled.
Similarly, sales orders in the AuraSound division could not be filled, as needed
parts and components could not be obtained from vendors who needed to be paid.
This in turn limited Aura's ability to generate cash flow from sales in the
AuraGen and AuraSound divisions.
As previously reported in the Company's Form 10-Q for the period ended
November 30, 1998, the Company's management was forced to take steps to curtail
its expansion plans and began implementing measures to reduce its overhead until
such time as additional working capital could be obtained. These steps have
included the layoff or resignation of more than fifty employees since January
15, 1999, the sale of the Company's MYS division to its former owners, the
elimination of the display division and the temporary suspension of
development activities associated with the EVA program. Steps are also
underway to license Aura's proprietary AuraSound line of speakers. In
addition, since March 1999 Aura pledged approximately 3.5 million shares of
NewCom Common Stock owned by it to secure obligations of Aura to certain
creditors. Approximately 450,000 shares of NewCom were liquidated by some of
these creditors and applied to reduce Aura's indebtedness.
Since January 1999 the Company's limited resources have been devoted
almost entirely to continuing the manufacturing and sale of the AuraGen
products. This has required the Company to make some difficult decisions,
including the decision to delay payments to the auditors, which in turn has
delayed the filing of the Company's Annual Report on Form 10-K. However, the
decision was made to support the AuraGen program at all costs, as the Company
believes that ultimately the success of the Company and realization of
shareholder value will depend on the successful implementation of the AuraGen
program.
Although the Company has experienced delays in the shipping of AuraGen
products since the beginning of the year as a result of insufficient working
capital, necessary parts are now being obtained and shipments of AuraGens have
resumed. However, the Company's continued operation will require an infusion of
additional working capital, which will in turn require the successful
restructuring of Aura's outstanding indebtedness, discussed below.
With its limited resources the Company has stayed focused on the
AuraGen. The Company continues to support the U.S. Army in its evaluation of the
AuraGen (known to the U.S. Army as the VIPER). Over 25 cities across the U.S.
have purchased and are currently evaluating the AuraGen for their use. Some
cities have already specified the AuraGen as a requirement for some of their
vehicles. Over 30 utilities in the U.S. have also purchased and are evaluating
the AuraGen. Certain major telecommunications companies have recently completed
their evaluations and the Company expects that purchases by these companies will
be forthcoming. Numerous state and federal agencies are evaluating the AuraGen
for their specific applications.
While the Company's limited resources have slowed progress, the Company
has continued to develop different engine mounts for the AuraGen. Today, the
Company has completed the engine mount designs and started production that will
fit most of the trucks, pickups and SUV's built in North America by the major
OEMs. The Company's 5kw model is now available for more than 20 different
vehicle models. The Company continues to work closely with OEMs to evaluate the
possibilities for an OEM option sometime in the future.
Need For Restructuring and Infusion of Working Capital
The Company's ability to maintain and expand its operations will
require an infusion of working capital and the restructuring of Aura's principal
indebtedness. In this regard, the Company has retained one of the top five
international accounting firms to assist it in implementing a restructuring.
Discussions are ongoing with key investor groups who together represent Aura
indebtedness of approximately $35 million, consisting of straight debt and debt
which is convertible into Aura Common Stock, with a view towards converting
this indebtedness into equity. The Company believes that the restructuring of
this indebtedness is required in order to obtain working capital from other
third parties. There are no assurances that satisfactory agreements will be
reached with these debtholders. Absent an agreement, the Company will
explore other avenues.
A successful restructuring will also require the cooperation of other
creditors of Aura. As of June 15, 1999, the Company was in arrears in respect of
more than $10 million in trade payables and in arrears under leases or mortgages
in six Company facilities. The Company's proposed restructuring plan calls for
leases and mortgages to be paid current and all trade creditors to be paid in
full over time. This will require an infusion of working capital from third
parties and the agreement of these creditors. There are no assurances that
satisfactory agreements will be reached with these creditors.
The Company is also a party to certain guarantees of NewCom
indebtedness, including a guarantee of NewCom's indebtedness to Deutsche
Financial Services ("DFS") of approximately $8.5 million, and a stipulated
judgment in favor of a NewCom creditor for approximately $2.0 million. In April
1999 DFS commenced legal proceedings against Aura to obtain a prejudgment lien
on Aura's assets to secure Aura's guarantee obligations. Although there are
no assurances, the Company believes DFS is fully collateralized by the assets
of NewCom that it possesses and that there will be no resulting obligation on
Aura's part.
The Company does not anticipate that it will be able to obtain external
financing until a restructuring of its principal outstanding indebtedness can be
achieved. Although the Company presently has no commitments to obtain working
capital financing from third parties, it is in ongoing discussions with a number
of potential investors who have expressed serious interest in providing working
capital to the Company, subject to achieving a successful debt restructuring.
There are no assurances that such working capital will be made available to the
Company, or that such capital will be available at the times or in the amounts
required by the Company.
<PAGE>
Status of Nasdaq Stock Market Listing
In February 1999 the Company was notified by the Nasdaq Stock Market
("Nasdaq") that the Company's Common Stock was not in compliance with Nasdaq's
requirement that the Common Stock maintain a minimum bid price of $1.00, and
that the Company would have 90 days to regain compliance. In May 1999 the
Company requested a hearing before Nasdaq to obtain a temporary exemption from
the $1.00 minimum bid price requirement. Nasdaq has scheduled a hearing on July
9, 1999.
Nasdaq listing rules also require that listed companies timely file
periodic reports with the SEC, including Form 10-Ks and 10-Qs in order to
maintain their listing. The Company's Form 10-K, which is due by June 16, 1999,
is not being filed timely as a result of the inability of the Company to
complete its audit. As previously reported by the Company, the audit has been
delayed as a result of the Company's inability to pay its auditors. The Company
intends to seek a temporary exemption from this listing requirement.
The Company's ability to regain compliance with SEC filing requirements
is dependent upon its ability to pay its auditors. The Company's ability to
regain compliance with the $1.00 minimum bid price requirement will likely
require the Company to effect a reverse stock split, an action which requires
shareholder approval and solicitation of proxies. The Company intends to file
its Form 10-K for the fiscal year ended February 28, 1999, and seek shareholder
approval of a reverse stock split at such time as the Company has sufficient
working capital to pay the costs associated with these actions. There are no
assurances as to when or if the Company will be able to complete these actions.
Even if the Company is able to complete these actions, there are no assurances
that they can be completed by the deadlines established by Nasdaq. Even if these
actions can be successfully completed, Nasdaq retains the discretion to modify
or increase listing criteria, and there are no assurances that the Company will
be able to maintain compliance with other Nasdaq listing criteria. If the
Company's Common Stock is delisted, it nonetheless intends to file its Form 10-K
as soon as the audit can be completed.
This Report contains forward looking statements and future results may
differ materially from those anticipated in such forward looking statements.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed by the undersigned hereunto
duly authorized.
AURA SYSTEMS, INC.
(Registrant)
Date: June 16, 1999 By: /s/ Steven C. Veen
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Steven C. Veen
Chief Financial Officer
