SCHEDULE 14(a) INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act
of 1934 (amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] solicitng Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
AURA SYSTEMS, INC>
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Name of Person(s) filing Proxy Statement, if other than the Registrant)
Payment of filing Fee (Check the appropriate box).
[X] No fee required.
[ ] Fee computed on table below per Exchange Act rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid
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AURA SYSTEMS, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON OCTOBER 2, 2001
To the Stockholders of Aura Systems, Inc.:
The Annual Meeting of Stockholders of Aura Systems, Inc., a Delaware
corporation (the "Company"), will be held on October 2, 2001 at 3:00 p.m., PST,
at the Manhattan Beach Marriott, 1400 Parkview Avenue, Manhattan Beach,
California, for the following purposes:
(1) To elect a Board of Directors of nine members; and
(2) To transact any other business which may properly come before the
meeting.
Stockholders of record at the close of business on August 6, 2001 will be
entitled to notice of and to vote at the meeting and any adjournments thereof.
All Stockholders are cordially invited to attend the meeting in person.
Whether or not you expect to attend the meeting, PLEASE COMPLETE AND SIGN THE
ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE. The giving of
your proxy will not affect your right to vote in person should you later decide
to attend the meeting.
Any Stockholder of record of the Company at the close of business on August
6, 2001 may attend. Any beneficial owner of shares with a letter of
authorization from his record holder may attend the meeting.
By Order of the Board of Directors
/s/ Michael I. Froch
Michael I. Froch
Secretary
El Segundo, California
August 20, 2001
Please mark, date, and sign the enclosed Proxy and return it at an early date in
the enclosed return envelope so that, if you are unable to attend the Annual
Meeting, your shares may be voted.
AURA SYSTEMS, INC.
2335 Alaska Avenue
El Segundo, CA 90245
(310) 643-5300
PROXY STATEMENT
August 20, 2001
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Aura Systems, Inc. ("Aura" or the
"Company") for the Annual Meeting of Stockholders to be held on October 2, 2001
at 3:00 p.m., PST, at the Manhattan Beach Marriott, 1400 Parkview Avenue,
Manhattan Beach, California, (the "Annual Meeting") and any postponements or
adjournments thereof. Any Stockholder giving a proxy may revoke it before or at
the meeting by providing a proxy bearing a later date or by attending the
meeting and expressing a desire to vote in person. If the enclosed proxy is
properly signed and returned, the shares represented thereby will be voted at
the Annual Meeting as directed by the Stockholder on the proxy card; and, if no
choice is specified, they will be voted (i) "FOR" the Directors nominated by the
Board of Directors and (ii) in the discretion of the persons acting as proxies,
for any other matters. Your cooperation in promptly returning the enclosed proxy
will reduce Aura's expenses and enable its management and employees to continue
their normal duties for your benefit with minimum interruption for follow-up
proxy solicitation.
Only Stockholders of record at the close of business on August 6, 2001 are
entitled to receive notice of and to vote at the meeting. On that date, Aura had
outstanding 323,833,438 shares of Common Stock and no Preferred Stock. The
shares of Common Stock vote as a single class. Holders of shares of Common Stock
on the record date are entitled to one vote for each share held. The presence at
the Annual Meeting, either in person or by proxy, of the holders of a majority
of the shares of Common Stock issued, outstanding and entitled to vote is
necessary to constitute a quorum for the transaction of business.
In accordance with Delaware law, abstentions and "broker non-votes"
(i.e. proxies from brokers or nominees indicating that such persons have not
received instructions from the beneficial owners or other persons entitled to
vote shares as to a matter with respect to which brokers or nominees do not have
discretionary power to vote) will be treated as present for purposes of
determining the presence of a quorum. For purposes of determining approval
of a
matter presented at the meeting, abstentions will be deemed present and entitled
to vote and will, therefore, have the same legal effect as a vote "against" a
matter presented at the meeting. Broker non-votes will be deemed not entitled to
vote on the matter as to which the non-vote is indicated. Therefore, a broker
non-vote will have no legal effect on any matter requiring the affirmative vote
of a plurality of the votes cast, and will have the same legal effect as a vote
"against" any other matters presented at the meeting which require approval by a
majority of the shares represented in person or by proxy at the meeting.
In the event that sufficient votes in favor of any of the proposals are not
received by the date of the Annual Meeting, the persons named as proxies may
propose one or more adjournments of the Annual Meeting to permit further
solicitations of proxies. Any such adjournment will require the affirmative vote
of the holders of a majority of the shares of Common Stock present in person or
by proxy at the Annual Meeting. The persons named as proxies will vote in favor
of such adjournment or adjournments.
The cost of preparing, assembling, printing and mailing the materials, the
Notice and the enclosed form of Proxy, as well as the cost of soliciting proxies
relating to the Annual Meeting, will be borne by the Company. The Company will
request banks, brokers, dealers, and voting trustees or other nominees to
forward solicitation materials to their customers who are beneficial owners of
shares, and will reimburse them for the reasonable out-of-pocket expenses of
such solicitations. The original solicitation of proxies by mail may be
supplemented by telephone, telegram, personal solicitation or other means by
officers and other regular employees or agents of the Company, but no additional
compensation will be paid to such individuals on account of such activities.
This Proxy Statement and the accompanying Notice of Annual Meeting and form of
Proxy are being mailed or delivered to Stockholders on or about September 10,
2001.
PROPOSAL NO. 1
ELECTION OF NINE NOMINEES FOR DIRECTORS
The Board of Directors of the Company recommends that the Stockholders vote
"FOR" the election of the nine nominees for Director.
Nominees and Voting
The By-Laws of the Company provide for a Board of nine Directors.
Consequently, at the Annual Meeting, nine Directors will be elected to serve
until the next Annual Meeting and until their successors are elected and
qualified. Proxies may not be voted for more than nine persons. The Company has
nominated for election as Directors the nine persons named below. Each of these
nominees has indicated that they are able and willing to serve as Directors.
Under the terms of its Loan Agreement with its principal lender, the
Company's Board of Directors is required to be comprised of persons the majority
of whom are "independent directors," as defined in such agreement, so long as
any indebtedness is outstanding to the lender. A person is deemed to be an
"independent director" if such person is not an employee or former employee or
otherwise having a significant business relationship with the Company during the
past three years. Accordingly, a majority of the Company's nominees are
"independent directors" under the Loan Agreement.
Unless otherwise instructed, the Company's proxy holders intend to vote the
shares of Common Stock represented by the proxies in favor of the election of
these nominees. If for any reason any of these nominees will be unable or
unwilling to serve, the shares represented by the enclosed proxy will be voted
for the election of the balance of those named and such other person or persons
as the Board of Directors may recommend. The Board of Directors has no reason to
believe that any such nominee will be unable or unwilling to serve. Directors
are elected by a plurality of the votes cast.
The Company's nominees and Directors are listed below, together with their
ages, principal occupations, offices with the Company and year in which each
became a Director of the Company.
The Board of Directors of the Company recommends that the Stockholders vote
"FOR" the election of the nine nominees for Director.
Name Age Since Title
------------------------------ ----- ------ --------------------------------------------------------------------------
------------------------------ ----- ------ --------------------------------------------------------------------------
Zvi Kurtzman 54 1987 Chief Executive Officer, Chairman, Board of Directors
Stephen A. Talesnick 52 1999 Vice-Chairman, Board of Directors, Member of Compensation Committee
Carl A. Albert 59 2001 Director
Harvey Cohen 68 1993 Director, Member of Audit Committee
Salvador Diaz-Verson, Jr. 49 1997 Director, Member of Compensation Committee
Harry B. Haisfield 59 2000 Director, Member of Compensation Committee
Neal Meehan 60 2000 Director, Member of Audit Committee
Norman Reitman 77 2000 Director, Member of Audit Committee
William Richbourg 58 2001 Director
Business Experience of Directors and Nominees During the Past Five Years
Zvi Kurtzman is the CEO and Chairman of the Board of Directors of the
Company and has served in this capacity since 1987. Mr. Kurtzman also served as
the Company's President from 1987 to 1997. Mr. Kurtzman obtained his B.S. and
M.S. degrees in physics from California State University, Northridge in 1970 and
1971, respectively, and completed all course requirements for a Ph.D. in
theoretical physics at the University of California, Riverside. He was employed
as a senior scientist with the Science Applications International Corporation, a
scientific research company in San Diego, from 1984 to 1985 and with Hughes
Aircraft Company, a scientific and aerospace company, from 1983 to 1984. Prior
thereto, Mr. Kurtzman was a consultant to major defense subcontractors in the
areas of computers, automation and engineering. Since June 2001, Mr. Kurtzman
has served on the Board of Directors of Ontro, Inc., a NASDAQ company engaged in
the research, development and sale of integrated thermal containers designed to
heat liquid contents such as coffee, tea, hot chocolate, soups, and alcoholic
beverages.
In October 1996, the Securities and Exchange Commission ("Commission")
issued an order (Securities Act Release No. 7352) instituting an administrative
proceeding against Aura Systems, Zvi Kurtzman, and an Aura former officer. The
proceeding was settled on consent of all the parties, without admitting or
denying any of the Commission's findings. In its order, the Commission found
that Aura and the others violated the reporting, record keeping and anti-fraud
provisions of the securities laws in 1993 and 1994 in connection with its
reporting on two transactions in reports previously filed with the Commission.
The Commission's order directs that each party cease and desist from committing
or causing any future violation of these provisions. The Commission did not
require Aura to restate any of the previously issued financial statements or
otherwise amend any of its prior reports filed with the Commission. Neither Mr.
Kurtzman, nor anyone else, personally benefited in any way from these events.
Also, the Commission did not seek any monetary penalties from Aura, Mr.
Kurtzman, or anyone else. For a more complete description of the Commission's
Order, see the Commission's release referred to above.
Stephen A. Talesnick is Vice Chairman of the Board of Directors and has
served in this capacity since January 2001. He originally joined the Board of
Directors in September 1999. Mr. Talesnick has owned and maintained a private
law practice since 1977, which is presently located in Beverly Hills. Mr.
Talesnick specializes in business and financial transactions in addition to
entertainment industry related matters. He originally practiced as an associate
in the New York law firm of White & Case. In 1992, Mr. Talesnick became a
financial advisor in the financial services industry and is registered with the
Securities and Exchange Commission. Mr. Talesnick is a graduate of The Wharton
School of Finance and Commerce at the University Of Pennsylvania and received
his Juris Doctor degree from Columbia University School of Law.
Carl A. Albert is a Director of the Company and has served in this capacity
since July 10, 2001. Mr. Albert is presently a member of the Board of Directors
of Fairchild Dornier Corporation, a privately held company in the business of
manufacturing aircraft. Mr. Albert has held a significant interest in Fairchild
Dornier Corporation since 1990, when he provided the venture capital necessary
for acquiring ownership control of the company's original predecessor
corporation, Fairchild Aircraft. From 1996 through 1999, following Fairchild
Aircraft's purchase of Daimler-Benz' 80% interest in Dornier, he was the
Chairman of the Board of Directors of Fairchild Dornier Corporation, its Chief
Executive Officer and the majority stockholder. Mr. Albert was the Chairman of
the Board of Directors of Fairchild Aircraft, its Chief Executive Officer and
the majority stockholder from 1990 through 1996. From 1986 through 1989, he
provided venture capital and served as the CEO or President of a California
based regional airline, West Wings Airlines, which operated as an American Eagle
franchisee until acquired by the parent of American Airlines in 1988. Mr.
Albert's business experience includes 18 years as an attorney, specializing in
business and corporate law in Los Angeles, California. He also serves and has
served as a Member of the Board of Directors of a number of privately and
publicly held corporations, including Dr. Pepper Bottling Company of California,
K & K Properties, Ozark Airlines and Tulip Corporation. Mr. Albert holds a B.A.
from UCLA in political science and an L.L.B. from the UCLA School of Law.
Harvey Cohen is a Director of the Company and has served in this capacity
since August 1993. Mr. Cohen is President of Margate Advisory Group, Inc., an
investment advisor registered with the Securities and Exchange Commission, and a
management consultant since August 1981. Mr. Cohen has consulted with the
Company on various operating and growth strategies since June 1989 and assisted
in the sale of certain of the Company's securities. From December 1979 through
July 1981, he was President and Chief Operating Officer of Silicon Systems,
Inc., a custom integrated circuit manufacturer which made its initial public
offering in February 1981 after having raised $4 million in venture capital in
1980. From 1975 until 1979, Mr. Cohen served as President and Chief Executive
Officer of International Communication Sciences, Inc., a communications computer
manufacturing start-up company for which he raised over $7.5 million in venture
capital. From 1966 through 1975, Mr. Cohen was employed by Scientific Data
Systems, Inc. ("S.D.S."), a computer manufacturing and service company, which
became Xerox Data Systems, Inc. ("X.D.S.") after its acquisition by Xerox in
1979. During that time, he held several senior management positions, including
Vice President-Systems Division of S.D.S. and Senior Vice President-Advanced
Systems Operating of the Business Planning Group. Mr. Cohen received his B.S.
(Honors) in Electrical Engineering in 1955 and an MBA in 1957 from Harvard
University.
Hon. Salvador Diaz-Verson, Jr. is a Director of the Company and has served
in this capacity since September 1997. Mr. Diaz-Verson is the founder, and since
1991 has been the Chairman and President of Diaz-Verson Capital Investments,
Inc., an Investment Adviser registered with the Securities and Exchange
Commission. Mr. Diaz-Verson served as president and member of the Board of
Directors of American Family Corporation (AFLCAC Inc.) a publicly held insurance
holding company, from 1979 until 1991. Mr. Diaz-Verson also served as Executive
Vice President and Chief Investment Officer of American Family Life Assurance
Company, subsidiary of AFLCAC Inc. from 1976 through 1991. Mr. Diaz-Verson is a
graduate of Florida State University. He is currently a Director of the board of
Miramar Securities, Clemente Capital Inc., Regions Bank of Georgia and The
Philippine Strategic Investment Holding Limited. Since 1992, Mr. Diaz-Verson has
also been a member of the Board of Trustees of the Christopher Columbus
Fellowship Foundation, presidentially appointed by President George Bush in
1992, and re-appointed by President Clinton in early 2000.
Norman Reitman is a Director of the Company and has served in this capacity
since March 6, 2000. He previously served as a Director of the Company from
January 1989 to September 1998. Mr. Reitman obtained his B.B.A. degree in
business administration from St. Johns University in 1946 and became licensed as
a public accountant in New York in 1955. Mr. Reitman is the retired Chairman of
the Board and President of Norman Reitman Co., Inc., insurance auditors, where
he served from 1979 until June 1990. Mr. Reitman was a senior partner in Norman
Reitman Co., a public accounting firm, where he served from 1952 through 1979.
Mr. Reitman served on the Board of Directors and was a Vice President of
American Family Life Assurance Co., a publicly held insurance company, from 1966
until April 1991.
Harry B. Haisfield is a Director of the Company and has served in this
capacity since October 2000 following appointment by resolution of the Board of
Directors, pursuant to the Bylaws of the corporation. Since 1982, Mr. Haisfield,
a private investor, has been involved with start-up companies and has served on
the Board of Directors of several corporations. He is currently the Chairman and
CEO of Raydak Corporation, which develops non-destructive testing technology. He
has served on the Board of Directors of Achieve.Com, Radiance Communications and
as a Director of First Pacific Networks, a publicly held company. Upon
completing college, Mr. Haisfield entered the U.S. Naval flight training program
in Pensacola, Florida, finishing in the top of his class. He served more than
five years as an officer and pilot in the U.S. Marines until his release in 1966
at the rank of Captain. At that time he left the military to join Pan American
Airlines where he served as an active pilot until 1991.
Neal Meehan is a Director of the Company and has served in this capacity
since October 2000 following appointment by resolution of the Board of
Directors, pursuant to the Bylaws of the corporation. Mr. Meehan's business
career spans the transportation and telecommunications sectors, and he is
currently involved in market development and strategic planning for start-up and
mature companies. He has served as president and chief executive officer of a
number of airlines including New York Air, Midway Airlines, Chicago Air and
Continental Express. He has also served in various marketing and operations
capacities for American Airlines and Continental Airlines. In addition, he has
served in various senior capacities for a number of telecommunications firms
including In-Flight Phone Corp., Iridium LLC and Hush Communications USA, Inc.,
a firm specializing in data encryption. After a successful career in the United
States Marine Corps, Mr. Meehan received his MBA from St. Johns University. Mr.
Meehan is also the recipient of an honorary doctorate from St. Johns University
in Commercial Science.
William B. Richbourg is a Director of the Company and has served in this
capacity since January 2001. Mr. Richbourg, a trial lawyer, has been engaged in
the private practice of law, since 1968. He has a JD from the University of
Florida Law School. Mr. Richbourg is active in the environmental field where he
has served as President and Director of Environmental Systems, Inc., a
privately-held company involved in the electro-magnetic treatment of water and
as President and Director of ECO-21, a privately-held company specializing in
the marketing and sales of an after-market emissions reducing system for
gasoline and diesel engines. As an outstanding football player at the University
of Florida, he was the recipient of numerous academic and athletic awards.
MANAGEMENT
Listed below are Executive Officers and key employees of the Company who
are not Directors or nominees, their ages, titles and background information.
Name Age Title
-------------------------------- ------ -------------------------------------------------------------------------
-------------------------------- ------ -------------------------------------------------------------------------
Gerald S. Papazian 46 President, Chief Operating Officer
Arthur J. Schwartz, Ph.D. 53 Executive Vice President
Cipora Kurtzman Lavut 45 Senior Vice President, Corporate Communications
Neal B. Kaufman 56 Senior Vice President, Management Information Systems
Steven C. Veen 45 Senior Vice President, Chief Financial Officer
Michael I. Froch 39 Senior Vice President, General Counsel and Secretary
Jacob Mail 51 Senior Vice President, AuraGen Operations
Keith O. Stuart 45 Senior Vice President, Applications Development
Ronald J. Goldstein 60 Senior Vice President, Government/Military Sales
Richard E. Van Allen, Ph.D. 54 Senior Vice President, Industrial and Special Programs
DuWayne Menke 55 Vice President, AuraGen Sales and Marketing
Richard Ulinski 60 Vice President, Engineering
Gerald S. Papazian has been the Company's President and Chief Operating
Officer since July 1997. He joined the Company in August 1988 from Bear, Stearns
& Co., an investment-banking firm, where he served from 1986 as Vice President,
Corporate Finance. His responsibilities there included valuation of companies
for potential financing, merger or acquisition. Prior to joining Bear Stearns,
Mr. Papazian was an Associate in the New York law firm of Stroock & Stroock &
Lavan, where he specialized in general corporate and securities law with
extensive experience in public offerings. He received a BA, Economics (magna cum
laude) from the University of Southern California in 1977 and a JD and MBA from
the University of California, Los Angeles in 1981. He served as a trustee of the
University of Southern California from 1994 to 1999.
Arthur J. Schwartz, Ph.D. has been the Executive Vice President of the
Company since February 1987. Dr. Schwartz obtained his M.S. degree in physics
from the University of Chicago in 1971 and a Ph.D. in physics from the
University of Pittsburgh in 1978. Dr. Schwartz was employed as a Technical
Director with Science Applications International Corp., a scientific research
company in San Diego, California from 1983 to 1984 and was a senior physicist
with Hughes Aircraft Company, a scientific and aerospace company, from 1980 to
1984. While at Hughes, he was responsible for advanced studies and development
where he headed a research and development effort for new technologies to
process optical signals detected by space sensors. While at Aura, he served for
3 years on a Joint Tri Services Committee reporting to the U.S. Government on
certain technology issues.
Cipora Kurtzman Lavut is Senior Vice President, Corporate Communications,
and has served in this capacity since December 1991. She previously served as
Vice President in charge of Marketing for the Company since 1988. She graduated
in 1984 from California State University at Northridge with a B.S. degree in
Business Administration.
Neal B. Kaufman is Senior Vice President, Management Information Systems,
and has served in this capacity since 1988. Mr. Kaufman graduated from the
University of California, Los Angeles, in 1967 where he obtained a B.S. in
engineering. He was employed as a software project manager with Abacus
Programming Corporation, a software development firm, from 1975 to 1985. He
headed a team of software specialists on the Gas Centrifuge Nuclear Fuel
enrichment program for the United States Department of Energy and developed
software related to the Viking and Mariner projects for the California Institute
of Technology Jet Propulsion Laboratory in Pasadena, California.
Steven C. Veen, a Certified Public Accountant, is Senior Vice President,
Chief Financial Officer, and has served in this capacity since March 1994. He
joined the Company as its Controller in December 1992. Before that, he had over
12 years experience in varying capacities in the public accounting profession.
Mr. Veen served from 1983 to December 1992 with Muller, King, Black, Mathys &
Acker, Certified Public Accountants. He received a B.A. in accounting from
Michigan State University in 1981.
Michael I. Froch is Senior Vice President, General Counsel and Secretary of
the Company and has served as General Counsel since March 1997 and as Secretary
since July 1997. He joined the Company in 1994 as its corporate counsel. From
1991 through 1994, Mr. Froch was engaged in private law practice in California.
Mr. Froch is admitted to the California and District of Columbia bars. He
received his Juris Doctor degree from Santa Clara University School of Law in
1989, during which time he served as judicial extern to the Honorable Spencer M.
Williams, United States District Judge for the Northern District of California.
He received his A.B. degree from the University of California at Berkeley in
1984, serving from 1982 through 1983 as Staff Assistant to the Honorable Tom
Lantos, Member of Congress, presently the Ranking Member of the Committee on
International Relations of the United States House of Representatives.
Jacob Mail is Senior Vice President, AuraGen Operations, serving in this
capacity since November 1999. Previously he has served as Vice President of
Operations from 1995 to 1999. Mr. Mail served over 20 years at Israeli Aircraft
Industries, starting as a Lead Engineer and progressing to Program Manager. He
was responsible for the development and production of hydraulic actuation,
steering control systems, rotor brake systems and other systems and subsystems
involved in both commercial and military aircraft. Systems designed by Mr. Mail
are being used today all over the western world. In addition, Mr. Mail has
extensive experience in the preparation of technical specifications planning and
organizing production in accordance with customer specifications at full quality
assurance.
Keith O. Stuart is Senior Vice President, Applications Development and has
served in this capacity since November 1999. Previously he served as President
of the Company's Tech Center division, from 1995 to 1999 and has been in charge
of hardware development for Aura since 1988. Mr. Stuart obtained his B.S. and
M.S. degrees in electrical engineering from the University of California Los
Angeles in 1978 and 1980, respectively. Mr. Stuart worked for Cyphermaster, Inc.
during 1986 and was employed by Hughes Aircraft Company, a scientific and
aerospace company, prior thereto. Mr. Stuart has designed and fabricated
digitally controlled, magnetically supported gimbals that isolate the seeker
portion of a United States Space Defense Initiative and has also developed a
multi-computer automated test station for the evaluation of sophisticated
electro-optical devices.
Ronald J. Goldstein is Senior Vice President, Government/Military Sales,
serving in this capacity since November 1999. He is responsible for the
marketing and sales of AuraGen to worldwide government agencies and the military
and has served in various capacities at Aura since 1989. He holds two M.S.
degrees in Computing Technology and the Management of R & D from George
Washington University and has completed coursework for a Ph.D. in Nuclear
Engineering from North Carolina State University. Mr. Goldstein has over 25
years of experience in high technology both in government and industry. Since
1989, Mr. Goldstein was responsible for all marketing and business development
activities for the Company and served since 1995 as President of the
Automotive/Industrial division of the Company. Prior to joining Aura, Mr.
Goldstein was Manager of Space Initiatives at Hughes Aircraft Company, a
scientific and research company, where he was responsible for the design,
production and marketing of a wide variety of aerospace systems and hardware.
Prior to joining Hughes in 1982, Mr. Goldstein was the Special Assistant for
National Programs in the Office of the Secretary of Defense, and before that
held high level program management positions with the Defense Department and
Central Intelligence Agency.
Dr. Richard E. Van Allen is Senior Vice President, Industrial and Special
Programs, serving in this capacity since June 1999. He is currently the Program
Manager for the military version of the commercial AuraGen generator. In
addition, Dr. Van Allen manages ongoing electromagnetic actuator projects. He
joined the company in 1990 and previously was Manager and Vice President of the
AuraSound Division, and before that was Division manager of the Magnetics
Division. In these positions, Dr. Van Allen has been involved in the development
and manufacture of virtually every electromagnetic system produced by Aura
Systems. Prior to joining Aura, he was a Laboratory Manager in Advanced
Government Programs at the Hughes Aircraft Company Space and Communications
Group. Before joining Hughes, Dr. Van Allen served as the Navigation Team Leader
for the Voyager outer planets exploration program at the Jet Propulsion
Laboratory. He received his B.S. degree in Aeronautical and Astronautical
Engineering, along with an M.S. and Ph.D. in Aerospace Engineering, from Purdue
University.
DuWayne Menke is Vice President of AuraGen Sales and Marketing. Mr. Menke
joined Aura in 2000 to manage sales activities. He is responsible for building
the distributor network and coordinating all commercial and fleet sales
activities of the company. He has 30 years of experience in generator sales. He
has 38 years experience in sales with over 35 years in the sales of electrical
generation equipment. He was previously branch manager for Stewart & Stevenson,
one of the largest distributors of power equipment. He has served on the board
and as CEO of Power Services, Intl., which provided parts and services for
vehicle systems.
Richard Ulinski is Aura's Chief Engineer and Vice President of Engineering.
He has been responsible for all phases of the electronics design for the AuraGen
electronics including module customization, circuit board design,
software-hardware interfaces, test and analysis features both in the company and
for the remote installer and dealer specialty equipment. Previously he ran a
consulting service working on all aspects of digital and analog controls
including 3 years supporting Aura on the AuraGen program. Previously he was VP
of Engineering for RJS Inc. designing bar coders, scanners and verifiers. Mr.
Ulinski holds numerous patents in Electro-optical, Electro-mechanical and bar
code related products. Mr. Ulinski holds an AAS degree in Electronics from
Mohawk Valley Community College.
Family Relationships
Cipora Kurtzman Lavut, a Senior Vice President, Corporate Communications,
is the sister of Zvi Kurtzman, who is the Chief Executive Officer and a Director
of the Company. Jacob Mail, Senior Vice President, AuraGen Operations is a first
cousin of Cipora Kurtzman Lavut and Zvi Kurtzman.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the Company's
Common Stock owned as of July 31, 2001 (i) by each person who is known by Aura
to be the beneficial owner of more than five percent (5%) of its outstanding
Common Stock, (ii) by each of the Company's Directors and those executive
officers named in the Summary Compensation Table, and (iii) by all Directors and
executive officers as a group:
Shares of Common Stock Percent of Common Stock
Name Beneficially Owned Beneficially Owned
Gardner Lewis Asset Management L.P. 21,562,736 (17) 6.6%
ICM Asset Management Inc. 18,897,864 (16) 5.8%
James M. Simmons 18,897,864 (16) 5.8%
Arthur Liu 18,858,174 (15) 5.7%
Zvi (Harry) Kurtzman 5,715,008 (1)(2) 1.7%
Arthur J. Schwartz 3,299,311 (1)(3)(4) 1.0%
Cipora Kurtzman Lavut 2,590,592 (5) *
Harvey Cohen 728,287 (6) *
Salvador Diaz-Verson, Jr. 2,365,128 (7) *
Stephen A. Talesnick 3,087,698 (10) *
Gerald S. Papazian 1,097,345 (8) *
Steven C. Veen 1,357,280 (9) *
Norman Reitman 717,142 (14) *
Harry Haisfield 1,556,700 (11) *
William Richbourg 460,000 (12) *
Neal Meehan 440,625 (13) *
Carl A. Albert 1,220,893 *
All executive officers and Directors 28,480,757 8.79%
as a group (21 persons)
* Less than 1% of outstanding shares.
(1) Includes 175,000 shares held of record by Advanced Integrated Systems, Inc.
(2) Includes 2,878,333 shares which may be purchased pursuant to options
exercisable within 60 days of July 31, 2001.
(3) Includes 1,111,666 shares which may be purchased pursuant to options
exercisable within 60 days of July 31, 2001.
(4) Includes 32,000 shares held by Dr. Schwartz as custodian for his children,
and 74,000 owned by Dr. Schwartz' children, to which Dr. Schwartz disclaims
any beneficial ownership.
(5) Includes 1,111,666 shares which may be purchased pursuant to options
exercisable within 60 days of July 31, 2001.
(6) Includes 31,250 shares beneficially owned, and 525,000 shares which may be
purchased pursuant to options within 60 days of July 31, 2001.
(7) Includes 450,000 shares which may be purchased pursuant to options
exercisable within 60 days of July 31, 2001.
(8) Includes 652,666 shares which may be purchased pursuant to options
exercisable within 60 days of July 31, 2001.
(9) Includes 801,666 shares which may be purchased pursuant to options
exercisable within 60 days of July 31, 2001, and 20,000 shares held by Mr.
Veen as custodian for his children, to which Mr. Veen disclaims any
beneficial ownership.
(10) Includes 300,000 shares which may be purchased pursuant to options
exercisable within 60 days of July 31, 2001.
(11) Includes 524,000 shares which may be purchased pursuant to options and
warrants exercisable within 60 days of July 31, 2001.
(12) Includes 250,000 shares which may be purchased pursuant to options
exercisable within 60 days of July 31, 2001.
(13) Includes 296,875 shares which may be purchased pursuant to options and
warrants exercisable within 60 days of July 31, 2001
(14) Includes 475,000 shares which may be purchased pursuant to options
exercisable within 60 days of July 31, 2001 and 12,500 shares owned by Mr.
Reitman's wife, as to which 12,500 shares he disclaims any beneficial
ownership.
(15) Includes 11,208,574 shares held by Alaris, Inc. which may be deemed to be
beneficially owned by Mr. Liu and 4,500,000 shares which may be purchased
pursuant to warrants exercisable within 60 days of July 31, 2001.
(16) Based upon information contained in Schedule 13G/A dated May 16, 2001, as
filed with the SEC by ICM Asset Management, Inc. and James M. Simmons. ICM
Asset Management, Inc. is a registered investment advisor whose clients
have the right to receive or the power to direct the receipt of dividends
from, or the proceeds from the sale of, the stock. James M. Simmons is the
President of ICM Asset Management, Inc, and is the beneficial owner of
these shares in such capacity. Neither of such persons has sole voting nor
sole dispositive power with respect to any of the 18,897,864 shares
reported as being beneficially owned. Of the 18,897,864 shares beneficially
owned by these persons, they have shared dispositive power with respect to
all of these shares, and shared voting power with respect to 18,025,524
shares.
(17) Based upon information contained in Schedule 13G/A dated February 13, 2001,
as filed with the SEC by Gardner Lewis Asset Management Inc. Of the
21,562,736 shares beneficially owned by this person, it has sole
dispositive power with respect to all of these shares, sole voting power
with respect to 19,508,336 shares, and shared voting power with respect to
318,100 shares. The mailing address for Gardner Lewis Asset Management,
L.P. is 285 Wilmington - West Chester Pike, Chadds Ford, PA 19317. The
mailing address for ICM Asset Management, Inc. is W. 601 Main Avenue, Suite
600, Spokane, WA 99201. The mailing address for the others is c/o Aura
Systems, Inc., 2335 Alaska Avenue, El Segundo, CA 90245.
Board of Directors Meetings and Committees
Aura's Board of Directors held ten meetings during the year ended February
28, 2001. Each Director whose term is expected to continue, attended more than
75% of the Board meetings during Fiscal 2001. During the last fiscal year the
Company did not maintain a nominating committee. Since August 1993, the Company
has maintained a Compensation Committee which presently consists of Salvador
Diaz-Verson, Jr., Stephen A. Talesnick and Harry Haisfield. The Compensation
Committee met nine times during Fiscal 2001. Since January 1989, the Company has
maintained an Audit Committee which presently consists of Harvey Cohen, Norman
Reitman and Neal Meehan. The Audit Committee approves the selection and
engagement of independent accountants and reviews with them the plan and scope
of their audit for each year, the results of the audit when completed, and their
fees for services performed. The Audit Committee met four times during the
Fiscal year ended February 28, 2001.
Effective March 2000, each non-employee Director is entitled to receive
$20,000 per year for serving as a Director, and an additional $5,000 per year
for each Director who serves on the audit committee.
EXECUTIVE COMPENSATION
Cash Compensation For Executives
The following table summarizes all compensation paid to the Company's Chief
Executive Officer, and to the four most highly compensated executive officers of
the Company other than the Chief Executive Officer whose total compensation
exceeded $100,000 during the Fiscal year ended February 28, 2001.
SUMMARY COMPENSATION TABLE
Annual Long Term All Other
Compensation(1) Compensation Awards Compensation(2)
--------------- ------------------- ---------------
Name and Principal Position Year Salary Options/SARs
Zvi (Harry) Kurtzman (1) 2001 $385,000 4,500,000 $0
Chief Executive Officer 2000 386,232 0
1999 384,290 1,000,000
Gerald S. Papazian (1) 2001 $210,000 1,000,000 $2,029
President and Chief Operating Officer 2000 217,777 0
1999 203,025 100,000
Arthur J. Schwartz (1) 2001 $205,000 1,000,000 $0
Executive Vice President 2000 210,192 0
1999 204,895 500,000
Steven C. Veen (1) 2001 $200,000 1,000,000 $2,100
Senior Vice President and 2000 205,469 0
Chief Financial Officer 1999 196,412 100,000
Cipora Kurtzman Lavut (1) 2001 $195,000 1,000,000 $0
Senior Vice President 2000 203,942 0
1999 199,221 500,000
(1) The amounts shown are the amounts actually paid to the named officers
during the respective fiscal years. Because of the timing of the payments,
these amounts do not represent the actual salary accrued by each individual
during the period. The actual salary rate for these individuals which was
accrued during the Fiscal year ended February 2001, 2000 and 1999,
respectively, were as follows: Zvi Kurtzman - $385,000, $385,000, $385,000;
Gerald S. Papazian - $210,000, $210,000, $210,000; Arthur J. Schwartz -
$205,000, $205,000, $205,000; Steven C. Veen - $200,000, $200,000,
$200,000; Cipora Kurtzman Lavut - $195,000, $195,000, $195,000. Of the
compensation paid in Fiscal 2001, $100,427, $53,140, $50,254, $35,301,
$38,027 was paid in the form of 315,361, 166,869, 157,807, 110,851, 119,414
shares, respectively, of restricted common stock of the Company to Mr.
Kurtzman, Mr. Papazian, Mr. Schwartz, Mr. Veen and Ms. Kurtzman Lavut,
respectively. Of the compensation paid in Fiscal 2000, $144,561, $34,781,
$78,201, $44,918 and $58,520 was paid in the form of 535,413, 128,818,
289,632, 166,363, and 216,742 shares, respectively, of restricted common
stock of the Company, valued as of the date of grant, to Mr. Kurtzman, Mr.
Papazian, Mr. Schwartz, Mr. Veen and Ms. Kurtzman Lavut, respectively. As
of February 28, 2001 the restricted shares owned by these persons were
valued at $382,848, $133,059, $201,348, $124,746 and $151,270,
respectively, based upon the closing reported price of the Company's stock
on such date.
(2) Such compensation consisted of total Company contributions made to the plan
account of each individual pursuant to the Company's Employee Retirement
Savings Plan during the Fiscal year ended February 28, 2001.
No cash bonuses or restricted stock awards were granted to the above
individuals during the Fiscal years ended February 28, 2001, February 29, 2000,
and February 28, 1999. Effective March 2000, each non-employee Director is
entitled to receive $20,000 per year for serving as a Director, and an
additional $5,000 per year for each Director who serves on the audit committee.
For Fiscal 2001, in lieu of cash, each Director received options to
purchase eighty thousand shares of Aura Common Stock at an exercise price of
fifty cents per share, with members of the Audit Committee receiving an
additional twenty thousand stock options for their service on the Audit
Committee. The grant to the Directors for the prior year's service occurred
subsequent to year end and vest six months plus one day of the date of grant. In
addition and subsequent to year end, each Director, except for Messrs.
Diaz-Verson, Jr. and Talesnick, was granted fifty thousand options to purchase
Aura Common Stock at an exercise price of sixty four cents per share, vesting
six months plus one day of the date of grant. Messrs. Diaz-Verson, Jr. and
Talesnick were granted each one hundred fifty thousand stock options. On July
10, 2001, Mr. Albert was granted two hundred fifty thousand stock options with
an exercise price of $0.57 per share, vesting six months plus one day of the
date of grant.
Option Grants in the Last Fiscal Year
The following table summarizes certain information regarding option
grants to purchase Common Stock of the Company to the Chief Executive Officer
and those other executive officers named in the Summary Compensation Table (the
"Named Executive Officers").
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
Potential
Realizable Value at
Assumed Annual
Rates of Stock Price
Appreciation
Individual Grants For Option Term
----------------------------- ------------------------------------------- ------------- -------------------------
Number of % of
Securities Total
Under- Options/
lying SARs
Options/ Granted to Exercise
SARs Employees Or Base
Granted In Fiscal Price Expiration
Name (#) Year ($/Sh) Date 5% ($) 10% ($)
----------------------------- -------------- --------------- ------------ ------------- ----------- -------------
Zvi (Harry) Kurtzman 4,500,000 25% 0.31 6/7/10 855,000 2,205,000
Gerald Papazian 1,000,000 5.7% 0.31 6/7/10 190,000 490,000
Arthur J. Schwartz 1,000,000 5.7% 0.31 6/7/10 190,000 490,000
Steven C. Veen 1,000,000 5.7% 0.31 6/7/10 190,000 490,000
Cipora Kurtzman Lavut 1,000,000 5.7% 0.31 6/7/10 190,000 490,000
The following table summarizes certain information regarding the number
and value of all options to purchase Common Stock of the Company held by the
Chief Executive Officer and those other executive officers named in the Summary
Compensation Table.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
Number of Unexercised Value of Unexercised
Options/SARs at Fiscal In-the-Money Options/
Name Year End SARs at Fiscal Year End*
---- -------------------------------- ------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
Zvi (Harry) Kurtzman 720,000 5,100,000 $ 0 $ 630,000
Gerald S. Papazian 166,000 1,060,000 $ 0 $ 140,000
Arthur J. Schwartz 445,000 1,300,000 $ 0 $ 140,000
Steven C. Veen 265,000 1,160,000 $ 0 $ 140,000
Cipora Kurtzman Lavut 445,000 1,300,000 $ 0 $ 140,000
* Based on the average high and low reported prices of the Company's Common
Stock on the last day of the Fiscal year ended February 28, 2001.
Subsequent to year end, the above named officers were awarded the following
option grants: Zvi Kurtzman - 500,000 shares, Gerald S. Papazian - 300,000
shares, Arthur J. Schwartz - 300,000 shares, Steven C. Veen - 300,000 shares,
Cipora Kurtzman Lavut - 300,000 shares.
No options were exercised by the above individuals during the Fiscal year
ended February 28, 2001.
Employment Agreements
Effective as of March 5, 1998 the Company, following unanimous approval of
all five outside, disinterested Directors of the Board of Directors, entered
into employment agreements with each of Messrs. Kurtzman, Schwartz, Kaufman and
Ms. Kurtzman Lavut. The employment agreements provide for a term of three years,
in each case with provision for automatic one year extensions until either the
executive or the Company notifies the other that such party does not wish to
extend the agreement. Messrs. Kurtzman, Schwartz, Kaufman and Ms. Kurtzman Lavut
are paid base salaries of $385,000, $205,000, $195,000, $195,000 per year
pursuant to their respective employment agreements. In addition, such agreements
provide for discretionary annual bonuses as determined by the Board of Directors
and target bonuses of up to 50% of the executive's base salary based on the
attainment of certain criteria determined by the Compensation Committee. The
employment agreements also provide for standard employee benefits, including
participation in the Company's stock incentive plan. In addition, the Company is
required to maintain, during the executive's term of employment, a life
insurance policy with a face value of two times the executive's base salary,
provided such premiums do not exceed $10,000 per year.
Each of the employment agreements provides that if the Company terminates
the executive's employment without "Cause" (as defined in the employment
agreements), then such executive is entitled to receive the base salary at the
rate then in effect for the remainder of the term (or for a period of six months
if greater), a bonus equal to the highest annual discretionary bonus in the
preceding three year period prior to such termination for each fiscal year
during the Severance Period, continuation of all life insurance premium payments
and all outstanding equity awards would vest. Pursuant to the terms of the
employment agreements Messrs. Kurtzman, Schwartz, Kaufman and Ms. Kurtzman Lavut
also received a one time option grant to purchase, respectively, 1,000,000,
500,000, 500,000 and 500,000 shares of Common Stock under the Company's Option
Plan, which options vest over five years. The per share exercise price of such
grant is $3.31, which is 5% above the fair market value of the options on the
date such options were granted.
The employment agreements provide that during the term of employment, each
executive will be subject to certain confidentiality and non-solicitation
restrictions.
Severance Agreements
Effective as of March 5, 1998, the Company, following unanimous approval of
all five outside, disinterested Directors of the Board of Directors, entered
into severance agreements with each of Messrs. Kurtzman, Schwartz, Kaufman and
Ms. Kurtzman Lavut. The severance agreements provide for a term of three years,
with a provision for automatic one-year extensions until either the executive or
the Company notifies the other that such party does not wish to extend the
agreement. If a "Change in Control" (as defined in the agreement) occurs, the
agreements will continue for at least 24 months following the date of such
"Change in Control". The agreements provide that if, following a "Change in
Control", the executive's employment is terminated without "Cause" (as defined
in the agreement) or with "Good Reason" (as defined in the agreement) or the
executive terminates his or her employment for any reason during the one month
period commencing on the first anniversary of the "Change in Control", the
executive would be entitled to receive (i) three times the sum of the base
salary plus the highest annual bonus earned by the executive in the three year
period immediately preceding such termination; (ii) continued employee benefits
for three years, reduced to the extent benefits of the same type are received by
or made available to the executive during the 36 month period following
termination; and (iii) accelerated vesting of stock options. To the extent the
executive becomes subject to the "golden parachute" excise tax imposed under
Section 4999 of the Internal Revenue Code of 1986, the executive would receive
an additional cash payment in an amount sufficient to offset the effects of such
excise tax.
Compensation Committee Report
The Company maintains a Compensation Committee (the "Committee"),
consisting entirely of outside, disinterested Directors who are not employees or
former employees of the Company. The Committee recommends salary practices for
executive officers of the Company, with all compensation determinations
ultimately made by a majority of the outside, disinterested Directors.
Compensation Philosophy
The Company's policy in compensating executive officers is to establish
methods and levels of compensation that will provide strong incentives to
promote the profitability and growth of the Company and reward superior
performance. Compensation of executive officers includes salary as well as
stock-based programs. The Board believes that compensation of the Company's key
executives should be sufficient to attract and retain highly qualified personnel
and also provide meaningful incentives for measurably superior performance. The
Company places special emphasis on equity-based compensation, particularly in
the form of options. This approach also serves to match the interests of the
executive officers with the interest of the stockholders. The Company seeks to
reward achievement of long and short-term performance goals which are measured
by a number of factors, including improvements in revenue and achieving
profitability.
Included in the factors considered by the Committee in setting the
compensation of the Company's Chief Executive Officer are the growth in the
Company's commercial sales, the development of commercial applications for the
Company's technology, and the effective allocation of capital resources.
Employment Contracts
The Company offers employment contracts to key executives only when it is
in the best interest of the Company and its stockholders to attract and retain
such key executives and to ensure continuity and stability of management.
Effective as of March 1998, the Company entered into employment agreements and
severance agreements with Messrs. Kurtzman, Schwartz, Papazian, Veen, Froch,
Kaufman, and Ms. Kurtzman Lavut and entered into severance agreements with
Messrs. Goldstein, Mail, and Stuart. In June 2001, the Compensation Committee
and the disinterested members of the Board of Directors approved and authorized
the Company to enter into an employment agreement and severance agreement with
Jacob Mail under the same terms as Messrs. Kurtzman and Schwartz, and Ms.
Kurtzman Lavut. No additional cash compensation was paid to Mr. Mail as a result
of the Board's action. The Committee reviewed and approved such agreements
unanimously after consulting with a nationally recognized employee benefits firm
and determining that such agreements were necessary in order to retain highly
qualified executives whose abilities are critical to the long-term success and
competitiveness of the Company.
The employment agreements with Mr. Kurtzman and the Named Executive
Officers have an initial term of three years. The term is automatically extended
for one year on each anniversary of the effective date of the employment
agreement unless either party gives prior notice of termination of the
agreement. Upon the death or disability of these executives, their employment
agreements provide for a lump sum payment equal to one year's salary and the
immediate vesting of stock based compensation awards. In the event of the
executive's termination for cause, the terminated executive is entitled only to
compensation accrued through the date of termination. If the executive is
terminated by the Company other than by reason of death, disability or cause,
the terminated executive is entitled to continued payment of the base salary
through the end of the stated term together with an annual bonus for each of the
remaining years under the employment agreement equal to the highest annual bonus
amount received by the terminated executive in the three years preceding
termination and the immediate vesting of stock based compensation awards.
Pursuant to severance agreements entered into effective March 1998 between
the Company and key executives of the Company, including Mr. Kurtzman and the
Named Executive Officers, these individuals are entitled to certain additional
benefits, which become effective at such time as there is a "Change in Control"
of the Company, as defined in the severance agreements. If such executive's
employment is terminated following a "Change in Control" other than by reason of
death, disability or by the executive without "Good Reason", or if following a
"Change in Control" the executive elects to terminate his employment on the one
year anniversary following a "Change in Control", the terminating executive is
entitled to specified severance payments in lieu of salary, bonus and other
compensation which would otherwise accrue to the executive upon termination of
the employment agreement. Specifically, the severance agreements provide that,
for Messrs. Kurtzman and Schwartz and Ms. Kurtzman Lavut, a lump sum severance
payment is due upon termination in the amount of three times the sum of the
terminated executive's base salary then in effect plus the highest annual bonus
earned in the three years preceding the date of termination; and in the case of
Messrs. Veen and Papazian, 1.5 times such base salary and bonus. The severance
agreements also provide for the accelerated vesting of stock based awards and
the continuation of life and health insurance benefits following the date of
termination (36 months for Messrs. Kurtzman and Schwartz, and Ms. Kurtzman
Lavut, and 18 months for Messrs. Papazian and Veen).
The Company's senior management believes that at some time in the future,
as market acceptance of the AuraGen accelerates and manufacturing operations
expand, it may be desirable to replace all or part of the senior members of the
management team with individuals having focused experience in large scale
manufacturing and sales operation. Accordingly, in March 2000 Mr. Kurtzman
proposed to the Board of Directors that consideration be given to restructuring
employment and severance agreements to allow the Company the flexibility to
implement an orderly management transition, if and when deemed advisable by the
Board.
Subsequently, the Company's Board of Directors entered into discussions
with certain members of senior management with a view towards restructuring the
employment and severance agreements. The Board of Directors, through its
Compensation Committee, retained independent outside consultants to formulate a
proposal whereby these agreements with senior management would be modified to
allow for the possibility of an orderly management transition in the future if
and when deemed advisable by the Board.
Following discussions between the Compensation Committee of the Board of
Directors and the senior management members, in consultation with independent
consultants, the Compensation Committee proposed that agreements be entered into
whereby the existing employment and severance agreements with Mr. Kurtzman, the
Named Executive Officers and other key executive officers would be restructured.
Under the current proposal, which has been approved unanimously by the
Compensation Committee and by a majority of the Board of Directors, the Company
would have the right to terminate these affected employees at will and such
affected employees would relinquish their rights to further compensation and
severance payments. In exchange for relinquishing their rights, the
participating members would receive a one-time payment in stock options at an
exercise price of $0.55 per share in lieu of receiving cash compensation. The
number of stock options would be determined based upon the underlying total
compensation due to the employee upon termination under the existing agreements,
multiplied by two and divided by $0.32 per share.
If and when any management members subject to the proposal are terminated
in the Board's discretion, such members would thereafter remain as consultants
to the Company for a period of one year at 85% of their then current base
salaries, subject to extension by mutual agreement. The management members
covered by the proposal have agreed to these terms. However, there are material
terms which remain to be considered and agreed to by the Board of Directors and
the affected members of the management team. There are no assurances that final
agreements will be achieved or when such agreements will be implemented.
Compensation of Chief Executive Officer and Other Executives
Pursuant to employment agreements entered into effective as of March 1998,
the Compensation Committee increased Mr. Kurtzman's base salary in March 1998 to
$385,000, and increased the base salary of Papazian, Schwartz, Veen and Ms.
Kurtzman Lavut to $210,000, $205,000, $200,000 $195,000, effective as of
December 1997, after consulting with a nationally recognized employee benefits
firm. The increase for Mr. Kurtzman reflected the Compensation Committee's
assessment of his performance and Mr. Kurtzman's service to the Company. Salary
increases for other senior executives affected during 1998 were based on similar
considerations including individual performance, position, tenure, experience
and compensation surveys of comparable companies. Under the terms of their
employment agreements the base salary is subject to annual adjustment, based
upon the Company's normal historical business practices and consistent with
salaries paid to executives performing similar functions in the Los Angeles
area.
Effective in Fiscal 1999, Mr. Kurtzman and the Named Executive Officers
are, pursuant to their employment agreements with the Company, entitled to a
discretionary annual bonus as determined by the Compensation Committee and a
majority of the outside, disinterested Directors of the Board of Directors. In
determining the amounts of such bonuses, the Compensation Committee considers
the individual performance of each executive and the performance of the Company.
Based upon the Company's financial performance during Fiscal 2000, the
Compensation Committee determined not to award bonuses to Mr. Kurtzman or the
Named Executive Officers.
In March 1998, the Committee reviewed and unanimously approved stock option
awards under the Company's stock option plan after consulting with a nationally
recognized employee benefits firm. The Committee granted Mr. Kurtzman an option
to purchase 1,000,000 shares of Common Stock, which vest 20% per year over five
years. The options are exercisable at $3.31 per share which was 105% of the
market price of the Company's Common Stock on the date of grant. Senior
executives of the Company participate in the stock option plan and the
Compensation Committee granted such executives options to purchase Common Stock
during Fiscal 1998. In June 2000, the Compensation Committee unanimously
approved additional stock option awards under the Company's stock option plan to
Mr. Kurtzman and the Named Executive Officers, described in the table entitled
"Option/SAR Grants in the Last Fiscal Year" appearing above. In determining the
number of shares to award to Mr. Kurtzman and other executives, the Compensation
Committee considered several factors, including primarily Mr. Kurtzman's and
other executives' actual and potential contributions to the Company's long term
success, and the size of awards provided to other executives in comparable
companies holding similar positions.
In July 1997, the Compensation Committee unanimously recommended the
re-pricing of stock options granted to key employees, including Mr. Kurtzman and
the Named Executive Officers. The Compensation Committee's re-pricing of options
for key employees was made to those persons who have made significant
contributions to the Company's business, for the purpose of maintaining
corporate morale and creating an incentive for continued employment.
Section 162(m) Policy
Section 162(m) of the Internal Revenue Code of 1986, as amended, generally
provides that publicly held companies may not deduct compensation paid to
certain of its top executive officers to the extent such compensation exceeds $1
million per officer in any year. However, pursuant to regulations issued by the
Treasury Department, certain limited exemptions to Section 162(m) apply with
respect to "qualified performance-based compensation" and to compensation paid
in certain circumstances by companies in the first few years following their
initial public offering of stock. The Company has taken steps to provide that
these exemptions will apply to compensation paid to its executive officers, and
the Company will continue to monitor the applicability of Section 162(m) to its
ongoing compensation arrangements. Accordingly, the Company does not expect that
amounts of compensation paid to its executive officers will fail to be
deductible by reason of Section 162(m).
Committee Members
Salvador Diaz-Verson, Jr., Stephen A. Talesnick, Harry Haisfield
Compensation Committee Interlocks and Insider Participation
The Compensation Committee for the Fiscal year ended February 28, 2001 is
comprised of Salvador Diaz-Verson, Jr., Stephen A. Talesnick, and Harry
Haisfield. Decisions regarding compensation of executive officers for the Fiscal
year ended February 28, 2001 were made unanimously by the outside, disinterested
Directors of the Board of Directors, after reviewing recommendations of the
Compensation Committee.
Audit Committee Report
The Company maintains an Audit Committee (the "Committee"), consisting
entirely of outside, disinterested Directors who are not employees or former
employees of the Company. The Committee has, in the course of its duties,
reviewed and discussed with management the audited financial statements, and has
discussed with the independent auditors the matters required to be discussed by
Statement on Auditing Standards No. 61. The Committee has also received the
appropriate auditors disclosures regarding the auditors' independence as
required by Independence Standards Board Standard No. 1. The Committee
recommended to the Board of Directors that the audited financial statements be
included in the Company's Annual Report on Form 10-K as filed with the
Commission for Fiscal 2000. The Board of Directors has adopted a written charter
for the Committee.
In August 1998, a lawsuit captioned Collins v. Kurtzman et al. was filed in
U.S. District Court in the Central District of California, which purported to be
a derivative shareholder suit on behalf of Aura against members of the Board of
Directors of the Company. Aura believes that the action was without merit. In
April 1999, a final settlement was entered into by the parties which called for
a dismissal of the action and no payments by any of the defendants. In
consideration of the plaintiff dismissing its lawsuit, Aura agreed to adopt and
implement a fraud detection program (the "Program") under the auspices of the
Audit Committee, after consulting with the Company's outside legal counsel and
independent auditors. The purpose of the Program is to detect and prevent fraud,
maintain accurate books and records for financial transactions, establish
procedures to ensure the recording of transactions to be in accordance with
generally accepted accounting principles, and to ensure that the Company's SEC
filings comply with SEC rules and regulations. The Audit Committee is
responsible for monitoring the Program on an ongoing basis, with the assistance
of the Company's outside legal counsel and its independent auditors.
Committee Members
Harvey Cohen, Norman Reitman, Neal Meehan
Changes in Accountants
On August 23, 2000, the Company received a notice of resignation from its
independent auditors, Pannell Kerr Forster, Certified Public Accountants, a
Professional Corporation ("PKF"). The Company had been informed by PKF that
their decision was solely due to business reasons. Having served as the
independent auditors of the Company since 1992, PKF never had nor does it
currently have any disagreements with the Company on any matter of accounting
principles or practices, financial statement disclosure, auditing scope or
procedure, or any reportable events. The auditors reports on the financial
statements for the past eight years during its entire engagement period have not
contained any adverse opinion or disclaimer of opinion and have not been
qualified or modified as to uncertainty, audit scope or accounting principles
except for Fiscal years 1999 and 2000 when the audit reports were modified with
a going concern uncertainty.
PKF fully cooperated with the auditor selection and transition process,
which was completed on January 9, 2001 when the firm Singer Lewak Greenbaum &
Goldstein LLP was engaged by the Company's Board of Directors.
Unrelated to its decision and pursuant to SEC rules, under Item
304(a)(1)(v)(C)(1)(i) of Regulation S-K, PFK also advised that information had
come to its attention which, if further investigated, may materially impact the
fairness or reliability of previously issued audit reports or the underlying
financial statements of Aura Systems, Inc. and Subsidiaries. The information
concerning officer loans, which took place in Fiscal 1997, was contained in
court filings of the SEC in regards to the Staff's response to an SEC
investigation, reported publicly by the Company in a press release dated January
20, 1999.
The Company does not believe that the matters referred to above will have a
material effect on the Company's future financial condition or results of
operations.
Representatives of Singer Lewak Greenbaum & Goldstein are expected to be in
attendance at the Annual Meeting, will have the opportunity to make a statement
if they so desire to do so, and are expected to be available to respond to
appropriate questions. Representatives of Pannell Kerr Forster are not expected
to be in attendance at the Annual Meeting.
Certain Relationships and Related Transactions
December 1998 Private Placement
In December 1998, the Company completed a private placement of Units, each
Unit consisting of 10 shares of Common Stock and Warrants to purchase four
shares of Common Stock at an exercise price of $1.00 per share for five years.
The original subscription price was $10.00 per Unit. Of the total gross offering
proceeds of approximately $1.8 million, $100,000 was invested by the mother of
Zvi Kurtzman, and $400,000 was invested by Stephen Talesnick, who subsequently
became a member of the Board of Directors in 1999. The terms of the offering
called for, among other things, the prompt registration of the purchased
securities with the SEC. As a result, principally of delays in completing the
Company's audit for the Fiscal year ended February 1999, the Company was unable
to timely file the required registration. Consequently, in amendments to the
offering terms which culminated in March 2000, the Company agreed to increase
the number of shares received by each investor based upon an agreed price of
$.33 per share and the investors agreed to surrender the Warrants and their
right to receive interest from the Company.
Convertible Note Exchange
As part of the Company's financial restructuring in Fiscal 1999, the
Company offered to exchange convertible notes issued to investors in 1993 for
Common Stock. As a result of the restructuring, the Company converted the notes
at a price of $.27 per share. These investors, among others, included Zvi
Kurtzman and Arthur J. Schwartz, whose notes entitled them to receive from the
Company $100,000 and $80,000, respectively, plus accrued and unpaid interest.
Both Messrs. Kurtzman and Schwartz exchanged their notes for Common Stock in
March 2000.
Transactions with Algo Technologies, Inc. and Affiliates
In October 1999, the Company entered into an agreement with RGC
International Investors, LDC, an institutional investor ("RGC") and Algo
Technologies, Inc. ("Algo") whereby RGC (i) sold to Algo and a group of
unrelated investors (the "Algo Investors") the Company's three Convertible
Unsecured Debentures (the "RGC Debentures"), in the aggregate principal amount
of $17,365,000, (ii) exchanged with the Registrant its $3 million Secured
Convertible Note for a new non-convertible Secured Note (the "New RGC Note") in
the original principal amount of $3 million, and (iii) cancelled Warrants to
purchase 9,000,770 shares of the Registrant's Common Stock in exchange for new
Warrants to purchase 1,000,000 shares of common stock exercisable at $0.375 per
share. The New RGC Note bears interest at the rate of 8% per annum, with
principal and interest payable no less frequently than quarterly. The New RGC
Note continues to be secured by a lien on certain assets of the Company,
including inventory and accounts receivable.
Under the agreement between the Company and the Algo Investors, the RGC
Debentures were convertible into a maximum of 46,500,000 shares of the
Registrant's Common Stock unless the Registrant failed to complete the
restructuring with a group of three investors, including Infinity Investors
Limited ("Infinity"). The Algo Investors converted a portion of the RGC
Debentures into 46,500,000 shares of Common Stock and canceled the remaining
outstanding principal and interest owed under the RGC Debentures upon the
consummation of the restructuring with another investor group of approximately
$17.4 million of outstanding Debentures described below.
In February 2000, the Company consummated a restructuring agreement with
Infinity whereby the Algo Investors acquired $4 million of Debentures from
Infinity in exchange for $3 million from the Algo Investors and 1,111,111 shares
of Common Stock owned by Algo, and Aura exchanged with the Investor Group the
remaining outstanding Debentures evidencing more than $13 million of
indebtedness for 100,000 Warrants exercisable at $0.375 per share, and new
Secured Notes in the aggregate principal amount of $12.5 million. The Debentures
acquired by the Algo Investors were converted into 18,534,445 shares of Aura
Common Stock in full satisfaction of such Debentures as part of the
restructuring.
In October 1999, Algo acquired 10 million shares of Aura Common Stock from
Aura at $0.25 per share in a private placement. In May 2000, Arthur Liu, who may
be deemed to be an affiliate of Algo, participated in a private placement
whereby Mr. Liu received Units consisting of 9 million shares of Aura Common
Stock and Warrants to purchase 5 million shares of Common Stock at $0.48 per
share. Algo may be deemed to be the beneficial owner of more than 5% of Aura's
outstanding Common Stock. Mr. Liu is the beneficial owner of a majority of the
capital stock of Algo. See "Security Ownership of Certain Beneficial Owners and
Management" elsewhere herein.
In June 1999, Alaris, Inc., an affiliate of Algo, acquired or licensed the
principal assets and technology of Aura's AuraSound division. The sale was
finalized in December 1999 with total consideration received of approximately
$2.4 million.
Indemnification Agreements with Directors
Section 145 of the Delaware General Corporation Law provides for the
indemnification of officers, directors, and other corporate agents in terms
sufficiently broad to indemnify such persons under certain circumstances for
liabilities (including reimbursement of expenses incurred) arising under the
Securities Act of 1933, as amended (the "Act"). The Company has entered into
agreements with its Directors to provide indemnity to such persons to the
maximum extent permitted under applicable laws. Effective as of July 10, 2001,
in furtherance of its existing policy the Company entered into written
agreements with its Directors.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities and Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's officers, Directors, and beneficial
owners of more than ten percent of the Common Stock, to file with the Securities
and Exchange Commission and the National Association of Securities Dealers, Inc.
reports of ownership and changes in ownership of the Common Stock. Copies of
such reports are required to be furnished to the Company. Based solely on its
review of the copies of such reports furnished to the Company, or written
representations that no reports were required, the Company believes that during
its Fiscal year ended February 28, 2001, all filing requirements applicable to
its officers, Directors, and ten percent beneficial owners were satisfied except
that Messrs. Goldstein, Haisfield, Mail, Meehan, Menke, Reitman, Richbourg,
Stuart, Talesnick, Ulinski, Diaz-Verson, and Van Allen failed to timely file a
single Form 5 with one transaction acquisition reported and Messrs. Cohen,
Froch, Kaufman, Kurtzman, Kurtzman Lavut, Papazian, Schwartz, and Veen failed to
timely file a single Form 5 with two transaction acquisitions reported. Messrs.
Haisfield, Meehan and Richbourg failed to timely file a single Form 3.
Auditor Fees
The aggregate fees billed by Singer Lewak Greenbaum & Goldstein LLP, for
professional services rendered for Fiscal 2001 are as follows:
Audit fees for the audit of the Company's annual financial statements
for the year ended February 28, 2001 $72,732
All other fees $ 5,790
Performance Graph
The following graph compares the cumulative total stockholder return of
the Company with the cumulative total return on the NASDAQ Stock Market Index
(U.S.) and the S&P Industrial Index+. The Comparisons in the graph are required
by the Securities and Exchange Commission and are not intended to forecast or be
indicative of possible future performance of the Company's common stock.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG AURA SYSTEMS, INCORPORATED,
THE NASDAQ STOCK MARKET (U.S.) INDEX AND THE S & P INDUSTRIAL INDEX
*$100 INVESTED ON 2/28/97 IN STOCK OR INDEX-
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING FEBRUARY 28
Cumulative Total Return
Feb-97 Feb-98 Feb-99 Feb-00 Feb-01
------ ------ ------ ------ ------
AURA SYSTEMS, INC. 100 116 19 13 17
NASDAQ STOCK MARKET INDEX (U.S.) 100 135 175 350 162
S & P INDUSTRIAL INDEX 100 133 157 173 157
+ In 2001, the S&P Technology Index was divided into individual technology
sectors which do not match the Company's business area. As a result, on a
going forward basis comparisons will be made versus the Industrial Index which
is more indicative of the Company's business.
MISCELLANEOUS
Stockholder Proposals for the 2002 Annual Meeting
Stockholder proposals complying with the applicable rules under the
Exchange Act intended to be presented at the 2002 Annual Meeting of Stockholders
must be received at the offices of the Company by April 15, 2002 to be
considered by Aura for inclusion in Aura's proxy statement and form of proxy
relating to that meeting. Such proposals should be directed to the attention of
the Secretary, Aura Systems, Inc., 2335 Alaska Avenue, El Segundo, CA 90245.
The Stockholder's written notice relating to proposals other than for
Director nominees must contain (i) the name and address of the Stockholder
making the proposals, (ii) any material interest of the Stockholder in the
proposal, and (iii) such information concerning the person making the proposal
and the proposal itself as would be required by SEC rules to be included in a
proxy statement soliciting proxies for such proposal. Presentation of any
Stockholder proposal at the Annual Meeting is also subject to procedures
established by the Chairman of the Meeting consistent with Delaware corporate
law.
Other Matters
Neither Aura, nor any of the persons named as proxies, knows of matters
other than those above stated to be voted on at the Annual Meeting. However, if
any other matters are properly presented at the meeting, it is the intention of
the persons named as proxies to vote in accordance with their judgment on such
matters, subject to direction by the Board of Directors.
Under the Company's By-Laws, nominations for Director of the Company
and other Stockholder proposals, other than those made by the Board of
Directors, may only be made by Stockholders of record on the record date who
have delivered a written notice to the Secretary of the Company no later than 10
days following the Notice of Annual Meeting.
Available Information
The 2001 Annual Report to Stockholders accompanies this Proxy
Statement, but is not to be deemed a part of the proxy soliciting material.
While you have the matter in mind, please complete, sign and return the
enclosed proxy card promptly.
By Order of the Board of Directors
/s/ Michael I. Froch
Michael I. Froch
Secretary
El Segundo, California
- ------------------
<page>
AURA SYSTEMS, INC.
2335 ALASKA AVENUE
EL SEGUNDO, CA 90245
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Zvi (Harry) Kurtzman and Michael I.
Froch as Proxies, each with the power to appoint their substitutes and with full
power to act alone, and hereby authorizes them to represent and to vote as
designated below, all shares of Common Stock of Aura Systems, Inc. held of
record by the undersigned on August 6, 2001, at the Annual Meeting of
Stockholders to be held on October 2, 2001, including any adjournments or
continuances thereof.
The Proxies appointed hereby are instructed to vote as indicated herein
on the following proposals as more fully described in the Company's Notice of
Meeting of Stockholders and Proxy Statement, each dated August 20, 2001, receipt
of which is hereby acknowledged, and in their discretion on any other business
which may properly come before the meeting or adjournment thereof.
1. Election of Directors
[_] FOR all nominees listed below (except [_] WITHHOLD AUTHORITY to vote
as marked to the contrary below for all nominees listed below
(INSTRUCTION: To withhold authority to vote for any individual nominee
strike a line through the nominee's name below.)
Zvi (Harry) Kurtzman Harvey Cohen Neal Meehan
Stephen A. Talesnick Salvador Diaz-Verson, Jr. Norman Reitman
Carl A. Albert Harry Haisfield William Richbourg
In their discretion, the Proxies are authorized to vote upon such other business
as may properly come before the meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THE PROXY WILL BE VOTED
FOR PROPOSAL 1.
Dated: ______________________, 2001
Please sign exactly as the name
appears below. When shares are held
by joint tenants, both should sign.
When signing as attorney, as
executor, administrator, trustee or
guardian, please give full title as
such. If a corporation, please sign
in full corporate name by President
or other authorized officer. If a
partnership, please sign in
partnership name by authorized
person.
-----------------------------------
Signature
-----------------------------------
Signature if held jointly
If you also expect to attend the
stockholders' meeting, the Board of
Directors requests you check the box
below:
[_] I/we plan to attend the
stockholders meeting
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
<page>
Dear Shareholders:
During Fiscal 2001 we continued to rebuild our Company as a focused
AuraGen(R) operation. As part of that focus, early in the year we sold the
Ceramics operation. We continued our efforts to further reduce debt and other
liabilities. We started to rebuild our sales organization internally and
externally. Once again we started to focus on product development to provide new
additional power level options to the AuraGen and to provide more applications
on different automotive engine configurations. After a long and hard process
that took most of the year we are now listed on the OTC Bulletin Board.
Revenues for the year were virtually all AuraGen related and were
approximately $2.5 million as compared to $0.8 million for AuraGen related
revenues in the previous year. The gross margin for the AuraGen product was
approximately 52% in Fiscal 2001 as compared to negative 16% in Fiscal 2000.
Overhead expenses, excluding depreciation charges, in Fiscal 2001
declined by approximately 48% to $3.4 million from $6.6 million in the prior
year. Selling and administrative expenses in Fiscal 2001 increased by 19% to
$12.7 million from $10.7 million in the previous year. Research and development
expenses increased in Fiscal 2001 by over 360% to $550,000 from $150,000 in the
prior year. Interest expenses in Fiscal 2001 declined by approximately 49% to
$2.3 million from $4.5 million in the previous year.
The above results reflect the operational changes that are ongoing as
we start our recovery program. The gross margins experienced last year reflect a
combination of a decrease in costs as production started to increase, and an
increase in our selling price as we gained confidence in the market place. We
expect gross margins to stabilize at approximately 50% for the coming year.
Overhead expenses declined as a result of our focusing activities and cost
saving programs. We expect overhead expenses to stabilize at these levels for
the coming year. General and administrative expenses increased moderately as we
increase our sales force and our sales infrastructure. We expect general and
administrative expenses to again increase moderately over the next year as we
increase our sales efforts. Research and development, which increased with a
large percentage from previous year, is still quite modest. The large percentage
increase is due to the almost total stoppage of any R & D activities in the
previous year. In the coming year we expect R & D expenses to increase and
stabilize at approximately $1.25 million for the year. Finally, the decrease in
interest reflects the continued decline in our debt. As the debt continues to
decline in the coming year, we expect the interest charges to also decline.
Highlights of Fiscal 2001
Much has happened during Fiscal 2001. In early May, the Ballistic
Missile Defense Office informed us that the AuraGen technology was selected for
an award as one of 21 innovations out of hundreds of technologies that were
examined. The technologies were judged on their potential to provide
"significant economic and social return to the Nation and its Taxpayers." Also
in May, we started to ship AuraGen G5000 to support the General Motors Service
Parts Organization, Goodwrench Mobile Service Program. The GM Goodwrench Mobile
Service Program is offering a number of vehicle options to its dealers, all of
which include the AuraGen.
In early July 2000, the U.S. Patent office allowed the second AuraGen
patent. This second patent enhanced our competitive position by providing patent
coverage not only for the basic AuraGen machine but also to the integrated
control system associated with the vehicle power generating system. The new
patent extended coverage to include the controller that converts the variable
frequency and amplitude output power electric energy into constant frequency and
constant voltage electric output power irrespective of the operational speed of
the vehicle.
In August 2000, the U.S Army successfully completed the third and final
airdrop test for the AuraGen and certified the AuraGen for airborne operations.
Also in August, the U.S Government General Services Administration (GSA) started
to include the AuraGen in its pre-approved product catalog.
In September 2000, we started to install AC/DC VIPER AuraGens and train
Army personnel in the installation of the system for the 82nd Airborne and
Special Forces. In addition to the Army, by the end of September, 34
municipalities, 54 state and city agencies, 40 utilities, 17 telecommunication
and 38 industrial organizations have started to use the AuraGen for their
specific applications.
In October 2000, the FBI purchased AuraGens for both the Hostage Rescue
Team and the Evidence Recovery Team. In late October, General Motors displayed
the AuraGen at the SEMA show in Las Vegas on the Yukon XL, Silverado pickup
truck, Suburban and the Savanna Pro Van. On all of the above vehicles, the
AuraGen was fully integrated including the control panel on the dash.
In December 2000, we signed our first distribution agreement with
Stewart and Stevenson's Western Region to market and service the AuraGen. Also
in December, the AuraGen received the California Multiple Award Schedule (CMAS)
contract number.
In February 2001, we were listed on the OTC Bulletin Board and the
California Department of Transportation ("Caltrans") specified the AuraGen for
its new vehicles. Subsequent events
Toward the end of Fiscal 2001, we started an aggressive program to
develop a distribution network across the country. Setting up this distribution
network is a key parameter in our business plan. In order to be able to offer
the AuraGen to national fleets and OEM customers, we must have in place a
service organization for installation and service. We now have distribution
covering 24 states and partially covering an additional 7 states. Our
distributors are well-recognized leaders in industrial and power system
distribution and provide service to our customers 7 days a week, 24 hours a day.
In the coming months we expect to complete our distribution network to cover all
50 states.
We completed the developments for the G8500, an 8,500-Watt AuraGen(R)
that is now in production and being sold to our customers. We have also
completed the development for the AC/DC Inverter Battery Charger version and
expect it to be in production by the end of September.
Subsequent to year-end, we settled our disputes with Deutsche Bank. We
now welcome Deutsche Bank as a major shareholder in Aura.
Outlook for the future
The outlook for the future is getting better and better as each day
goes by. New applications for the AuraGen are constantly being added. We now
have engine mounts that fit most of General Motors, Ford and Chrysler for both
gasoline and diesel engines. In addition, the AuraGen can be installed on
numerous models of Cummins, Freightliner, Detroit Diesel, Navistar, Caterpillar
and American General engines. As the number of platforms where the AuraGen can
be installed increases so do our business opportunities. We expect to develop
additional applications over the coming year as we start to examine foreign made
trucks.
We will continue to enhance our distribution network by adding
distributors to fill the areas that are not covered by our existing
distributors. In addition, we will start to explore setting up distribution in
other parts of the world. We are constantly making inroads into the U.S.
military. These activities will increase as more and more different military
organizations adapt the AuraGen for their use. We also expect to see the
adaptation of the AuraGen by other armies for their mobile power needs.
Our development activities will stay focused on developing different
power configurations. We recently started to ship 8,500-Watt versions and expect
to ship AC/DC/Inverter/Battery Charger units by the end of August 2001 for both
6,000-Watt and 8,500-Watt units. We are developing both larger and smaller power
level units, as well as a marine version.
Our sales activities will be focused on working with our distributors
and OEM customers. We anticipate that sometime in Fiscal 2002 we will see the
start of regular monthly shipments to OEM customers. This will provide stability
in sales forecasts, as the demand will be more uniformly predictable over long
periods of time.
We strongly believe that the AuraGen is slowly but surely becoming the
mobile power solution of choice across many industries and users. This trend is
accelerating and as more and more users employ our product we hear over and over
again that great expression, "We will never go back to gensets". We still have
significant challenges ahead. We need to increase both our engineering and sales
staff, be more aggressive in our marketing, continue to improve our balance
sheet, rebuild confidence in the investment community, increase confidence among
our suppliers and most important, rebuild confidence among you, our
shareholders.
I would like to take this opportunity and thank all of our shareholders
for their patience and support throughout a very difficult few years. I would
also like to thank our staff for working hard and smart with limited resources,
our suppliers for believing in the Company and its product when almost no one
else would, and our creditors who stuck it out under very trying circumstances
with patience and understanding.
In Fiscal 2000, we touched the abyss and bounced off it. In Fiscal
2001, we focused our operation and determination and started to rebuild our
Company. In the coming years, we are looking forward to being the mobile
electric power solution of choice. We believe that soon it will be obvious to
everyone that all the pain was not in vain.
Yours truly,
Harry Kurtzman
CEO
This letter contains forward looking statements and future results may
differ materially from those anticipated in such forward statements, as
discussed in the Company's Report which follows.