Aura Systems, SEC in Tentative Settlement

Aura Systems Inc., a small El Segundo-based provider of magnetic power technology, said Thursday that it tentatively agreed to settle civil charges that Aura violated financial reporting and fraud provisions of U.S. securities laws.

Under a consent decree reached in principle with the staff of the Securities and Exchange Commission, Aura said the company, its president, Zvi “Harry” Kurtzman, and an unidentified former officer would neither admit nor deny the findings by the agency.

The agreement also states that the SEC staff will not seek cash penalties from the three, nor will it require Aura to restate any of its previously reported financial results, Aura said.

However, the agreement is still subject to approval by the Securities and Exchange Commission itself, and SEC spokesman John Heine in Washington declined to comment on Aura’s announcement.

Aura executives also declined to elaborate beyond the announcement, which did not indicate whether, as part of the tentative agreement, the SEC staff plans to require Aura to take certain actions or accept any other type of penalty.

Aura is trying to apply its electromagnetic technology to make more efficient and productive industrial and consumer products. But the company has failed to stay profitable despite rising sales, and its stock price has been battered in recent years. In its fiscal year ended Feb. 29, the company lost $26 million on sales of $82.3 million.

Aura’s annual report to the SEC for fiscal 1996, which was filed earlier this month, also disclosed that the SEC staff was recommending that civil charges be brought against the company, Kurtzman and the former officer.

The SEC’s probe revolved around two items in Aura’s SEC filings for its fiscal years 1993 and ’94. In one, the SEC staff asserted that Aura should have disclosed more details about sales of computer monitors to a customer, Micro Computer Distribution Power, in 1992 and ’93. Aura has said the sales generated little or no profit.

In the other case, the SEC objected to how Aura reported its business arrangement with John Jory Corp., a construction firm, because certain revenue and costs related to the Jory deals were incorporated into some of Aura’s reported results. Aura later excluded those results in amended filings with the SEC.