El Segundo-based Aura Systems Inc., a maker of mobile power sources (that's its latest incarnation, anyway), is one of those outfits that seem to have nine lives.
If there was a television show named "Corporate Survivor," its premiere episode would be on Aura Systems, a one-time Nasdaq company now traded on the bulletin board, under the symbol AURA.OB.
Indeed, last week Aura Systems showed what clinging to life is all about, filing an S-3 statement with the Securities and Exchange Commission to raise another $7.8 million in stock.
Over the past 15 years, Aura has always posted red ink, but has been a tiger at issuing stocks and bonds to finance the ever-bright future, raising nearly $130 million.
Shareholders have gotten clawed along the way, as new equity issues and convertible debt diluted share value, along with chronic losses. One of several black-letter days for shareholders was in June 1999, when Aura Systems told the SEC that its annual 10-K report would be filed late because the company didn't have the money to pay the auditors.
Most recently, Aura Systems reported a net loss of more than $4.7 million on just $501,803 in revenues for the quarter ended Nov. 30, 2000.
But through it all, Aura Systems has survived. And astonishingly, although Aura Systems' stock was trading for 48 cents a share last week off from $5 a share in 1996 it still has a market capitalization of more than $129 million.
And once again, chairman and founder Zvi Kurtzman, 54, is rallying the troops, this time behind Aura Systems "AuraGen," which he says is a new kind of mobile power source that solves a lot of the world's electricity problems. In a nutshell, AuraGen generators can be hooked up to automobile engines (similar to alternators) to produce electric power, at both 110 and 220 volts, claims Kurtzman.
Kurtzman's latest vision is one in which automobile engines play a role in solving the nation's power crisis.
Speaking at his latest annual meeting in January, Kurtzman said, "The world produces 50 million new cars and light trucks per year, along with 400,000 heavy-duty trucks. The 'installed' base in North America is over 200 million vehicles. This installed base provides an opportunity to generate a very large amount of power.
"For example, 100,000 AuraGens each generating six kilowatts of power can provide 600 megawatts per hour, the equivalent of a major power generating facility.
"According to the December issue of the (George) Gilder Report, electric power generated from...automobile power plants is where the future is. We are pleased and honored at the mention of Aura Systems by the Gilder Report as one of the companies that is helping shape the 'powercosm.'"
Kurtzman concluded by stating that he soon expects to begin shipping 20,000 AuraGen units a year.
Investors may recall Kurtzman's enthusiasm in past years for products that always seemed on the cusp of true commercial greatness vibrating vests for video-game players, high-end loudspeakers, magnetic bearings that would reduce friction for millions of new cars. Somehow, those deals never reached fruition.
Moreover, Aura Systems is a company perennially at odds with somebody; it settled shareholder litigation in 1999 in which it was charged with fudging numbers, and it has been probed at least twice by the SEC on accounting issues.
Did we say auditors? One CPA firm, Pannel Kerr Foster, resigned the Aura Systems account in 2000, stating that earlier audits and reports may have been based on inaccurate information. Indeed, losses were ultimately restated, and became larger.
But somehow, Aura Systems keeps bouncing back, like one of those inflatable punching clowns with the rounded, weighted feet. After more than a decade of losses, the company still seems to be able to tap capital markets, and tout products that capture investor imagination.
And who knows? Maybe Californians in the future will drive to work, and then hook up their cars to power generators, keeping their employers in juice for the day.Success Amid Distress
Speaking of juice, San Francisco-based Pacific Gas & Electric bonds are trading for 50 cents on the dollar, and many owners in particular pension funds, with rules on the ratings of bonds they can own need to get out, and get out now.
That situation helps explains why the Westside-based brokerage Jefferies Group Inc. tends to thrive, no matter which direction Wall Street takes, said Frank Baxter, chairman, last week. "We've always tried to be an all-weather firm. We made money when all of Wall Street lost money in 1990, and we made money in 1994, during the last dip," said Baxter.
Part of Jefferies' success is that it treads where many fear into the world of distressed securities and corporate restructuring.
Jefferies for decades has been known for its institutional trading desks, which handle jumbo blocks of stock, or distressed bonds. Jefferies knows what kind of buyers might be willing to swallow a few billion of PG & E; corporate IOUs, in a hurry.
Too, Jefferies has investment bankers and strategists who work for bondholders' or creditors' committees, when corporations declare bankruptcy all of which explains why Jefferies' stock, trading last week at just under $30 a share, is actually up from $23 a year ago, bear market or no.
Most other brokerage stocks are down, or way down.
By the way, Larry Post, president of MW Post Advisory Group in Century City, a buyer and trader in distressed debt, finds PG & E;'s "first mortgage bonds" (a type of secured debt) to be an intriguing play.
"(PG & E; officials) have announced they will continue to pay interest on the bonds through the bankruptcy, and then probably when the company emerges from bankruptcy," said Post.
But the debt is trading for as low as 81 cents on the dollar. Meanwhile, general corporate bonds issued by PG & E; were trading for about half of face value last week.
Contributing columnist Benjamin Mark Cole writes about the local investment community for the Los Angeles Business Journal. His new book, "The Pied Pipers of Wall Street: How Analysts Sell You Down the River," Bloomberg Press, will be published in May. He can be reached at firstname.lastname@example.org.
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