Aura Systems deal with former executives threatens its future.

AURA Systems Inc. has managed to survive scrapes with the Securities and Exchange Commission, ties to stock promoter Rafi Khan and going-concern warnings from its accountants. Now a bungled real estate deal with a group that includes its SEC-barred founder is threatening to cause its demise.

To gain a cash infusion, the El Segundo-based power products manufacturer sold its headquarters and manufacturing plant in December for $6.5 million, including assumption of a $5.1 million mortgage.

As part of the two-step deal, Aura handed over an initial 49.9 percent of the properties, and received most of its $1.5 million in proceeds. It also agreed to pay its prospective landlords, including Aura founder Zvi "Harry" Kurtzman, $800,000 in security deposits and other lees as part of a leaseback arrangement.

But the deal soon went awry.

According to a filing last month with the Securities and Exchange Commission, Aura reported that the mortgage holder "did not consent" to the rest of the deal, creating "significant doubt" that it would be completed. Meanwhile, Aura defaulted on its payments to the Kurtzman group, which also includes four other former Aura executives. In June, Aura agreed to settle tip with the buyers by handing over one of its receivables and putting the buildings tip for sale.

But it may be too late. Aura reported that the mortgage holder began foreclosure proceedings in September, after the company failed to make $480,000 in back payments. While it is trying to strike a deal to stave off the proceedings, the company admitted that these problems could force it to "cease operations."

In 2002, Kurtzman was barred for life by the SEC from ever serving as an officer of a public company.

In the meantime, Aura has managed to stem its losses and boost sales. For the second quarter ended Sept. 30, it reported a loss of $3.5 million compared with a loss of $5.7 million loss in the like year-earlier period. Revenues nearly doubled to $519,679.