<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended September 30, 1996 Commission File Number 1-8355
HELIONETICS, INC.
(Exact name of registrant as specified in its charter)
California 95-2629097
(State of incorporation) (IRS Employer ID No.)
or organization)
6849 Hayvenhurst Avenue, Van Nuys, CA 91406
(Address of principal executive offices)
(818) 778-0000
(Registrant's telephone number)
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
Name of each exchange
Title of each class on which registered
------------------- ---------------------
<S> <C>
Common stock, no par value OTC Bulletin Board
</TABLE>
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15 (d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
YES X NO
-------- -------
Shares of common stock outstanding as of September 30, 1996: 5,289,472
<PAGE> 2
HELIONETICS, INC.
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE #
------
<S> <C>
Item 1. Financial Statements
Statements of Operations 1
Balance Sheets 2-4
Statements of Cash Flows 5-6
Notes to Consolidated Financial Statements 7-10
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 11-12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 2. None
Item 3. None
Item 4. None
Item 5. None
Item 6. None
</TABLE>
<PAGE> 3
HELIONETICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands except share data)
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30 September 30
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
REVENUES (Note 1) $ 3,179 $ 29,017 $ 1,183 $ 10,141
-------- -------- -------- --------
COSTS AND EXPENSES
Cost of sales 2,674 20,864 1,086 7,557
Selling, general and administrative 3,655 10,236 759 3,118
Interest 278 460 136 147
-------- -------- -------- --------
6,607 31,560 1,981 10,822
-------- -------- -------- --------
OTHER INCOME (EXPENSE): (78) 346 (58) 197
-------- -------- -------- --------
INCOME (LOSS) FROM CONTINUING OPERATIONS
BEFORE PROVISION FOR INCOME TAXES (3,506) (2,197) (856) (484)
Provision for income tax (Note 5) -- -- -- --
-------- -------- -------- --------
LOSS FROM CONTINUING OPERATIONS $ (3,506) $ (2,197) (856) (484)
DISCONTINUED OPERATIONS:
Income of discontinued segment -- 1,022 -- 604
-------- -------- -------- --------
NET INCOME (LOSS) $ (3,506) $ (1,175) $ (856) $ 120
======== ======== ======== ========
EARNING PER COMMON AND COMMON
EQUIVALENT SHARE (Note 1):
Continuing operations $ (0.66) $ (0.63) $ (0.16) $ (0.12)
Discontinued operations -- $ 0.29 -- $ 0.15
-------- -------- -------- --------
Net Income $ (0.66) $ (0.34) $ (0.16) $ 0.03
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
1
<PAGE> 4
HELIONETICS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
<TABLE>
<CAPTION>
September 30 December 31
1996 1995
------- -------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents including $93 restricted $ 260 $ 189
Accounts receivable, less allowance of $110
in 1996 and in 1995 741 428
Inventories (Note 1) 1,005 960
Prepaid expenses and other 48 133
------- -------
Total current assets 2,054 1,710
------- -------
PROPERTY, PLANT AND EQUIPMENT
at cost:
Leasehold improvements 232 232
Machinery and equipment 1,687 1,600
------- -------
1,919 1,832
Less--Accumulated depreciation and amortization (1,064) (796)
------- -------
855 1,036
------- -------
OTHER ASSETS:
Patent costs (Note 1) 105 188
Excess of cost over net assets of acquired
companies, net (Note 1) 3,467 4,351
Notes receivable and other assets (Note 1) 325 64
------- -------
3,897 4,603
------- -------
$ 6,806 $ 7,349
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
2
<PAGE> 5
HELIONETICS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
<TABLE>
<CAPTION>
September 30 December 31
1996 1995
------ ------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt (Note 2) 668 1,093
Accounts payable and accrued liabilities 15,139 14,245
------ ------
Total current liabilities 15,807 15,338
------ ------
LONG-TERM DEBT, net of current maturities (Note 2) 878 943
------ ------
NOTES and LOANS PAYABLE to proponents and
shareholder (Note 3) 2,790 1,009
------ ------
MINORITY INTEREST 693 165
------ ------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Preferred stock, no par value
Authorized--2,000,000 shares; none outstanding -- --
Class A and B convertible preferred stock
No stated value
Authorized--150,000 shares of each
Outstanding --
51,175 shares of Class A in 1996 and 1995 and 57,629
shares of Class B in 1996 and 1995, respectively -- --
Class C convertible preferred stock,
$3.50 stated value
Authorized--2,800,000 shares
Outstanding--304,000 shares in 1996 and 304,000
shares in 1995 692 692
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
3
<PAGE> 6
HELIONETICS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
<TABLE>
<CAPTION>
September 30 December 31
1996 1995
-------- --------
<S> <C> <C>
SHAREHOLDERS' EQUITY (cont'd)
Class D convertible preferred stock
$10.00 stated value
Authorized--100,000 shares
Outstanding--none -- --
Class E convertible preferred stock
$10.00 stated value
Authorized--90,000 shares
Outstanding--none -- --
Class F convertible preferred stock
no stated value
Authorized--2,800,000 shares
Outstanding--none in 1996
and in 1995 -- --
Class H convertible preferred stock
1,150,000 shares to be authorized
None outstanding -- --
Common stock
No par value
Authorized--50,000,000 shares
Outstanding--5,289,000 and 4,939,000 shares in 1996
and in 1995, respectively 78,821 78,571
Additional paid-in capital 2,674 2,674
Accumulated deficit (95,549) (92,043)
-------- --------
Total shareholders' equity (13,362) (10,106)
-------- --------
$ 6,806 $ 7,349
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
4
<PAGE> 7
HELIONETICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Ended
September 30
1996 1995
------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) from continuing operations $(3,506) $(1,175)
Adjustment to reconcile net (loss) to net
cash provided by (used in) operating activities
of continuing operations--
Depreciation and amortization 1,235 1,197
Minority interest 528 (434)
Interest -- proponent 104 78
Change in operating assets and liabilities 196 (2,410)
------- -------
Net cash provided by (used in) operations (1,443) (2,744)
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment (87) (751)
Cash (paid) acquired in business acquisition -- 16
Other assets (261) 1,244
------- -------
Net cash provided by (used in) investing activities $ (348) $ 509
======= =======
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE> 8
HELIONETICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands except share data)
<TABLE>
<CAPTION>
Nine Months Ended
September 30
1996 1995
------- -------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in note payable and long term debt, net $ (65) $ (253)
Increase (decrease) in notes payable to
proponents and shareholders, net 1,677 2,614
Proceeds from sale of stock 250 --
------- -------
Net cash provided by (used in) financing
activities 1,862 2,061
------- -------
Net increase (decrease) in cash and
equivalents 71 (174)
Cash and equivalents at beginning of period 189 5,464
------- -------
Cash and equivalents at end of period $ 260 $ 5,290
======= =======
Interest paid $ 306 $ 461
======= =======
</TABLE>
The accompanying notes are an integral part of these statements.
6
<PAGE> 9
HELIONETICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The unaudited consolidated financial statements have been prepared pursuant
to the rules and regulations of the Securities and Exchange Commission and are
unaudited. The December 31, 1995 Balance Sheet has been condensed and summarized
from the audited financial statements as of that date. Certain information and
footnote disclosures normally included in the financial statements have been
condensed or omitted pursuant to such rules and regulations. It is suggested
that these financial statements be read in conjunction with the financial
statements, including the independent auditor's report dated May 24, 1996, and
the notes thereto included in the Company's latest annual report on Form 10-K
with attention to Note 3-Basis of Presentation, discussing the uncertainty as to
the Company's continuance as a going concern because of certain litigation
settlements and other contingencies. In the opinion of management the
accompanying financial statements contain all adjustments necessary to present
fairly the Company's financial position and the results of operations for the
periods presented. The results of operations for the nine months ended September
30, 1996, are not necessarily indicative of the results to be expected for the
full year. All share data for 1995 was restated to reflect the 10 for 1 reverse
stock split in February 1996.
The consolidated financial statements of the Company during the interim of
1995 have not been restated and included Tri-Lite, Inc. In the fourth quarter of
1995, due to the reduction of ownership and control over Tri-Lite, and the
bankruptcy filing previously disclosed, the Company changed its method of
accounting for their investment in Tri-Lite for the year ended December 31, 1995
from consolidation to the equity method.
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
the Company and its subsidiaries. Upon consolidation all material intercompany
transactions and accounts have been eliminated.
INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out method) or
estimated net realizable value. Costs include direct material, direct labor and
applicable manufacturing and engineering overhead.
OTHER ASSETS
Patent costs are amortized on a straight-line basis over the shorter of the
estimated periods to be benefitted or the term of the patent.
Excess of cost over net assets of acquired companies is amortized on a
straight-line basis over five to thirty years.
EARNINGS PER SHARE
Earnings per common share is based upon the weighted average number of
shares outstanding during each period including common equivalent shares. The
1995 weighted average shares were restated to reflect the 10 for 1 reverse stock
split in 1996.
Earnings per common share, assuming full dilution, is based upon the
weighted average number of shares outstanding plus the common shares issuable
upon conversion in exercise of securities whose
7
<PAGE> 10
HELIONETICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
exercise conversion as of January 1 would reduce earnings per common and common
equivalent share for that year.
The weighted average shares used in calculating primary earnings per share are
summarized as follows:
<TABLE>
<CAPTION>
(amounts in thousands)
1996 1995
---- ----
<S> <C> <C>
Nine Months 5,289 3,475
Three Months 5,289 4,084
</TABLE>
RECLASSIFICATIONS AND RESTATEMENTS
Certain account reclassifications have been made to the 1995 balances to
conform to the 1996 presentation.
(2) LONG-TERM DEBT AND CREDIT FACILITIES
Long-term debt at September 30, 1996 and December 31, 1995 were as follows
(in thousands):
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Convertible unsecured note payable bearing interest at 6%,
with interest payable quarterly beginning March 31, 1994
and principal and remaining accrued interest due on
December 31, 1996 $ 400 $ 400
Convertible secured promissory notes -- 500
Note payable-directors and unsecured creditors, interest at prime,
quarterly interest only, principal due October 1, 1999, unsecured 448 448
Note payable-US Treasury, interest 9%, payable monthly principal and
interest of $5,000 through December 1999, unsecured 217 202
Priority tax payable quarterly with interest ranging from
10% to 14% per annum 58 58
Others 423 428
------- -------
1,546 2,036
Less: Current maturities (668) (1,093)
------- -------
$ 878 $ 943
======= =======
</TABLE>
8
<PAGE> 11
HELIONETICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(3) NOTES AND LOANS PAYABLE TO PROPONENTS AND SHAREHOLDERS
At September 30, 1996 and December 31, 1995, the Company had notes and loans
payable to proponents and shareholders totaling $2,790,000 and $1,009,000,
respectively. The notes and loans bear interest at rates ranging from 7.5
percent to 10 percent per annum. The notes and loans represent advances between
the Company and the proponents. All other notes and loans are secured by the
appropriate UCC-1 filings. In May 1996, Ms. Barnes required the Company pursuant
to the Security Agreement signed by the Company, to deliver to Ms. Barnes
possession of all securities evidencing ownership by the Company of all of its
subsidiaries until such time as all of her loans are paid in full.
Subsequent to September 30, 1996, loans payable to Ms. Barnes will be partly
extinguished through the issuance of common stock at its fair market value. Ms.
Barnes continued to provide loans to the Company subsequent to September 30,
1996.
(4) INCOME TAXES
No provision for federal and state income taxes was provided for the period
as a result of the taxable losses incurred. Through December 31, 1992, the
Company accounted for income taxes under Statement of Financial Accounting
Standards No. 96, "Accounting for Income Taxes". This standard required income
taxes to be provided based upon a liability approach, under which deferred taxes
were recorded at the rates to be in effect when such taxes were due.
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes." Under Statement
109, the liability method is used in accounting for income taxes. Under this
method, deferred tax assets and liabilities are determined based on differences
between financial reporting and tax bases of assets and liabilities and are
measured using the enacted tax rates and laws that will be in effect when the
differences are expected to reverse. As permitted by Statement 109, the Company
has elected not to restate the consolidated financial statements of any prior
years. The effect of the change was not material to the consolidated financial
statements.
At June 30, 1996, the Company believes it has significant net operating loss
carryforwards for federal and state income tax purposes. Such amounts would be
available to reduce future federal and state income tax liabilities as
appropriate and, to the extent not used, would expire through 2010. As a result
of various stock transactions during the past two years, certain of these net
operating loss carryforwards are subject to annual limitations of approximately
$1,400,000 to be used in future periods.
At September 30, 1996, Laser Photonics and Acculase had net operating loss
carryforwards of approximately $5,700,000 and $10,002,000 which expire in
various years through 2010. These net operating losses are subject to annual
limitations imposed by the Internal Revenue Code due to change in control of
Companies.
(5) OPTIONS
The following are options granted subsequent to December 31, 1995 and
outstanding as of September 30, 1996:
<TABLE>
<CAPTION>
Shares Price
------ -----
<S> <C> <C>
Bernard B. Katz 150,000 $3.50
KB Equities, Inc. 600,000 0.35
Maxwell Malone 150,000 3.50
</TABLE>
9
<PAGE> 12
HELIONETICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(5) OPTIONS (CONTINUED)
<TABLE>
<S> <C> <C>
Chaim Markheim 150,000 3.50
Richard Sergo 150,000 3.50
Raymond Hartman 150,000 3.50
Larry Suelzle 150,000 3.50
Adrian Cayetano 75,000 3.50
</TABLE>
(6) SUBSEQUENT EVENT
The Cornell Medical Center's paper relating to animal studies evidencing 100%
patency (open channels) was presented and distributed at the American Heart
Association's November 1996 meeting held in New Orleans, La.
Helionetics joined as co-proponent with Tri-Lite to file a Tri-Lite Plan of
Reorganization in the Tri-Lite Chapter 11 proceeding. A final Disclosure
Statement, as amended, is set for hearing in January 1997. Although no assurance
can be given, the Company expects Tri-Lite to emerge from bankruptcy proceedings
in early 1997.
10
<PAGE> 13
HELIONETICS, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
Working capital (the difference between current assets and current
liabilities) deficit was $13,753,000 at September 30, 1996 compared with
$13,628,000 at December 31, 1995, or a decline of $125,000. Receivables and
inventories increased by a combined total of $358,000; trade payables and
accrued liabilities increased by $894,000. Capital expenditures are minimal and
totalled $87,000 for the nine months period.
The Company believes that its current operations are viable and has access to
additional debt financing to augment operating cash flow, if necessary, to
continue its business operations. The low level of the Company's stock price,
however, has a negative effect on the Company's ability to raise such financing.
The Company, in addition, has several litigation settlements accrued, as well as
other actual and contingent liabilities and if such accruals and liabilities can
not be renegotiated and must be paid in cash, substantial doubt about the
Company's ability to continue as a going concern exists. As previously
discussed, the liquidity needs of the Company in 1996 will be provided as
follows: LPI liquidity will be provided through sales of its own securities;
Marinco and DECC division from its own internal operations; Corporate
activities, Sentinel and Acculase primarily on loans to be provided by Ms. Susan
Barnes, issuance of shares of the Company's common stock and sale of the
Company's securities from private placements, if desirable.
In July 1996, the Company received a federal court order, pursuant to a
litigation judgement, preventing it from access to its assets. The Company,
while currently in negotiation to relieve it from the negative effect of the
court order, could give no assurance that the temporary restraining order issued
will not be replaced by a permanent injunction.
The Company spent considerable amount of cash both in defense of litigations
against it and its own plaintiff's action against US Surgical Corporation and
others and expect this defense and action to continue till the end of 1996.
The Company, approved issuance of approximately 2,682,394 shares of the
Company's common stock for services rendered by employees, consultants and for
professional fees. For the nine months ended September 1996, Ms. Barnes loaned
the Company approximately $1,620,000 which included payments for Company
expenses and debt and for consulting fees. Ms. Barnes also accrued $162,000 for
the rent of the Van Nuys facilities.
RESULTS OF OPERATIONS
The Company spun-off KSWI in December 1995 and Tri-Lite results of operations
for 1996 was not included due to its filing for Chapter 11 bankruptcy and the
reduction of the Company's ownership and control of Tri-Lite in late 1995.
Tri-Lite's results of operations however, was included in the interim financial
statements during 1995.
The Company had approximately $3,179 and $1,183 thousands in revenues for the
nine months and three months ended September 30, 1996, compared with $29,017 and
$10,141 thousands for the corresponding period in the prior year, or a net
decrease of $25,838 and $8,958 thousands, respectively. $26,550 and $8,966
thousands of 1995 revenues for the nine and three months period was attributed
to Tri-Lite. LPI, acquired from Chapter 11 proceedings in May 1995, contributed
$2,161 and $779 thousands of revenues in 1996 for the nine and three months
period, respectively.
The loss in 1996 continued to reflect the ongoing support for Acculase's
excimer laser for TMR application and the continued commercialization efforts
for Sentinel's Sentry-E fault tolerant computer.
11
<PAGE> 14
HELIONETICS, INC. AND SUBSIDIARIES
The ongoing support of the Acculase projects resulted in the receipt by the
Company, in August 1996, of the FDA approval for human clinical testing of the
TMR procedures utilizing the Acculase excimer laser.
Cost of sales was 84% and 92% for the nine and three months of 1996 compared
with 72% and 75% for the comparable period in 1995, respectively. The decline in
margin was attributed to the effect of DECC's decline in revenues (lower
revenues to offset fixed cost). In 1995 Tri-Lite contributed to a favorable
consolidated margin compared with 1996, which excluded Tri-Lite.
Selling, general and administrative expenses were $3,655 and $759 thousands
for the reported periods in 1996 compared with $10,236 and $3,118 thousands in
the same period in 1995. As a percent of revenue, these expenses were 115% and
64% for the nine and three months period in 1996; 35% and 31% for the same
period in 1995, respectively. Tri-Lite contributed $7,852 and $2,801 thousands
for the nine and three months in 1995, respectively and none in 1996.
12
<PAGE> 15
HELIONETICS, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In March 1995, an action was instituted by Bo B. Sramek and Hevka H. Sramek
against Helionetics and Bernard B. Katz in the Superior Court of California,
Central Orange County District (Case No. 743947) for shares of Helionetics'
common stock which Helionetics failed to deliver. In April 1996, an amount of
$2.4 million was awarded to the Srameks. An award is also made in favor of
Bernard B. Katz, as an individual, against the plaintiff. In connection with Mr.
Katz's award, Mr. Katz is in the process of filing a counter claim against the
plaintiff and their counsel. Should Mr. Katz prevail on his contemplated action,
any proceeds to be awarded Mr. Katz less court costs will be contributed by Mr.
Katz to Helionetics.
The Company is a defendant in class action law suits alleging violation of
federal securities laws. Although management believes that these actions are
without merit and intends to defend them vigorously, counsel for the Company has
determined a probable loss in the seven-digit range. Based on ongoing
negotiations, management of the Company has accrued $3,500,000 as of December
31, 1995, which is included in accrued liabilities in the accompanying
statements. The Company and co-defendants has filed summary judgement motions
seeking to have the class action lawsuit dismissed on the basis of results of a
very extensive discovery initiated by the plaintiff. Discovery procedures by the
plaintiff has since been terminated by a court order. No assurance can be given
that the Company and co-defendants will be successful in its summary judgement
motions.
In October 1995, Tri-Lite, Inc. filed a complaint in the U. S. District Court
for the Northern District of Ohio against the company for $2 million in
compensatory damages and $2 million in punitive damages for the alleged
repudiation and revocation of the company's guaranty of Tri-Lite's credit
facility with its senior lender, along with other cause of actions. The company
disputes all of Tri-Lite's credit claims. Due to Tri-Lite's Chapter 11
Bankruptcy filing in February 1996, there is a stay on the case. The company
will file a counter- suit against the Tri-Lite's officers and board of directors
when the stay is lifted. The Company believes that the suit filed by Tri-Lite is
without merit and anticipates that any judgement would not have a material
adverse effect on its financial condition or results of operations.
The Company in July 1995 filed a civil complaint in Superior Court of Los
Angeles County (Case No. BC 131 749) against U. S. Surgical Corporation and
other for over $2.5 million compensatory damages and unspecified punitive
damages. The defendants removed the case to the U. S. District Court for the
Central District of California under Case No. 95-5513 RAP (RNBx). The Company
has filed, in accordance with Connecticut law, an amended complaint seeking
total damages in excess of $300 million. The Federal District Court in
Connecticut has advised all parties that the case is scheduled for trial in
September 1997. The Company believes that it will expend considerable resources
in prosecuting this case, however, no assurance can be given that the Company
will prevail in its complaint.
Helionetics is currently in litigation in the case of Lawrence Fund, et al.
v. Helionetics, et al., in the United States District Court, Southern District
of New York (Case No. 95 Civ. 1005 RPP). After inquest, a judgement was rendered
in the amount of $612,045 in favor of Lawrence Fund against the Company and
Bernard B. Katz, its chairman. The default judgement was granted primarily due
to the inability of the Company to continue to retain and pay its then New York
counsel to continue the case to proceed to trial. The Company believes that it
may have prevailed in a trial since the letter requesting registration of
securities for which plaintiff received judgement is a forgery. While management
is confident that Helionetics may be successful on appeal and/or that the matter
may be disposed off on favorable terms, the action described above exacerbates
the condition described by the independent auditors report dated May 24, 1996
(See Note 1 of Notes to Consolidated Financial Statements).
13
<PAGE> 16
HELIONETICS, INC. AND SUBSIDIARIES
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
None
14
<PAGE> 17
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HELIONETICS, INC.
DATE: December 12, 1996 /s/E. Maxwell Malone
-------------------------- --------------------------
E. Maxwell Malone
Chief Executive Officer
DATE: December 12, 1996 /s/Chaim Markheim
-------------------------- --------------------------
Chaim Markheim
Vice-President
DATE: December 12, 1996 /s/Adrian Cayetano
-------------------------- --------------------------
Adrian Cayetano
Controller
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 260
<SECURITIES> 0
<RECEIVABLES> 851
<ALLOWANCES> 110
<INVENTORY> 1,005
<CURRENT-ASSETS> 2,054
<PP&E> 1,919
<DEPRECIATION> (1,064)
<TOTAL-ASSETS> 6,806
<CURRENT-LIABILITIES> 15,807
<BONDS> 0
0
692
<COMMON> 78,821
<OTHER-SE> 2,674
<TOTAL-LIABILITY-AND-EQUITY> 6,806
<SALES> 3,179
<TOTAL-REVENUES> 3,179
<CGS> 2,674
<TOTAL-COSTS> 2,674
<OTHER-EXPENSES> 3,655
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 278
<INCOME-PRETAX> (3,506)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,506)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,506)
<EPS-PRIMARY> (0.66)
<EPS-DILUTED> 0
</TABLE>
