-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BtWVp05oE4+uiIYmjMbBTego1B3kSN8WNKMPRg6st3NZ0mgqYxfsAA7SB7r5HvE1 IOguOhyRVUHPM/SilKjqxw== 0000892569-96-002624.txt : 19961216 0000892569-96-002624.hdr.sgml : 19961216 ACCESSION NUMBER: 0000892569-96-002624 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961213 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: HELIONETICS INC CENTRAL INDEX KEY: 0000319648 STANDARD INDUSTRIAL CLASSIFICATION: CONSTRUCTION SPECIAL TRADE CONTRACTORS [1700] IRS NUMBER: 952629097 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-08355 FILM NUMBER: 96680324 BUSINESS ADDRESS: STREET 1: 6849 HAYVENHURST AVE CITY: VAN NUYS STATE: CA ZIP: 91406 BUSINESS PHONE: 7142618313 MAIL ADDRESS: STREET 1: 6849 HAYVENHURST AVE CITY: VAN NUYS STATE: CA ZIP: 91406 10-Q 1 FORM 10-Q FOR PERIOD ENDED SEPTEMBER 30, 1996 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:
Name of each exchange Title of each class on which registered ------------------- --------------------- Common stock, no par value OTC Bulletin Board
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 2 HELIONETICS, INC. INDEX
PART I. FINANCIAL INFORMATION PAGE # ------ 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
3 HELIONETICS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (dollars in thousands except share data) PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS
Nine Months Ended Three Months Ended September 30 September 30 1996 1995 1996 1995 -------- -------- -------- -------- 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 ======== ======== ======== ========
The accompanying notes are an integral part of these statements. 1 4 HELIONETICS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (dollars in thousands)
September 30 December 31 1996 1995 ------- ------- 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 ======= =======
The accompanying notes are an integral part of these consolidated balance sheets. 2 5 HELIONETICS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (dollars in thousands)
September 30 December 31 1996 1995 ------ ------ 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
The accompanying notes are an integral part of these consolidated balance sheets. 3 6 HELIONETICS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (dollars in thousands)
September 30 December 31 1996 1995 -------- -------- 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 ======== ========
The accompanying notes are an integral part of these consolidated balance sheets. 4 7 HELIONETICS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended September 30 1996 1995 ------- ------- 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 ======= =======
The accompanying notes are an integral part of these statements. 5 8 HELIONETICS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (dollars in thousands except share data)
Nine Months Ended September 30 1996 1995 ------- ------- 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 ======= =======
The accompanying notes are an integral part of these statements. 6 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 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:
(amounts in thousands) 1996 1995 ---- ---- Nine Months 5,289 3,475 Three Months 5,289 4,084
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):
1996 1995 ---- ---- 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 ======= =======
8 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:
Shares Price ------ ----- Bernard B. Katz 150,000 $3.50 KB Equities, Inc. 600,000 0.35 Maxwell Malone 150,000 3.50
9 12 HELIONETICS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (5) OPTIONS (CONTINUED) 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
(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 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 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 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 16 HELIONETICS, INC. AND SUBSIDIARIES ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K None 14 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 EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 9-MOS DEC-31-1996 JAN-01-1996 SEP-30-1996 260 0 851 110 1,005 2,054 1,919 (1,064) 6,806 15,807 0 0 692 78,821 2,674 6,806 3,179 3,179 2,674 2,674 3,655 0 278 (3,506) 0 (3,506) 0 0 0 (3,506) (0.66) 0
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