Helionetics Records $386,000 Loss, Blames Cash Crunch

Faced with a cash shortage that forced layoffs and other cutbacks, defense contractor Helionetics Inc. reported an after-tax loss from operations of $386,000 on revenue of $2.3 million for its fourth quarter ended Dec. 31.

The fourth-quarter loss compares to a loss of $171,000 on revenue of $1.6 million a year ago.

Helionetics said the loss will carry over into its first quarter, which ended March 31.

It attributed the deficit to a shortage of cash after the company was unable to obtain additional financing from its bank, MSE Financial of Encino.

The cash shortage forced the company to lay off 20 of its 135 employees, defer salaries and take other cost-cutting measures, company officials said.

Vincent Williams, president and chief executive, said the cost-reduction measures should allow the company to be profitable for the remainder of the year. He said the company was able to obtain a new $1.9-million line of credit earlier this month.

Helionetics, a manufacturer of power conversion systems for the military, is controlled by controversial Beverly Hills financier Bernard B. Katz. The company emerged from 2 1/2 years of bankruptcy proceedings in March, 1989, after a bitter fight over its reorganization plan.

In exchange for personal guarantees for a line of credit, Helionetics will issue 2.3 million warrants to KB Equities, a company controlled by Katz and an associate, George de Bell. MSE Financial required as collateral a commercial building owned by Katz.

For the year ended Dec. 31, 1989, the company earned $237,000, before extraordinary items, on revenue of $10 million. That contrasts with a loss of $695,000 on revenue of $5.2 million in 1988.

In February, Helionetics announced it had signed a letter of intent to acquire Definicon International Corp. of Newbury Park for about $12.5 million in stock. Williams, a former Definicon executive, said the company will distribute its proxy statement on the acquisition to shareholders in the next several weeks.

If the merger is completed, Helionetics’ top executives and affiliates have agreed to give back 75% of their securities holdings to avoid diluting the equity held by public shareholders. The insiders include Katz’s wife, Susan Barnes, Bell and Helionetics Chairman Charles Jobbins.