<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 June 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 July 31, 1996: 5,200,420
<PAGE> 2
HELIONETICS, INC.
INDEX
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE #
------
<S> <C> <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>
Six Months Ended Three Months Ended
June 30 June 30
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES (Note 1) $ 1,996 $ 18,876 $ 1,118 $ 8,942
-------- -------- -------- --------
COSTS AND EXPENSES
Cost of sales 1,588 13,307 928 6,390
Selling, general and administrative 2,896 7,118 1,115 2,968
Interest 142 313 67 147
-------- -------- -------- --------
4,626 20,738 2,110 9,505
-------- -------- -------- --------
OTHER INCOME (EXPENSE): (20)) 149 39 148
-------- -------- -------- --------
INCOME (LOSS) FROM CONTINUING OPERATIONS
BEFORE PROVISION FOR INCOME TAXES (2,650) (1,713) (953) (415)
Provision for income tax (Note 5) -- -- -- --
-------- -------- -------- --------
LOSS FROM CONTINUING OPERATIONS $ (2,650) $ (1,713) (953) (415)
DISCONTINUED OPERATIONS:
Income of discontinued segment -- 418 -- 601
-------- -------- -------- --------
NET INCOME (LOSS) $ (2,650) $ (1,295) $ (953) $ 186
======== ======== ======== ========
EARNING PER COMMON AND COMMON
EQUIVALENT SHARE (Note 1):
Continuing operations $ (0.50) $ (0.54) $ (0.18) $ (0.11)
Discontinued operations -- $ 0.13 -- $ 0.16
-------- -------- -------- --------
Net Income $ (0.50) $ (0.41) $ (0.18) $ 0.05
======== ======== ======== ========
</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>
June 30 December 31
1996 1995
-------- -------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents including $93 restricted $ 233 $ 189
Accounts receivable, less allowance of $110
in 1996 and in 1995 328 428
Inventories (Note 1) 1,021 960
Prepaid expenses and other 28 133
-------- -------
Total current assets 1,610 1,710
-------- -------
PROPERTY, PLANT AND EQUIPMENT
at cost:
Leasehold improvements 242 232
Machinery and equipment 1,674 1,600
-------- -------
1,916 1,832
Less--Accumulated depreciation and amortization (968) (796)
-------- -------
948 1,036
-------- -------
OTHER ASSETS:
Patent costs (Note 1) 111 188
Excess of cost over net assets of acquired
companies, net (Note 1) 3,703 4,351
Notes receivable and other assets (Note 1) 251 64
-------- -------
4,065 4,603
-------- -------
$ 6,623 $ 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>
June 30 December 31
1996 1995
------- -------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Note Payable (Note 2) $ 286 $ --
Current maturities of long-term debt (Note 2) 668 1,093
Accounts payable and accrued liabilities 14,915 14,245
------- -------
Total current liabilities 15,869 15,338
------- -------
LONG-TERM DEBT, net of current maturities (Note 2) 884 943
------- -------
NOTES and LOANS PAYABLE to proponents and
shareholder (Note 3) 2,319 1,009
------- -------
MINORITY INTEREST 64 165
------- -------
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>
June 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--5,200,000 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 (94,700) (92,043)
-------- --------
Total shareholders' equity (12,513) (10,106)
-------- --------
$ 6,623 $ 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>
Six Months Ended
June 30
1996 1995
------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) from continuing operations $(2,650) $(1,295)
Adjustment to reconcile net (loss) to net
cash provided by (used in) operating activities
of continuing operations--
Depreciation and amortization 897 724
Minority interest (452) 98
Interest -- proponent 78 78
Change in operating assets and liabilities 925 1,548
------- -------
Net cash provided by (used in) operations (1,202) 1,153
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment (84) (114)
Cash (paid) acquired in business acquisition -- (1,250)
Other assets (336) 401
------- -------
Net cash provided by (used in) investing activities $ (420) $ (963)
------- -------
</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>
Six Months Ended
June 30
1996 1995
------- -------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in note payable and long term debt, net $ (59) $ (284)
Increase (decrease) in notes payable to
proponents and shareholders, net 1,310 1,675
Minority interest 415 --
------- -------
Net cash provided by (used in) financing
activities 1,666 1,373
------- -------
Net increase (decrease) in cash and
equivalents 44 1,563
Cash and equivalents at beginning of period 189 5,464
------- -------
Cash and equivalents at end of period $ 233 $ 7,027
======= =======
Interest paid $ 64 $ 313
======= =======
</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 six months ended June 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
7
<PAGE> 10
HELIONETICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
of shares outstanding plus the common shares issuable upon conversion in
exercise of securities whose 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 earnings per share are
summarized as follows:
<TABLE>
<CAPTION>
(amounts in thousands)
1996 1995
----- -----
<S> <C> <C>
Primary 5,200 2,673
Fully diluted 5,200 2,673
</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 June 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 222 202
Priority tax payable quarterly with interest ranging from
10% to 14% per annum 58 58
Others 424 428
------ -------
1,552 2,036
Less: Current maturities (668) (1,093)
------ -------
$ 884 $ 943
====== =======
</TABLE>
The note payable represent the amount outstanding as of June 30, 1996 on
the LPI $500,000 receivable line of credit with a lending institution. The line
of credit advances up to 75% of eligible receivable with interest at 3% per
month on the outstanding balance. The line is secured by all assets of LPI.
8
<PAGE> 11
HELIONETICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(3) NOTES AND LOANS PAYABLE TO PROPONENTS AND SHAREHOLDERS
At June 30, 1996 and December 31, 1995, the Company had notes and loans
payable to proponents and shareholders totaling $2,319,000 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 Compnay, 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 June 30, 1996, notes and loans of approximately $1,200,000
payable to Ms. Barnes will be extinguished through the issuance of common stock
at its fair market value. Ms. Barnes continued to provide loans to the Company
subsequent to June 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 June 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 July 31, 1996:
9
<PAGE> 12
HELIONETICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
<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
(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
</TABLE>
(6) SUBSEQUENT EVENT
On August 26, 1996, Acculase received approval from the U.S. Food and Drug
Administration (FDA) to initiate human clinical trials with the Acculase excimer
laser in Transmyocardial Revascularization ("TMR") procedures (see press release
dated August 26, 1996 attached).
Cornell Medical Center was notified by the American Heart Association that
their paper relating to animal studies evidencing 100% patency (open channels)
was accepted for presentation and distribution at the association's November
1996 meeting to be held in New Orleans, La.
On July 22, 1996, 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 September 1996. Although
no assurance can be given, the Company expects Tri-Lite to emerge from
bankruptcy proceedings in 1996.
The lawsuit between Colyear Testamentary (prior landlord) and the Company
which was recorded at approximately $410,000 was settled for $87,500 whereby Ms.
Susan Barnes, at great personal risk, agreed to pay the amount of the settlement
by October 31, 1996 or face severe consequences.
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 $14,259,000 at June 30, 1996 compared with $13,628,000
at December 31, 1995, or a decline of $631,000. Receivables and inventories
decreased by a combined total of $325,000; trade payables and accrued
liabilities increased by $670,000. Capital expenditures are minimal and totalled
$84,000 for the six 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 Company, however, 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.
In July 1996, the Company received a federal court order, pursuant to a
litigation judgement, preventing it from access to its assets. This action,
however, did not affect the operations of the Company's operating subsidiaries.
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, however, expect this expenditures to be substantially less in 1997.
The Company, in February 1996, approved issuance of approximately 1,047,300
shares of the Company's common stock for services rendered by employees,
consultants and for professional fees. Additional shares are planned to be
issued for additional services. For the six months ended June 1996, Ms. Barnes
loaned the Company approximately $1,224,000 which included payments for Company
expenses and debt and for consulting fees. Ms. Barnes also accrued $108,000 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 $1,996 and $1,118 thousands in revenues for
the six months and three months ended June 30, 1996, compared with $18,876 and
$8,942 thousands for the corresponding period in the prior year, or a net
decrease of $16,880 and $7,824 thousands, respectively. $17,584 and $8,246
thousands of 1995 revenues for the six and three months period was attributed to
Tri-Lite. LPI, acquired from Chapter 11 proceedings in May 1995, contributed
$1,382 and $775 thousands of revenues in 1996 for the six and three months
period, respectively.
11
<PAGE> 14
HELIONETICS, INC. AND SUBSIDIARIES
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. 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 79% and 83% for the six and three months of 1996 compared
with 70% and 71% 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 $2,896 and $1,115
thousands for the reported periods in 1996 compared with $7,118 and $2,968
thousands in the same period in 1995. As a percent of revenue, these expenses
were 145% and 100% for the six and three months period in 1996; 38% and 33% for
the same period in 1995, respectively. Tri-Lite contributed $5,051 and $2,531
thousands for the six 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 milllion 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 jugement 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, Sourthern 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
Exhibit 27 -- Financial Data Schedule
Exhibit 99.1 -- Press Release dated August 26, 1996 on receipt of
FDA approval for human testing.
No reports on Form 8-K for the quarter ended June 30, 1996.
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: September 30, 1996 /s/E. Maxwell Malone
------------------------- -------------------------------
E. Maxwell Malone
Chief Executive Officer
DATE: September 30, 1996 /s/Chaim Markheim
------------------------- -------------------------------
Chaim Markheim
Vice-President
DATE: September 30, 1996 /s/Adrian Cayetano
------------------------- -------------------------------
Adrian Cayetano
Controller
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 233
<SECURITIES> 0
<RECEIVABLES> 438
<ALLOWANCES> 110
<INVENTORY> 1021
<CURRENT-ASSETS> 1610
<PP&E> 1916
<DEPRECIATION> (968)
<TOTAL-ASSETS> 6623
<CURRENT-LIABILITIES> 15869
<BONDS> 0
0
692
<COMMON> 78821
<OTHER-SE> (92026)
<TOTAL-LIABILITY-AND-EQUITY> 6623
<SALES> 1996
<TOTAL-REVENUES> 1996
<CGS> 1588
<TOTAL-COSTS> 1588
<OTHER-EXPENSES> 3038
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 142
<INCOME-PRETAX> (2650)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2650)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2650)
<EPS-PRIMARY> (0.50)
<EPS-DILUTED> 0
</TABLE>
<PAGE> 1
EXHIBIT 99.1
HELIONETICS
CONTACTS: Ray Hartman, General Manager AGENCY: Paul Keil/Andy Malone
AccuLase, Inc. 714/487-1988
619/455-7030 714/366-5803
SYMBOL: OTC--BB: HLXC
HELIONETICS/ACCULASE TMR LASER SYSTEM
RECEIVES FDA APPROVAL FOR HUMAN TESTING
First human trial expected to take place in September
at New York Hospital-Cornell Medical Center
VAN NUYS, CA, August 26, 1996 -- Helionetics, Inc. (OTC--BB: HLXC) today
said AccuLase, Inc., a majority-controlled research and development company
based in San Diego, has received approval from the U.S. Food and Drug
Administration (FDA) to initiate human clinical trials of the
Helionetics/AccuLase excimer laser in transmyocardial revascularization (TMR)
procedures.
Helionetics also said AccuLase will immediately begin to implement plans
for international commercialization of the TMR system which incorporates an
AccuLase-patented short-pulse excimer laser technology.
AccuLase general manager Raymond Hartman said a total of 30 human trials
will be conducted at New York Hospital-Cornell Medical Center, New York, and at
The Heart Institute of Good Samaritan Hospital, Los Angeles, following
institutional review board (IRB) approval at each site. Studies leading to FDA
approval of human testing were conducted at the two hospitals.
He said the first trial is expected to take place in September at New
York Hospital.
TMR is a new treatment modality for patients with coronary heart disease
in which laser channels created through the heart muscle allow oxygen-rich blood
from the interior of the main pumping chambers to flow directly to
oxygen-starved areas of the heart.
Robert Kloner, M.D., director of research of The Heart Institute of Good
Samaritan Hospital, said, "use of the Helionetics/AccuLase excimer laser in TMR
procedures looks very promising in that it doesn't cause thermal damage. We are
looking forward to beginning clinical protocols here at Good Samaritan this fall
in association with Cornell."
(more)
<PAGE> 2
Helionetics -Page 2
Dr. Kloner, a cardiologist and professor of medicine at the University of
Southern California, said the team of specialists who will conduct the clinical
studies at Good Samaritan will be headed by heart surgeon Greg Kay, M.D., and
include Peter Whittaker, Ph.D., director of The Heart Institute's laser
laboratory, and himself.
Hartman characterized FDA approval "as a major milestone in the history
of AccuLase," adding the company "is hopeful this new non-thermal, photoablative
technology will address the issues of ischemia itself as well as relief from
angina."
-30-
Certain of the above statements may be forward looking statements that involve
risks and uncertainties. In such instances, actual results could differ
materially as a result of a variety of factors, including competitive
developments and risk factors listed from time to time in the Company's SEC
reports.
