<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
Quarterly Report Under Section 13 or 15 (b)
of the Securities Exchange Act of 1934
For Quarter Ended: September 30, 1998
Commission File Number: 1-8292
HELM CAPITAL GROUP, INC.
(Exact name of registrant as specified in charter)
Delaware 59-0786066
State or other jurisdiction of IRS Employer
Incorporation or organization Identification No.
537 Steamboat Road
Greenwich, Connecticut 06830
(Address of principal executive offices)
203-629-1400
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrants (1) has filed all
reports required to be filed by section 13 of 15 (d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES /X/ NO / /
As of November 11, 1998, there were 3,829,000 shares of the Company's
common stock, par value $.01 per share, outstanding.
Page 1 of 14
<PAGE> 2
PART I - FINANCIAL INFORMATION
HELM CAPITAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1998
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Cash and cash equivalents $ 42
Loans receivable from affiliates 2,261
Prepaid expenses 22
Due from affiliates 71
Due from officer 50
Investments in affiliates 981
Other Assets 82
Cash Held in Escrow, Less Reserve 125
------
$3,634
======
</TABLE>
Page 2 of 14
<PAGE> 3
HELM CAPITAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1998
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<S> <C>
LIABILITIES AND SHAREHOLDERS' (DEFICIENCY)
Accrued interest $ 111
Accrued expenses 640
Due to affiliates 110
Note payable to bank 500
8% Convertible Subordinated Debentures
Due to Management 1,145
Subordinated Debentures 1,425
Accrued Expenses Payable in
Common Stock 575
Loan from affiliate 250
Other Liabilities 30
-------
TOTAL LIABILITIES 4,786
SHAREHOLDERS DEFICIENCY (NOTE 4) (1,152)
-------
$ 3,634
=======
</TABLE>
Page 3 of 14
<PAGE> 4
HELM CAPITAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
1998 1997
------- -------
<S> <C> <C>
REVENUES $ 67 $ --
------- -------
COSTS, EXPENSES, AND OTHER
Selling, general and administrative expenses 43 296
Gain on sale of securities (74) (37)
Equity in net (earnings) of affiliates 17 (43)
Increase in underlying equity of Intersystems, Inc. -- (501)
Interest and debt expense 62 94
------- -------
TOTAL COSTS, EXPENSES AND OTHER 48 (191)
------- -------
INCOME FROM CONTINUING OPERATIONS 19 191
------- -------
DISCONTINUED OPERATIONS
Income (loss) from operations of Interpak -- (88)
Gain on disposal of Interpak, net of income
taxes of $65
-- 2,324
------- -------
-- 2,236
------- -------
NET INCOME $ 19 $ 2,427
======= =======
Basic Earnings Per Share:
Continuing operations $ -- $ .06
Discontinued operations -- .86
------- -------
$ -- $ .92
======= =======
Diluted Earnings Per Share:
Continuing operations $ -- $ .04
Discontinued operations -- .53
------- -------
$ -- $ .57
======= =======
Average common shares outstanding:
Basic 3,796 2,592
======= =======
Assuming Dilution 3,796 4,211
======= =======
</TABLE>
Page 4 of 14
<PAGE> 5
HELM CAPITAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1998 1997
---- ----
<S> <C> <C>
REVENUES $ 225 $ 30
------- -------
COSTS, EXPENSES AND OTHER
Selling, general and administrative expenses 123 502
Gain on sale of securities (94) (515)
Equity in net (earnings) of affiliates (13) (49)
Increase in underlying equity of Intersystems, Inc. (501)
Interest and debt expense 190 274
Other (34) --
------- -------
TOTAL COSTS, EXPENSES AND OTHER 172 (289)
------- -------
INCOME FROM CONTINUING OPERATIONS 53 319
DISCONTINUED OPERATIONS
Income (loss) from operations of Interpak -- 95
Gain on disposal of Interpak, net of income
taxes of $65 in 1997 40 2,324
------- -------
40 2,419
------- -------
NET INCOME $ 93 $ 2,738
======= =======
Basic Earnings Per Share:
Continuing operations $ (.01) $ .09
Discontinued operations .01 .95
------- -------
$ -- $ 1.04
======= =======
Diluted Earnings Per Share:
Continuing operations $ (.01) $ .06
Discontinued operations .01 .58
------- -------
$ -- $ .64
======= =======
Average common shares outstanding:
Basic 3,748 2,541
------- -------
Assuming Dilution 3,748 4,160
======= =======
</TABLE>
Page 5 of 14
<PAGE> 6
HELM CAPITAL GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1998 1997
------- -------
<S> <C> <C>
Net cash used by operating activities $ (76) $ (424)
------- -------
Cash flows from investing activities:
Loans originated (1,951) --
Load repaid 650 --
Investment in affiliate (100) --
Repayment of loan to officer 62 --
Loan to officer (125) --
Proceeds from sales of securities 100 474
------- -------
(1,364) 474
------- -------
Cash flows from financing activities:
Increase (decrease) in notes payable
and long-term debt 500 (171)
Loan from affiliates 360 --
------- -------
860 (171)
------- -------
NET (DECREASE) IN CASH (580) (121)
CASH BEGINNING OF PERIOD 622 155
------- -------
CASH END OF PERIOD $ 42 $ 34
======= =======
Supplemental disclosure of cash flow information:
Cash paid for taxes $ 65 $ 6
======= =======
Noncash transactions:
Repayment of officer's note receivable by
exchange of preferred stock $ 175 --
Exchange of debentures for
Intersystem and Helm common stock 230 --
</TABLE>
Page 6 of 14
<PAGE> 7
HELM CAPITAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
Note 1. Management believes the accompanying unaudited condensed consolidated
financial statements of Helm Capital Group, Inc. and subsidiaries (the
Company) include all adjustments (consisting of only normal recurring
accruals) required to present fairly the financial statements for the
periods presented. The results of operations for any interim period are
not necessarily indicative of the annual results of operations.
Note 2 - Earnings (Loss) Per Share
Effective for the year ended December 31, 1997, the Company adopted
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings
Per Share" ("SFAS 128"). In accordance with SFAS 128, the Company is
required to provide basic and dilutive earnings (loss) per common share
information.
The basic earnings (loss) per common share is computed by dividing the
net income (loss) available to common shareholders by the weighted
average number of common shares outstanding.
Diluted earnings (loss) per common share is computed by dividing the
net income (loss) available to common shareholders, adjusted on an as
if converted basis, by the weighted average number of common shares
outstanding plus potential dilutive securities.
Page 7 of 14
<PAGE> 8
The following illustrates the components of income (loss) from continuing
operations utilized in the computation of earnings (loss) per share (in
thousands):
<TABLE>
<CAPTION>
Three Months Nine Months
Ended Ended
September 30, September 30,
-------------- --------------
1998 1997 1998 1997
----- ----- ----- -----
<S> <C> <C> <C> <C>
Income (loss) from continuing operations $ 19 $ 191 $ 53 $ 319
Dividends on preferred stock (30) (30) (90) (90)
----- ----- ----- -----
Numerator for basic income (loss)
from continuing operations $ (11) $ 161 $ (37) $ 229
===== ===== ===== =====
</TABLE>
For the three and nine months ended September 30, 1998 and 1997,
certain securities were not included in the calculation of diluted earnings
because of their anti-dilutive effect, those securities are as follows (in
thousands):
<TABLE>
<CAPTION>
Three Months Nine Months
Ended Ended
September 30, September 30,
------------- -------------
1998 1997 1998 1997
Shares Shares Shares Shares
------ ------ ------ ------
<S> <C> <C> <C> <C>
Stock options 375 90 375 90
Stock warrants 136 136 136 136
Shares issuable on conversion of
preferred shares 1,585 50 1,585 50
Shares issuable on conversion of
Subordinated debentures 736 238 736 238
----- ----- ----- -----
2,832 514 2,832 514
===== ===== ===== =====
</TABLE>
The adoption of SFAS 128 had no effect on net income per common share
for the three and nine months ended September 30, 1997, accordingly, no
restatement was necessary.
Page 8 of 14
<PAGE> 9
Note 3. Summarized Financial Data (in thousands):
<TABLE>
<CAPTION>
Intersystems, Inc. Three Months Ended
(15% owned in 1998 and 19% in 1997) September 30,
1998 1997
------ ------
<S> <C> <C>
NET SALES $8,599 $8,095
------ ------
Cost of sales 6,297 5,676
Selling, general and administrative expenses 1,868 1,746
Interest expense (net) 414 352
------ ------
TOTAL COST AND EXPENSES 8,579 7,774
------ ------
NET INCOME $ 20 $ 321
====== ======
</TABLE>
<TABLE>
<CAPTION>
Intersystems, Inc. Nine Months Ended
(15% owned in 1998 and 19% in 1997) September 30,
1998 1997
------- -------
<S> <C> <C>
NET SALES $26,589 $21,060
------- -------
Cost of sales 19,310 14,177
Selling, general and administrative expenses 5,570 5,027
Interest expense (net) 1,249 1,211
------- -------
TOTAL COST AND EXPENSES 26,129 20,415
------- -------
NET INCOME $ 460 $ 645
======= =======
</TABLE>
Page 9 of 14
<PAGE> 10
Note 4. Stockholders Equity (in thousands)
<TABLE>
<CAPTION>
Common Stock Additional
Preferred Stock $.01 par value Paid in
Shares Amount Shares Amount Capital
------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C>
Balance 33 $ -- 3,703 $ 37 $ 20,848
Jan. 1, 1998
Preferred stock
received from
officers in
connection with
retirement of debt (3) -- -- -- (175)
Common stock issued -- -- 127 1 99
-------- -------- -------- -------- --------
Balance
September 30, 1998 30 $ -- 3,830 $ 38 $ 20,772
-------- -------- -------- -------- ========
</TABLE>
<TABLE>
<CAPTION>
Retained
Earnings
(Deficit) Treasury Stock Total
--------- -------------- -----
<S> <C> <C> <C>
Balance $(22,026) $ (29) $ (1,170)
January 1, 1998
Preferred stock received
from officers in
connection with retirement
of debt -- -- (175)
Common stock issued -- -- 100
Net income 93 -- 93
-------- -------- --------
Balance
September 30, 1998 $(21,933) $ (29) $ (1,152)
-------- -------- --------
</TABLE>
Page 10 of 14
<PAGE> 11
Note 5.
On July 31, 1997, the Company's subsidiary, Interpak Holdings, Inc.,
sold its Interpak Terminals units, located in Houston, Texas and Edison, New
Jersey to Katoen Natie N.V., a privately-held Belgium corporation, for a cash
purchase price of $2.2 million of which $250,000 is held in escrow until July
31, 2000.
The results of Interpak have been classified as discontinued operations
in the accompanying financial statements as follows (in thousands):
<TABLE>
<CAPTION>
Month Seven Months
Ended Ended
July 31, 1997 July 31, 1997
------------- -------------
<S> <C> <C>
REVENUES $ 1,363 $10,608
TOTAL COST AND EXPENSES 1,451 10,513
------- -------
NET INCOME (LOSS) $ (88) $ 95
======= =======
</TABLE>
In the first quarter of 1998 the Company received additional proceeds
of $40,000 upon settlement of an Interpak liability.
In July 1998, the purchaser asserted claims for indemnification under
the purchase agreement in the amount of $690,000. The company has disputed the
claims made by the purchaser. After review and discussion, the purchase
agreement provides for an arbitration proceeding to determine the outcome of
unresolved items.
At the closing of the transaction, $250,000 of the purchase price was
held in escrow and $125,000 was reserved against it for possible claims.
Note 6.
In September 1998, the Company borrowed $500,000 from a commercial
bank. The loan is payable $100,000 in September 1999 and $400,000 in September
2000, bears interest at the prime rate, and is guaranteed by two officers of
the Company. The Company has also pledged 600,000 shares of Intersystems common
stock as collateral for the loan.
Note 7.
During the third quarter of 1998 an officer of the Company purchased a
$100,000 Unapix Entertainment, Inc. 10% convertible subordinated debenture held
by a subsidiary for its cost of $100,000. The proceeds were advanced to an
affiliate for a participation in commercial loans at an interest rate of 15%
per annum. An officer advanced the Company $225,000 at an annual interest rate
of 10%, which was in turn advanced to an affiliate, for a participation in
commercial loans, at an interest rate of 15% per annum. Prior to September 30,
1998, $180,000 was repaid by the affiliate and the remaining $45,000 due at
September 30, 1998 is payable to two officers.
Page 11 of 14
<PAGE> 12
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTH PERIODS ENDED SEPTEMBER 30, 1998 AND 1997
Revenues of $67,000 in the 1998 period consisted of interest income
from lending activities. No revenue was earned in the 1997 period. Future
revenues are expected to be derived primarily from the Company's focus on
financial services.
General and administrative expenses decreased by $253,000 in 1998
primarily due to reductions in salary expense and other expenses not required
for the Company's current level of operations.
Gain on sale of securities of $74,000 is a gain on Intersystems common
stock issued at market value to retire $100,000 principal amount of 9 1/2%
convertible subordinated debentures.
The gain of $37,000 in 1997 represents a gain from the sale of 8,200
shares of Unapix common stock. The income in underlying equity of Intersystems
of $501,000 in 1997 represents the Company's share of the increase in
Intersystems equity arising from the elimination of a redemption provision on an
issue of its common stock.
Interest and debt expense decreased by $32,000 (34%) due to reductions
in outstanding debt.
Income from discontinued operations in 1997 relates to Interpak
Terminals as described in note 5.
NINE MONTH PERIODS ENDED SEPTEMBER 30, 1998 AND 1997
Revenues of $225,000 in the 1998 period consisted of interest income
from lending activities compared to $30,000 in 1997 which consisted of
participating interests in seismic data sales. Future revenues are expected to
be derived primarily from the Company's focus on financial services.
General and administrative expenses decreased by $379,000 (75%) in 1998
due to reductions in salary expense and other expenses not required for the
Company's current level of operations.
Gain on sale of securities in 1998 is the gain described above for the
three months ended September 30, 1998 and a $20,000 gain on Intersystems common
stock issued at market value in the second quarter to retire 30,000 principal
amount of 8% convertible subordinated debentures held by two officers of the
Company. For the nine months ended September 30, 1997, the Company sold 79,400
shares of Unapix common stock at a gain of $415,000 and issued 70,060 shares of
Intersystems common stock to Intersystems in partial payment of advances for a
gain of $100,000.
Page 12 of 14
<PAGE> 13
Interest and debt expense decreased by $84,000 (31%) from $274,000 in
1997 to $190,000 in 1998 due to reductions in outstanding debt.
Other income in 1998 consists primarily of royalty income from an
affiliate.
Income from discontinued operations relates to Interpak Terminals. In
July 1998 the purchaser of Interpak Terminals asserted claims for
indemnification under the purchase agreement - see Note 5.
Impact of Inflation
Inflation has not had a significant impact on the Company's operations.
Liquidity and Capital Resources
Operating activities used cash of $76,000 for the nine months ended
September 30, 1998. Another $1,364,000 was used for investing activities,
primarily for loans, and $860,000 was provided by loans. The net activity
reduced the beginning cash balance of $622,000 by $580,000 resulting in cash at
September 30, 1998 of $42,000.
Future liquidity sources will consist of interest income from lending
activities, reimbursement of general and administrative expenses from
subsidiaries and affiliates, and possible sales of investment securities. On a
longer term basis, the Company may be required to seek additional liquidity
through debt and equity offerings of the Company and/or its subsidiaries or
affiliates.
Year 2000
The Company plans to begin a study of its computer hardware and vendor
supplied software to determine their compliance with year 2000 issues. The study
will also include an assessment of year 2000 compliance of third party entities
with which the Company has relationships.
PART II
Item 4. Submission of Matters to a Vote of Security-Holders
On July 9, 1998, the Company held its 1998 Annual Meeting of
Shareholders, at which the shareholders elected Herbert M. Pearlman, David S.
Lawi, Joseph J. Farley, William Lerner, John Stieglitz and Walter M. Craig, Jr.
to serve as directors until the 1999 annual meeting of shareholders and until
their successors are elected. The holders of record of 3,195,142 shares of
common stock of the Company out of a total of 3,743,941 shares of common stock
outstanding on the record date were present, in person or by proxy, at the
annual meeting of shareholders. Not less than 3,156,692 shares were voted in
favor of the election of each of the 6 nominees as director and not more than
38,450 shares were withheld with respect to any of the 6 nominees.
Page 13 of 14
<PAGE> 14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed in its behalf by the
undersigned thereunto duly authorized.
HELM CAPITAL GROUP, INC.
Date: November 11, 1998 /s/ Daniel T. Murphy
Daniel T. Murphy
Executive Vice President
Chief Accounting and
Financial Officer
Page 14 of 14
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 42
<SECURITIES> 0
<RECEIVABLES> 2,261
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 3,634
<CURRENT-LIABILITIES> 0
<BONDS> 2,570
0
0
<COMMON> 38
<OTHER-SE> (1,190)
<TOTAL-LIABILITY-AND-EQUITY> 3,634
<SALES> 225
<TOTAL-REVENUES> 225
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 123
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 190
<INCOME-PRETAX> 53
<INCOME-TAX> 0
<INCOME-CONTINUING> 53
<DISCONTINUED> 40
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 93
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
