<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: June 30, 1998
Commission File Number: 1-8292
HELM CAPITAL GROUP, INC.
(Exact name of registrant as specified in character)
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 August 12, 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, AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
JUNE 30, 1998
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
ASSETS
CURRENT ASSETS:
<S> <C>
Cash and cash equivalents $ 26
Loan receivable from affiliates 1,586
Prepaid expenses 23
Due from affiliates 83
Due from officer 50
Other 18
------
TOTAL CURRENT ASSETS 1,786
Investments in Affiliates 1,114
Other Assets 27
Cash Held in Escrow, Less Reserve 125
------
$3,052
======
</TABLE>
Page 2 of 14
<PAGE> 3
HELM CAPITAL GROUP, AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
JUNE 30, 1998
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
LIABILITIES AND SHAREHOLDERS' (DEFICIENCY)
CURRENT LIABILITIES:
<S> <C>
Accrued interest $ 120
Accrued expenses 572
-------
TOTAL CURRENT LIABILITIES 692
Subordinated Debentures 2,770
Accrued Expenses Payable in
Common Stock 575
Loan from affiliate 250
Other Liabilities 36
-------
TOTAL LIABILITIES 4,323
SHAREHOLDERS DEFICIENCY (NOTE 4) (1,271)
-------
$ 3,052
=======
</TABLE>
Page 3 of 14
<PAGE> 4
HELM CAPITAL GROUP, AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
June 30,
1998 1997
------- -------
<S> <C> <C>
REVENUES $ 78 $ 6
------- -------
COSTS, EXPENSES, AND OTHER:
Selling, general and administrative expenses 36 95
Gain on sale of securities (20) (171)
Equity in net (earnings) losses of affiliates (21) (42)
Interest and debt expense 73 90
------- -------
TOTAL COSTS, EXPENSES AND OTHER 68 (28)
------- -------
INCOME (LOSS) FROM
CONTINUING OPERATIONS 10 34
DISCONTINUED OPERATIONS -- 92
------- -------
NET (LOSS) INCOME $ 10 $ 126
======= =======
Earnings Per Share - Basic and Diluted
Continuing operations $ (.01) $ --
Discontinued operations -- .04
------- -------
$ (.01) $ .04
======= =======
Average common shares outstanding 3,729 2,522
======= =======
</TABLE>
Page 4 of 14
<PAGE> 5
HELM CAPITAL GROUP, AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1998 1997
------- -------
<S> <C> <C>
REVENUES $ 158 $ 30
------- -------
COSTS, EXPENSES, AND OTHER:
Selling, general and administrative expenses 80 205
Gain on sale of securities (20) (478)
Equity in net (earnings) losses of affiliates (30) (6)
Interest and debt expense 128 181
Other (34) --
------- -------
TOTAL COSTS, EXPENSES AND OTHER 124 (98)
------- -------
INCOME FROM CONTINUING OPERATIONS 34 128
DISCONTINUED OPERATIONS 40 183
------- -------
NET INCOME $ 74 $ 311
======= =======
Earnings Per Share - Basic and Diluted
Continuing operations $ (.01) $ .03
Discontinued operations .01 .07
------- -------
$ -- $ .10
======= =======
Average common shares outstanding 3,725 2,517
======= =======
</TABLE>
Page 5 of 14
<PAGE> 6
HELM CAPITAL GROUP, AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1998 1997
------- -------
<S> <C> <C>
Net cash used by operating activities $ (57) $ (212)
------- -------
Cash flows from investing activities:
Loans originated (1,276) --
Loan repaid 650 --
Investment in affiliate (100) --
Repayment of loan to officer 62 --
Loan to officer (125) --
Proceeds from sales of securities -- 374
------- -------
(789) 374
------- -------
Cash flows from financing activities:
Increase (decrease) in notes payable and
long-term debt -- (171)
Loan from affiliate 250 --
------- -------
250 (171)
------- -------
NET (DECREASE) IN CASH (596) (9)
CASH BEGINNING OF PERIOD 622 61
------- -------
CASH END OF PERIOD $ 26 $ 52
======= =======
Supplemental disclosure of cash flow information:
Cash paid for taxes $ 65 $ --
======= =======
Noncash transactions:
Repayment of officer's note receivable by
exchange of preferred stock $ 175 --
Exchange of debentures for
Intersystem common stock 30 --
</TABLE>
Page 6 of 14
<PAGE> 7
HELM CAPITAL GROUP, AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 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.
For the three months ended June 30, 1998 and 1997, potential dilutive
securities had an anti-dilutive effect and accordingly were not
included in the calculation of diluted earnings (loss) per common
share.
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 Six Months
Ended June 30, Ended June 30,
1998 1997 1998 1997
----- ----- ----- -----
<S> <C> <C> <C> <C>
Income (loss) from continuing operations $ 10 $ 34 $ 34 $ 128
Dividends on preferred stock (30) (30) (60) (60)
----- ----- ----- -----
Numerator for basic and diluted income
(loss) from continuing operations $ (20) $ 4 $ (26) $ 68
===== ===== ===== =====
</TABLE>
For the three and six months ended June 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 Six Months
Ended June 30, Ended June 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 1,591 1,713 1,591 1,699
Shares issuable on conversion of
Subordinated debentures 798 258 798 178
------- ------- ------- -------
2,900 2,197 2,900 2,103
======= ======= ======= =======
</TABLE>
The adoption of SFAS 128 had no effect on net loss per common share
for the three and six months ended June 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
- ------------------
(16% owned in 1998 and 19% in 1997) June 30,
1998 1997
------ ------
<S> <C> <C>
NET SALES $9,803 $7,481
------ ------
Cost of sales 7,226 4,950
Selling, general and administrative expenses 1,932 1,703
Interest expense (net) 434 525
------ ------
TOTAL COST AND EXPENSES 9,592 7,178
------ ------
NET INCOME $ 211 $ 303
====== ======
</TABLE>
<TABLE>
<CAPTION>
Intersystems, Inc. Six Months Ended
- ------------------
(16% owned in 1998 and 19% in 1997) June 30,
1998 1997
------- -------
<S> <C> <C>
NET SALES $17,990 $12,965
------- -------
Cost of sales 13,013 8,501
Selling, general and administrative expenses 3,702 3,282
Interest expense (net) 835 859
------- -------
TOTAL COST AND EXPENSES 17,550 12,642
------- -------
NET INCOME $ 440 $ 323
======= =======
</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
-- -- 27 -- --
-------- -------- -------- -------- --------
Balance
June 30, 1998 30 $ -- 3,730 $ 37 $ 20,673
======== ======== ======== ======== ========
</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)
Net income 74 -- 74
-------- -------- --------
Balance
June 30, 1998 $(21,952) $ (29) $ (1,271)
======== ======== ========
</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>
Three Months Six Months
Ended Ended
June 30, 1997 June 30, 1997
<S> <C> <C>
REVENUES $ 4,626 $ 9,246
------- -------
Operating expenses 3,475 7,037
Selling, general and administrative expenses 948 1,822
Equity in affiliates (24) (49)
Interest expense 135 253
------- -------
TOTAL COST AND EXPENSES 4,534 9,063
------- -------
NET INCOME $ 92 $ 183
======= =======
</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 and is in the process of reviewing the items included in the claim. 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.
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 June 30, 1998 AND 1997
Revenues of $78,000 in the 1998 period consisted of interest income
from lending activities compared to $6,000 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 $59,000 (63%) in 1998
primarily due to reductions in salary expense.
Gain on sale of securities of $20,000 is a gain on Intersystems common
stock issued at market value to retire $30,000 principal amount of 8%
convertible subordinated debentures held by two officers of the Company. The
gain of $171,000 in 1997 represents a gain from the sale of 16,000 shares of
Unapix common stock and 50,000 shares of Intersystems common stock issued at
market to Intersystems in partial payment of advances payable.
Income from discontinued operations relates to Interpak Terminals as
described in note 5.
SIX MONTH PERIODS ENDED June 30, 1998 AND 1997
Revenues of $158,000 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 $125,000 (61%) in 1998 due
to reductions in salary expense.
Gain on sale of securities in 1998 is the gain described above for the
three months ended June 30, 1998. The gain in 1997 includes the gains described
above for the three months ended June 30, 1997 and a gain of $307,000 from the
sale of 71,200 shares of Unapix common stock in the first quarter of 1997.
Interest and debt expense decreased by $53,000 (29%) from $181,000 in 1997
to $128,000 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.
Page 12 of 14
<PAGE> 13
Impact of Inflation
Inflation has not had a significant impact on the Company's operations.
Liquidity and Capital Resources
Operating activities used cash of $57,000. Another $789,000 was used for
investing activities, primarily for loans, and $250,000 was provided by loans
from affiliates. The net activity reduced the beginning cash balance of $622,000
by $596,000 resulting in cash at June 30, 1998 of $65,000.
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.
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: August 12, 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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 26
<SECURITIES> 0
<RECEIVABLES> 1,586
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,786
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 3,052
<CURRENT-LIABILITIES> 692
<BONDS> 2,770
0
0
<COMMON> 37
<OTHER-SE> (1,308)
<TOTAL-LIABILITY-AND-EQUITY> 3,052
<SALES> 158
<TOTAL-REVENUES> 158
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 80
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 128
<INCOME-PRETAX> 34
<INCOME-TAX> 0
<INCOME-CONTINUING> 34
<DISCONTINUED> 40
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 74
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
