<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: March 31, 1999
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 May 12, 1999, there were 3,779,000 shares of the Company's common
stock, par value $.01 per share, outstanding.
PAGE 1 OF 13
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PART I - FINANCIAL INFORMATION
HELM CAPITAL GROUP, INC., AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
MARCH 31, 1999
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 19
Notes receivable and advances from affiliates 2,451
Prepaid expenses 25
Due from related party 50
Other 18
------
TOTAL CURRENT ASSETS 2,563
INVESTMENTS IN AFFILIATES 688
OTHER ASSETS 36
CASH HELD IN ESCROW, LESS RESERVE 125
------
$3,412
======
</TABLE>
PAGE 2 OF 13
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HELM CAPITAL GROUP, INC., AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
MARCH 31, 1999
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<S> <C>
LIABILITIES AND SHAREHOLDERS'
(DEFICIENCY)
CURRENT LIABILITIES:
Accrued expenses $ 870
Advances due to affiliates 63
Notes due to related parties 370
Current portion of subordinated debentures 1,220
Current portion of bank loan 100
--------
TOTAL CURRENT LIABILITIES 2,623
SUBORDINATED DEBENTURES 1,450
LONG-TERM PORTION OF BANK LOAN 400
ACCRUED EXPENSES PAYABLE IN
COMMON STOCK 575
OTHER LIABILITIES 32
--------
TOTAL LIABILITIES 5,080
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' CAPITAL (DEFICIT):
Preferred stock, $.01 par value: shares
authorized 5,000; issued and outstanding 29 shares --
Common stock, $.01 par value: shares
authorized 15,000; issued 3,779 shares 38
Additional paid-in capital 20,723
Deficit (22,400)
--------
(1,639)
Less: 6 shares of treasury stock, at cost (29)
--------
TOTAL SHAREHOLDERS' CAPITAL (DEFICIT) (1,668)
--------
$ 3,412
========
</TABLE>
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HELM CAPITAL GROUP, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1999 1998
------- -------
<S> <C> <C>
REVENUES $ 58 $ 80
------- -------
COSTS, EXPENSES, AND OTHER:
Selling, general and administrative expenses 55 44
Equity in net (earnings) losses of affiliates 90 (9)
Interest and debt expense 73 55
Other -- (34)
------- -------
TOTAL COSTS, EXPENSES AND OTHER 218 56
------- -------
INCOME (LOSS) FROM CONTINUING
OPERATIONS (160) 24
DISCONTINUED OPERATIONS -- 40
CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING PRINCIPLE (20) --
------- -------
NET (LOSS) INCOME $ (180) $ 64
======= =======
Earnings Per Share - Basic and Diluted
Continuing operations $ (.05) $ --
Discontinued operations -- .01
Cumulative effect of change
in accounting principle -- --
------- -------
$ (.05) $ .01
======= =======
Average common shares outstanding 3,779 3,720
======= =======
</TABLE>
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HELM CAPITAL GROUP, INC., AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1999 1998
----- -----
<S> <C> <C>
Net cash provided by (used by) operating activities $ 4 $ (82)
----- -----
Cash flows from investing activities:
Loans originated -- (898)
Loan repaid -- 650
Investment in affiliate -- (100)
Loan to officer -- (125)
----- -----
-- (473)
----- -----
NET INCREASE (DECREASE) IN CASH 4 (555)
CASH BEGINNING OF PERIOD 15 622
----- -----
CASH END OF PERIOD $ 19 $ 67
===== =====
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
</TABLE>
PAGE 5 OF 13
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HELM CAPITAL GROUP, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999
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
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.
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The following illustrates income (loss) utilized in the computation of earnings
(loss) per share (in thousands):
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1999 1998
----- -----
<S> <C> <C>
Income (loss) from continuing operations $(160) $ 24
Dividends on preferred stock (30) (30)
----- -----
Numerator for basic and diluted (loss)
from continuing operations $(190) $ (6)
===== =====
</TABLE>
For the three months ended March 31, 1999 and 1998, certain securities
were not included in the calculation of diluted earnings because of their
antidilutive effect. Those securities are as follows (shares in thousands):
<TABLE>
<CAPTION>
1999 1998
----- -----
<S> <C> <C>
Stock options 437 243
Stock warrants 299 299
Shares issuable on conversion of
preferred shares 1,585 1,591
Shares issuable on conversion of
subordinated debentures 753 798
Shares issuable on conversion of
promissory notes 300 --
----- -----
3,374 2,931
===== =====
</TABLE>
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<PAGE> 8
Note 3. Summarized Financial Data (in thousands):
<TABLE>
<CAPTION>
Intersystems, Inc. Three Months Ended
(15 % owned in 1999 and 16% in 1998) March 31,
1999 1998
------- -------
<S> <C> <C>
REVENUES $ 6,324 $ 8,187
------- -------
Operating expenses 4,282 5,787
Selling, general and administrative expenses 1,792 1,770
Interest expense (net) 471 400
------- -------
TOTAL COST AND EXPENSES 6,545 7,957
------- -------
Income (loss) from continuing
Operations (221) 230
Cumulative effect of change in
accounting principle (134) --
------- -------
Net Income (loss) $ (355) $ 230
======= =======
</TABLE>
Note 4. Stockholders (Deficit) (in thousands)
<TABLE>
<CAPTION>
Common Stock Additional
Preferred Stock $.01 par value Paid
Shares Amount Shares Amount in Capital
------ ------ ------ ------ ----------
<S> <C> <C> <C> <C> <C>
Balance 29 $ -- 3,779 $ 38 $20,723
Jan. 1, 1999
Net Loss -- -- -- -- --
-- ----- ----- ------- -------
Balance
March 31, 1999 29 $ -- 3,779 $ 38 $20,723
== ===== ===== ======= =======
</TABLE>
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<TABLE>
<CAPTION>
Retained
Earnings
(Deficit) Treasury Stock Total
--------- -------------- -----
<S> <C> <C> <C>
Balance $(22,220) $ (29) $ (1,488)
January 1, 1999
Net loss (180) -- (180)
-------- -------- --------
Balance
March 31, 1999 $(22,400) $ (29) $ (1,668)
======== ======== ========
</TABLE>
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 U.S.A., Inc., a subsidiary of 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.
In the first quarter of 1998 the Company received additional proceeds of
$40,000 upon settlement of an Interpak liability which is reflected as income
from discontinued operations..
The company has received a claim for indemnification as guarantor in the
amount of approximately $700,000 arising out of alleged breaches of
representations and warranties made in connection with the sale of Interpak
Terminals, Inc. Management believes that this claim is overstated and is
endeavoring to settle the matter, without the necessity of arbitration, within
the escrow amount. At the present time, it appears that the matter will be
referred to arbitration. Management intends to mount a vigorous defense. No
assurance can be given, however, that management will be successful in this
effort.
PAGE 9 OF 13
<PAGE> 10
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTH PERIODS ENDED MARCH 31, 1999 AND 1998
Loss from continuing operations was $160,000 for the three months ended
March 31, 1999 compared to income of $24,000 in the three months ended March 31,
1998. The primary factor contributing to the loss in 1999 was equity in losses
of affiliates amounting to $90,000 in 1999 compared to equity in earnings of
$9,000 in 1998. Intersystems equity loss was $33,000 in 1999 compared to income
of $37,000 in 1998 (see note 3 to the financial statements) and an equity loss
in Core Capital of $57,000 in 1999 compared to a loss of $28,000 in 1998. The
1998 period also benefited from other income of $34,000 which consisted
primarily of royalty income from an affiliate.
Income from discontinued operations in 1998 relates to Interpak Terminals
as described in Note 5.
Cumulative effect of change in accounting principle in 1999 is the
Company's equity share of Intersystems change in accounting principle as
indicated in note 3.
Impact of Inflation
Inflation has not had a significant impact on the Company's operations.
Liquidity and Capital Resources
Operating activities for the three months ended March 31, 1999 provided
cash of $4,000 which increased cash to $19,000 at March 31, 1999.
YEAR 2000 COMPLIANCE
The Company's Compliance Program. Computer equipment using microprocessors that
use only two digits to identify a year may be unable to accurately process data
after December 31, 1999. In early 1998, the Company initiated its Year 2000
(Y2K) compliance project. The evaluation addressed internal hardware and
software, key vendors, customers and significant third parties at all Company
locations.
The Company's State of Readiness. In its office operations, the Company utilizes
recently purchased computer hardware and software which has been deemed Y2K
compliant. In the
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<PAGE> 11
fourth quarter of 1997, Helm replaced all Greenwich office computers with
compliant equipment and software.
Mezzanine has undertaken an analysis of all Spring Lake equipment and software
to determine Y2K compliance. The Company does not expect that the cost, if any,
to complete its testing and to replace parts for those machines not yet tested
will be material to the financial condition of the Company. The Company
estimates that all such equipment will be tested and in compliance by the second
quarter of 1999.
The Company is also evaluating the readiness of its third party supply chains
and major customers. The Company has requested Y2K compliance certification from
each of its major vendors, suppliers and customers. To date, no non-compliance
issues have arisen which pose a material problem for the Company.
Risks of Non-compliance and Contingency Plans. The major factors which pose the
greatest Y2K risks for the Company if the implementation of the Y2K compliance
program is not successful is the reliance on key third party vendors and major
customers. If those parties do not achieve compliance, the Company's operational
subsidiaries could experience interruption in production scheduling. Based on
initial information received from our vendors and customers, the Company does
not expect such delays.
The estimated costs of, and timetable for, becoming Y2K compliant constitute
forward looking statements as defined in the Private Securities Litigation
Reform Act of 1995. Investors are cautioned that such estimates are based upon
numerous assumptions by management, including accuracy or representations made
by third parties concerning their compliance with Y2K issues, and other factors.
The estimated costs of Y2K compliance also do not give effect to any future
corporate acquisitions or divestitures made by the Company or its subsidiaries.
FORWARD LOOKING STATEMENTS
This quarterly report for the period ended March 31, 1999 as well as
other public documents of the Company contains forward-looking statements which
involve known and unknown risks, uncertainties and other factors which may cause
the actual results, performance or achievement of the Company to be materially
different from any future results, performance or achievements expressed or
implied by such forward- looking statements. Such statements include, without
limitation, the Company's expectations and estimates as to future financial
performance, cash flows from operations, capital expenditures and the
availability of funds from refinancing of indebtness. Readers are urged to
consider statements which use the terms "believes', "intends", "expects",
"plans", "estimates", "anticipated" or "anticipates" to be uncertain and
forward-looking. In addition to other factors that may be discussed in the
company's filings with the Securities and Exchange Commission, including this
report, the following factors, among others, could cause the Company's actual
results to differ materially from those expressed in any forward-looking
statement made by the Company: (i) general
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economic and business conditions, acts of God and natural disasters, as well as
the demand for the Company's services, or the ability of the Company to provide
such services; (ii) the insolvency or failure to pay its debts by a significant
creditor of the Company or its subsidiaries or affiliates, or the inadequacy or
uncollectibility of any collateral pledged to secure such creditor's debts to
the Company or its subsidiaries or affiliates; (iii) increased competition; (iv)
changes in customer preferences and the inability of the Company's subsidiaries
of affiliates to develop and introduce new services to accommodate these
changes; and (v) the maturing of debt at the Company, subsidiary or affiliate
level and the inability of the Company, the subsidiary or affiliate to raise
capital to repay or refinance such debt on favorable terms, or the insufficiency
of collateral pledged to secure any such debt.
PAGE 12 OF 13
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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: May 12, 1999 /s/ Daniel T. Murphys
------------------------
Daniel T. Murphy
Executive Vice President
Chief Accounting and
Financial Officer
PAGE 13 OF 13
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 19
<SECURITIES> 0
<RECEIVABLES> 2,451
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,563
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 3,412
<CURRENT-LIABILITIES> 2,623
<BONDS> 1,450
38
0
<COMMON> 0
<OTHER-SE> (1,706)
<TOTAL-LIABILITY-AND-EQUITY> 3,412
<SALES> 58
<TOTAL-REVENUES> 58
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 55
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 73
<INCOME-PRETAX> (160)
<INCOME-TAX> 0
<INCOME-CONTINUING> (160)
<DISCONTINUED> 0
<EXTRAORDINARY> (20)
<CHANGES> 0
<NET-INCOME> (190)
<EPS-PRIMARY> (.05)
<EPS-DILUTED> 0
</TABLE>
