<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, 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 August 13, 1999, there were 3,779,000 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
JUNE 30, 1999
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS
- ------
<S> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 4
Notes receivable and advances from affiliates 2,441
Prepaid expenses 28
Due from related party 50
Other 13
------
TOTAL CURRENT ASSETS 2,536
INVESTMENTS IN AFFILIATES 670
OTHER ASSETS 30
------
$3,236
======
</TABLE>
PAGE 2 OF 14
<PAGE> 3
HELM CAPITAL GROUP, INC., AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
JUNE 30, 1999
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS'
- -----------------------------
(DEFICIENCY)
- -----------
<S> <C>
CURRENT LIABILITIES:
Accrued expenses $ 777
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 2,530
SUBORDINATED DEBENTURES 1,450
LONG-TERM PORTION OF BANK LOAN 400
ACCRUED EXPENSES PAYABLE IN
COMMON STOCK 575
OTHER LIABILITIES 30
---------
TOTAL LIABILITIES 4,985
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 (22,481)
---------
(1,720)
Less: 6 shares of treasury stock, at cost (29)
---------
TOTAL SHAREHOLDERS' CAPITAL (DEFICIT) (1,749)
---------
$ 3,236
=========
</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
June 30,
1999 1998
---- ----
<S> <C> <C>
REVENUES $ 57 $ 78
------- -------
COSTS, EXPENSES, AND OTHER:
Selling, general and administrative expenses 43 36
Gain on sale of securities -- (20)
Equity in net (earnings) losses of affiliates 18 (21)
Interest and debt expense 77 73
------- -------
TOTAL COSTS, EXPENSES AND OTHER 138 68
------- -------
NET (LOSS) INCOME $ (81) $ 10
======= =======
Earnings Per Share - Basic and Diluted $ (.03) $ (.01)
======= =======
Average common shares outstanding 3,779 3,729
======= =======
</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>
Six Months Ended
June 30,
1999 1998
---- ----
<S> <C> <C>
REVENUES $ 115 $ 158
------- -------
COSTS, EXPENSES, AND OTHER:
Selling, general and administrative expenses 98 80
Gain on sale of securities -- (20)
Equity in net (earnings) losses of affiliates 108 (30)
Interest and debt expense 150 128
Other -- (34)
------- -------
TOTAL COSTS, EXPENSES AND OTHER 356 124
------- -------
INCOME (LOSS) FROM
CONTINUING OPERATIONS (241) 34
DISCONTINUED OPERATIONS -- 40
CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING PRINCIPLE (20) --
------- -------
NET (LOSS) INCOME $ (261) $ 74
======= =======
Earnings Per Share - Basic and Diluted
Continuing operations $ (.08) $ (.01)
Discontinued operations -- .01
Cumulative effect of change in
accounting principle -- --
------- -------
$ (.08) $ --
======= =======
Average common shares outstanding 3,779 3,725
======= =======
</TABLE>
PAGE 5 OF 14
<PAGE> 6
HELM CAPITAL GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1999 1998
---- ----
<S> <C> <C>
Net cash used by operating activities $ (11) $ (57)
------- -------
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)
------- -------
-- (789)
------- -------
Cash flows from financing activities:
Loan from affiliate -- 250
------- -------
-- 250
------- -------
NET (DECREASE) IN CASH (11) (596)
CASH BEGINNING OF PERIOD 15 622
------- -------
CASH END OF PERIOD $ 4 $ 26
======= =======
Supplemental disclosure of cash flow information:
Cash paid for taxes $ -- $ 65
======= =======
Cash paid for interest $ 91 $ 75
======= =======
Noncash transactions:
Repayment of officer's note receivable by $ -- $ 175
exchange of preferred stock
Exchange of debentures for -- 30
Intersystem common stock
</TABLE>
PAGE 6 OF 14
<PAGE> 7
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.
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,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Income (loss) from continuing operations $ ( 81) $ 10 $(241) $ 34
Dividends on preferred stock (30) (30) (60) (60)
----- ----- ----- -----
Numerator for basic and diluted income
(loss) from continuing operations $(111) $ (20) $(301) $ (26)
===== ===== ===== =====
</TABLE>
For the three and six months ended June 30, 1999 and 1998, 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,
1999 1998 1999 1998
Shares Shares Shares Shares
------ ------ ------ ------
<S> <C> <C> <C> <C>
Stock options 437 375 437 375
Stock warrants 299 136 299 136
Shares issuable on conversion of
preferred shares 1,585 1,591 1,585 1,591
Shares issuable on conversion of
Subordinated debentures 753 798 753 798
Shares issuable on conversion of
Promissory Notes 300 -- 300 --
----- ----- ----- -----
3,374 2,900 3,374 2,900
===== ===== ===== =====
</TABLE>
PAGE 8 OF 14
<PAGE> 9
Note 3. Summarized Financial Data (in thousands):
<TABLE>
<CAPTION>
Intersystems, Inc. Three Months Six Months
(15% owned in 1999 and 16% in 1998) Ended June 30, Ended June 30,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES $ 6,324 $ 8,187 $ 15,127 $ 17,990
-------- -------- -------- --------
Operating expenses 4,282 5,787 10,404 13,013
Selling, general and administrative expenses 1,792 1,770 3,702 3,702
Interest expense (net) 471 400 1,011 835
-------- -------- -------- --------
TOTAL COST AND EXPENSES 6,545 7,957 15,117 17,550
-------- -------- -------- --------
Income (loss) from continuing
Operations (221) 230 10 440
Cumulative effect of change in
accounting principle (134) -- (133) --
-------- -------- -------- --------
Net Income (loss) $ (355) $ 230 $ (123) $ 440
======== ======== ======== ========
</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
Jan. 1, 1999 29 $ -- 3,779 $ 38 $20,723
Net Loss -- -- -- -- --
----- ----- ----- ------- -------
Balance
June 30, 1999 29 $ -- 3,779 $ 38 $20,723
====== ===== ===== ======= =======
</TABLE>
PAGE 9 OF 14
<PAGE> 10
<TABLE>
<CAPTION>
Retained
Earnings
(Deficit) Treasury Stock Total
--------- -------------- -----
<S> <C> <C> <C>
Balance
January 1, 1999 $(22,220) $ (29) $(1,488)
Net loss (261) -- (261)
-------- ----- -------
Balance
June 30, 1999 $(22,481) $ (29) $(1,749)
-------- ----- -------
</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 excess
of $750,000 arising out of alleged breaches of representations and warranties
made in connection with the sale of Interpak Terminals, Inc. The Company has
preliminarily agreed to forfeit the escrow account in full settlement of the
claim which is subject to the execution of a formal mutual release. The terms of
the release are presently being negotiated.
The escrow amount was written off in the three months ended June 30, 1999
and there was no effect on income because of previously provided liabilities.
Note 6.
The Company has agreed, subject to execution of a formal agreement, to sell
its common stock ownership interest in Teletrak Environmental Systems, Inc.,
(1,353,013 common shares) in a private sale to a third party for a cash
consideration of $200,000. The Teletrak shares are carried on the Company's
balance sheet at no value.
PAGE 10 OF 14
<PAGE> 11
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTH PERIODS ENDED JUNE 30, 1999 AND 1998
The net loss for the three months ended June 30, 1999 was $81,000 compared
to net income of $10,000 for the three months ended June 30, 1998. The primary
factors contributing to the loss in 1999 was a reduction in interest income
$21,000 due to lower rates, $20,000 gain on sale of securities in 1998 with no
comparable amount for 1999 and a $39,000 increase in equity loss of affiliates.
The equity loss in Core Capital was $50,000 in 1999 compared to a loss of
$10,000 in 1998.
SIX MONTH PERIODS ENDED JUNE 30, 1999 AND 1998
Loss from continuing operations was $241,000 for the six months ended June
30, 1999 compared to income from continuing operations of $34,000 in the 1998
period. Revenue decreased $43,000 due to lower rates, equity in loss of
affiliates increased $138,000, gain on sales of securities and other income was
$54,000 for 1998 with no comparable amount for 1999 and interest expense
increased $22,000 due to increased borrowings. Equity losses in affiliates
included an equity loss for Intersystems of $1,000 in 1999 compared with income
of $68,000 in 1998 and an equity loss in Core Capital of $107,000 in 1999
compared with $38,000 in 1998.
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 six months ended June 30, 1999 used cash of
$11,000 which reduced cash to $4,000 at June 30, 1999.
YEAR 2000 COMPLIANCE
PAGE 11 OF 14
<PAGE> 12
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 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 third
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 June 30, 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
PAGE 12 OF 14
<PAGE> 13
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 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 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 13, 1999 /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-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 4
<SECURITIES> 0
<RECEIVABLES> 2,441
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,536
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 3,236
<CURRENT-LIABILITIES> 2,530
<BONDS> 1,450
0
0
<COMMON> 38
<OTHER-SE> (1,787)
<TOTAL-LIABILITY-AND-EQUITY> 3,236
<SALES> 115
<TOTAL-REVENUES> 115
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 98
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 150
<INCOME-PRETAX> (281)
<INCOME-TAX> 0
<INCOME-CONTINUING> (281)
<DISCONTINUED> 0
<EXTRAORDINARY> (20)
<CHANGES> 0
<NET-INCOME> (261)
<EPS-BASIC> (.09)
<EPS-DILUTED> 0
</TABLE>
