<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, 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 November 12, 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
SEPTEMBER 30, 1999
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS
- ------
<S> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 16
Notes receivable and advances from affiliates 2,350
Prepaid expenses 24
Due from related party 113
Other 25
------
TOTAL CURRENT ASSETS 2,528
INVESTMENTS IN AFFILIATES 638
OTHER ASSETS 52
------
$3,218
======
</TABLE>
PAGE 2 OF 14
<PAGE> 3
HELM CAPITAL GROUP, INC., AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1999
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS'
- -----------------------------
(DEFICIENCY)
- ------------
<S> <C>
CURRENT LIABILITIES:
Accrued expenses $ 654
Advances due to affiliates 63
Notes due to related parties 370
Current portion of subordinated debentures 1,220
Bank loan 480
---------
TOTAL CURRENT LIABILITIES 2,787
SUBORDINATED DEBENTURES 1,450
ACCRUED EXPENSES PAYABLE IN
COMMON STOCK 575
OTHER LIABILITIES 35
---------
TOTAL LIABILITIES 4,847
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 (22,361)
---------
(1,600)
Less: 6 shares of treasury stock, at cost (29)
---------
TOTAL SHAREHOLDERS' CAPITAL (DEFICIT) (1,629)
---------
$ 3,218
=========
</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,
1999 1998
---- ----
<S> <C> <C>
REVENUES $ 71 $ 67
---- ----
COSTS, EXPENSES, AND OTHER:
Selling, general and administrative expenses 48 43
Gain on sale of securities (196) (74)
Equity in net (earnings) losses of affiliates 32 17
Interest and debt expense 67 62
-- --
TOTAL COSTS, EXPENSES AND OTHER (49) 48
--- --
NET INCOME $ 120 $ 19
====== ====
Earnings Per Share - Basic and Diluted $ .02 $ -
===== ===
Average common shares outstanding 3,779 3,796
====== =====
</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,
1999 1998
---- ----
<S> <C> <C>
REVENUES $186 $ 225
---- -----
COSTS, EXPENSES, AND OTHER:
Selling, general and administrative expenses 146 123
Gain on sale of securities (196) (94)
Equity in net (earnings) losses of affiliates 140 (13)
Interest and debt expense 217 190
Other - (34)
---- -----
TOTAL COSTS, EXPENSES AND OTHER 307 172
---- -----
INCOME (LOSS) FROM
CONTINUING OPERATIONS (121) 53
DISCONTINUED OPERATIONS - 40
CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING PRINCIPLE (20) -
---- -----
NET (LOSS) INCOME $ (141) $ 93
======= ====
Earnings Per Share - Basic and Diluted
Continuing operations $ (.06) $ (.01)
Discontinued operations - .01
Cumulative effect of change in
accounting principle - -
---- -----
$ (.06) $ -
======= ======
Average common shares outstanding 3,779 3,748
===== =====
</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,
1999 1998
---- ----
<S> <C> <C>
Net cash used by operating activities $ (112) $(76)
------ ----
Cash flows from investing activities:
Loans originated - (1,951)
Loan repaid - 650
Investment in affiliate - (100)
Repayment of loan to officer - 62
Loan to officer - (125)
Proceeds from sale of securities 196 100
--- ---
Cash flows from financing activities: 196 (1364)
--- -----
Increase (decrease) in notes payable
and long term debts (20) 500
Loan (to) from affiliate (63) 360
--- ---
(83) 860
--- ---
NET (DECREASE) IN CASH 1 (580)
CASH BEGINNING OF PERIOD 15 622
-- ---
CASH END OF PERIOD $ 16 $ 42
==== ====
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 - 230
Intersystem common stock
</TABLE>
PAGE 6 OF 14
<PAGE> 7
HELM CAPITAL GROUP, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 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 Nine Months
Ended September 30, Ended September 30,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Income (loss) from continuing operations $ 120 $19 $(121) $ 53
Dividends on preferred stock (30) (30) (90) (90)
--- --- --- ---
Numerator for basic and diluted income
(loss) from continuing operations $ 90 $ (11) $(211) $ (37)
==== ===== ===== =====
</TABLE>
For the three and nine months ended September 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 Nine Months
Ended September 30, Ended September 30,
1999 1998 1999 1998
Shares Shares Shares Shares
------ ------ ------ ------
<S> <C> <C> <C> <C>
Stock options 467 375 447 375
Stock warrants 299 136 299 136
Shares issuable on conversion of
preferred shares 1,585 1,585 1,585 1,585
Shares issuable on conversion of
Subordinated debentures 753 736 753 736
Shares issuable on conversion of
promissory notes 300 - 300 -
----- ----- ----- -----
3,404 2,832 3,384 2,832
===== ===== ===== =====
</TABLE>
PAGE 8 OF 14
<PAGE> 9
Note 3. Summarized Financial Data (in thousands):
<TABLE>
<CAPTION>
Intersystems, Inc. Three Months Nine Months
(15% owned in 1999 and 15% in 1998) Ended September 30, Ended September 30,
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
REVENUES $ 8,906 $ 8,599 $ 24,033 $ 26,589
-------- -------- -------- --------
Operating expenses 6,391 6,297 16,795 19,310
Selling, general and administrative expenses 1,884 1,868 5,586 5,570
Interest expense (net) 530 414 1,541 1,249
-------- -------- -------- --------
TOTAL COST AND EXPENSES 8,805 8,579 23,922 26,129
-------- -------- -------- --------
Income from operations 101 20 111 460
Cumulative effect of change in
accounting principle -- -- (133) --
-------- -------- -------- --------
Net Income (loss) $ 101 $ 20 $ (22) $ 460
======== ======== ======== ========
</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
September 30, 1999 29 $ -- 3,779 $ 38 $20,723
=== ==== ===== ======= =======
</TABLE>
PAGE 9 OF 14
<PAGE> 10
<TABLE>
<CAPTION>
Retained
Earnings Treasury
(Deficit) Stock Total
--------- ----- -----
<S> <C> <C> <C>
Balance
January 1, 1999 $(22,220) $ (29) $ (1,488)
Net loss (141) -- (141)
-------- -------- --------
Balance
September 30, 1999 $(22,361) $ (29) $ (1,629)
-------- -------- --------
</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 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. and agreed to forfeit
the escrow account in full settlement of the claim. 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.
In the third quarter of 1999, the Company sold 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 were carried on the Company's balance sheet at no value and the Company
recorded a gain of $196,000 on the sale, net of expenses.
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 SEPTEMBER 30, 1999 AND 1998
Net income the three months ended September 30, 1999 was $120,000 compared
to net income of $19,000 for the three months ended September 30, 1998. The
primary factors contributing to the increase in 1999 was a gain on the sale of
shares of an affiliate as described in Note 6.
NINE MONTH PERIODS ENDED SEPTEMBER 30, 1999 AND 1998
Loss from continuing operations was $121,000 for the nine months ended
September 30, 1999 compared to income from continuing operations of $53,000 in
the 1998 period. Revenue decreased $39,000 due to lower rates, equity in loss of
affiliates increased $153,000, gain on sales of securities was $196,000 for 1999
compared to $ 94,000 in 1998. Equity losses in affiliates included an equity
income for Intersystems of $17,000 in 1999 compared with income of $71,000 in
1998 and an equity loss in Core Capital of $157,000 in 1999 compared with
$58,000 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 15% 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 nine months ended September 30, 1999 used cash
of $112,000. Proceeds from the sale of securities provided $ 196,000 and $
83,000 was used for loans. The net effect of these amounts increased cash to $
16,000 at September 30, 1999.
PAGE 11 OF 14
<PAGE> 12
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 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 fourth
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 September 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
PAGE 12 OF 14
<PAGE> 13
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 indebtedness. 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.
Part II
Item 1. Legal Proceedings
The Company 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. in July
1997. At the closing of the sale, $ 250,000 of the purchase price was placed in
escrow to be used to satisfy legitimate indemnification claims. In August 1999,
a final settlement of this matter was negotiated within the limits of the escrow
account.
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 12, 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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 16
<SECURITIES> 0
<RECEIVABLES> 2,350
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,528
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 3,218
<CURRENT-LIABILITIES> 2,787
<BONDS> 1,450
0
0
<COMMON> 38
<OTHER-SE> (1,667)
<TOTAL-LIABILITY-AND-EQUITY> 3,218
<SALES> 186
<TOTAL-REVENUES> 186
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 146
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 217
<INCOME-PRETAX> (121)
<INCOME-TAX> 0
<INCOME-CONTINUING> (121)
<DISCONTINUED> 0
<EXTRAORDINARY> (20)
<CHANGES> 0
<NET-INCOME> (141)
<EPS-BASIC> (.06)
<EPS-DILUTED> 0
</TABLE>
