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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OF 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1997
COMMISSION FILE NUMBER 1-8292
HELM CAPITAL GROUP, INC.
(FORMERLY HELM RESOURCES, INC.)
(Exact name of registrant as specified in character)
Delaware 59-0786066
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number )
537 Steamboat Road
Greenwich, CT 06830
(Address of principal executive offices)
203-629-1400
(Registrant s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to filed by section 13 or 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, 1997 there were 2,791,389 shares of the Company's common
stock, par value $.01 per share, outstanding.
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PART I- FINANCIAL INFORMATION
HELM CAPITAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1997
(IN THOUSANDS)
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $1,716
Prepaid expenses 12
------
TOTAL CURRENT ASSETS 1,728
INVESTMENTS IN AFFILIATES 740
OTHER ASSETS 53
CASH HELD IN ESCROW, LESS RESERVE 125
------
$2,646
======
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HELM CAPITAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1997
(IN THOUSANDS)
(UNAUDITED)
LIABILITIES AND SHAREHOLDERS' (DEFICIENCY)
CURRENT LIABILITIES:
Notes payable to affiliates $ 110
Accrued interest 323
Accrued expenses 544
-------
TOTAL CURRENT LIABILITIES 977
SUBORDINATED DEBENTURES 2,969
ACCRUED EXPENSES PAYABLE IN COMMON STOCK 563
OTHER LIABILITIES 362
TOTAL LIABILITIES 4,871
SHAREHOLDERS DEFICIENCY (NOTE 4) (2,225)
-------
$ 2,646
=======
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HELM CAPITAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
Three Months Ended
September 30, 1997
------------------------
1997 1996
------- -------
REVENUES $ 1,363 $ 4,119
------- -------
COSTS, EXPENSES AND OTHER:
Operating expenses 1,295 3,316
Selling, general and administrative
expenses 419 1,056
Gain on sale of securities (37) (192)
Gain on sale of Interpak (2,324) --
Equity in net (earnings) of
affiliates (51) (30)
Increase in underlying equity
of Intersystems, Inc. (501) (18)
Interest and debt expense 135 249
Non recurring warehouse
reorganization expense -- 254
TOTAL COSTS, EXPENSES AND OTHER (1,064) 4,635
------- -------
NET INCOME(LOSS) $ 2,427 $ (516)
======= =======
Earnings(loss) Per Share
Primary $ .92 $ (.23)
======= =======
Fully Diluted .58 --
======= =======
Average common shares outstanding
Primary 2,592 2,459
======= =======
Fully Diluted 4,211 --
======= =======
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HELM CAPITAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
Nine Months Ended
September 30,1997
-----------------
1997 1996
---- -----
REVENUES $ 10,638 $ 13,996
-------- --------
COSTS, EXPENSES, AND OTHER:
Operating Expenses 8,330 10,753
Selling, general and
administrative expenses 2,449 3,116
Gain on sale of securities (515) (418)
Gain on sale of Interpak (2,324) --
Equity in net (earnings) losses
of affiliates (107) (22)
Increase in underlying equity of
Intersystems, Inc. (501) (60)
Interest and debt expense 568 675
Provision for settlement of
litigation -- 275
Non recurrring warehouse
reorganization expense -- 254
-------- --------
TOTAL COSTS, EXPENSES AND OTHER 7,900 14,573
-------- --------
INCOME (LOSS) FROM CONTINUING OPERATIONS 2,738 (577)
DISCONTINUED OPERATIONS OF AFFILIATE -- (168)
-------- --------
NET INCOME (LOSS) $ 2,738 $ (745)
======== ========
Primary Earnings Per Share:
Continuing operations $ 1.04 $ (.28)
Discontinued operations -- (.07)
-------- --------
$ 1.04 $ (.35)
======== ========
Fully Diluted Earnings Per Share $ .66 --
======== ========
Average common shares outstanding
Primary 2,541 2,453
======== ========
Fully Diluted 4,160 --
======== ========
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HELM CAPITAL GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
Nine Months Ended
September 30, 1997
------------------
1997 1996
------- -----
Net cash provided by (used in )
operating activities $ (424) $ 343
------- -----
Cash flows from investing activities:
Proceeds from sale of Interpak Terminals 1,950 --
Decrease in investments
in and due from affiliates -- 227
Proceeds from sales of securities 411 85
Additions to property, plant and
equipment -- (480)
------- -----
2,361 (168)
------- -----
Cash flows from financing activities:
Increase in due to affiliate -- 406
(Decrease) in notes payable
and long-term debt (282) (951)
------- -----
(282) (545)
------- -----
NET INCREASE(DECREASE) IN CASH 1,655 (370)
CASH BEGINNING OF PERIOD 61 434
------- -----
CASH END OF PERIOD $ 1,716 $ 64
======= =====
Cash paid during the period for:
Interest $ 128 $ 305
Taxes -- 2
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HELM CAPITAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
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. Primary earnings per share is computed by dividing earnings, after
deducting the preferred stock dividend requirements of $31,600 and
$94,800 in the three month and nine month periods, by the average
common shares outstanding during each period. Fully diluted earnings
per share for 1997 assumes conversion of series A and B 8% cumulative
convertible preferred stock after adding back the preferred dividend
requirements.
Note 3. Summarized Financial Data (in thousands):
Intersystems, Inc. Three Months Ended
(19% owned in 1997 and 24% in 1996) September 30, 1997
1997 1996
------ ------
REVENUES $8,095 $5,855
------ ------
Operating expenses 5,676 4,229
Selling, general and administrative
expenses 1,746 1,394
Interest expense (net) 352 166
------ ------
TOTAL COST AND EXPENSES 7,774 5,789
------ ------
NET INCOME $ 321 $ 66
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HELM CAPITAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
Nine Months Ended
September 30, 1997
------------------
1997 1996
------- --------
REVENUES $21,060 $ 14,826
------- --------
Operating expenses 14,177 10,453
Selling, general and administrative
expenses 5,027 3,980
Settlement of note receivable-sale
of trading business -- 48
Interest expense (net) 1,211 469
------- --------
TOTAL COST AND EXPENSES 20,415 14,950
------- --------
INCOME (LOSS) FROM CONTINUING OPERATIONS 645 (124)
DISCONTINUED OPERATIONS -- (730)
------- --------
NET INCOME (LOSS) $ 645 $ (854)
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Note 4. Stockholders Equity (in thousands)
Common Stock Additional
Preferred Stock $ .01 par value Paid
Shares Amount Shares Amount in capital
------ ------ ------ ------ ----------
Balance
Jan. 1, 1997 37 $-- 2,501 $ 25 $19,852
Preferred
stock received
from officers
in connection
with retirement
of debt (6) -- (322)
Common stock
issued -- -- 232 2 148
--- --- ------ ----- -------
Balance
September 30, 1997 31 $-- 2,733 $ 27 $19,678
--- --- ------ ----- -------
Unrealized gain Retained
on available for Earnings Treasury
sale securities (Deficit) Stock Total
--------------- --------- ----- -----
Balance
January 1, 1997 $ 315 $(24,639) $(29) $(4,476)
Preferred
stock received
from officers
in connection
with retirement
of debt -- -- -- (322)
Common stock
issued -- -- -- 150
Change in unrealized
gain on available
for sale securities (315) -- -- (315)
Net income -- 2,738 -- 2,738
----- -------- ---- -------
Balance
September 30, 1997 $ -- $(21,901) $(29) $(2,225)
----- -------- ---- -------
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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.
Interpak had sales of $1,363,000 for the month ended July 31, 1997;
$4,034,0000 for the quarter ended September 30, 1996; $10,608,000 for the seven
months ended July 31, 1997 and $13,842,000 for the nine months ended September
30, 1996.
Summarized Financial Data (in thousands):
Interpak, Inc.
Three
Month Months
Ended Ended
July 31, September 30,
1997 1996
------- -------
REVENUES $ 1,363 $ 4,097
------- -------
Operating expenses 1,295 3,062
Selling, general and administrative
expenses 123 959
Equity in affiliates (8) --
Non recurring warehouse reorganization
expense -- 254
Interest expense 41 132
------- -------
TOTAL COST AND EXPENSES 1,451 4,407
------- -------
NET INCOME (LOSS) $ (88) $ (310)
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Summarized Financial Data (in thousands):
Interpak, Inc.
Seven Nine
Months Months
Ended Ended
July 31, September 30,
1997 1996
-------- --------
REVENUES $ 10,608 $ 13,904
-------- --------
Operating expenses 8,330 10,885
Selling, general and administrative
expenses 1,947 2,709
Equity in affiliates (58) (66)
Expense related to settlement of
lawsuit -- 254
Non recurring warehouse reorganization
expense -- 250
Interest expense (net) 294 345
-------- --------
TOTAL COST AND EXPENSES 10,513 14,377
-------- --------
NET INCOME (LOSS) $ (95) $ (473)
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Note 6.
During the three months ended September 30, 1996 an officer of the company
purchased 25,000 shares of common stock of Unapix Entertainment, Inc. and 40,000
shares of common stock of Professional Financial Services, Inc. from the
Company, at market value. The purchase price was paid by surrender of $200,000
principal amount of senior subordinated notes due to him. The Company realized a
gain from the transaction of $177,000 which is included in gain on sale of
securities. In addition, the Company sold 10,000 shares of Intersystems common
stock for a gain of $15,000.
During the nine months ended September 30, 1996, the Company sold 65,000
shares of Intersysytems common stock at a gain of $106,000 and had an additional
gain of $79,000 from the sales of 17,152 common shares of Professional Financial
Services, Inc. , 4,783 common shares of Unapix Entertainment, Inc., 14,350
common shares of Intersystems and 86,098 warrants, which expire in 2006, to
purchase a like number of shares of Helm common stock at $1.25 per share, all at
market value to another officer of the company in exchange for $91,250 principal
amount of 8% debentures and accrued interest thereon of $16,203.
During the three months ended September 30, 1997, The Company sold 8,200
shares of Unapix common stock at a gain of $37,000.
During the nine months ended September 30, 1997, the Company sold 79,400
shares of Unapix common stock at a gain of $415,000 and 70,060 shares of
Intersystems common stock issued at market to Intersystems in partial payment of
advances at a gain of $100,000.
Note 7.
On October 30, 1997 the Company commenced an exchange offer to exchange
its outstanding 12% debentures, $1,650,000 principal amount outstanding, for
9 1/2% senior convertible notes due December 31, 2001 of Mezzanine Financial
Corp. (Mezzanine), a newly formed wholly owned subsidiary of Helm. Mezzanine was
created to engage in the business of providing capital in high yield debt
situations of mid-market companies and to provide asset-based lending directly
to or in participation with other commercial lenders. One-half of the new notes
will be convertible into
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shares of Helm common stock, at $1.25 per share, and one-half into shares of
Intersystem, Inc. common stock owned by Helm, at $2.75 per share.
Item 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTH PERIODS ENDED SEPTEMBER 30, 1997 AND 1996
Net income for the three months ended September 30, 1997 was $2,427,000
compared to a loss of $516,000 for the similar period in 1996. The net change of
$2,943,000 is primarily attributable to two factors-a gain on the sale of the
Interpak Terminals operations of $2,324,00 and $501,000 representing the
Company's share of the increase in the underlying equity of Intersystems, Inc.
The decreases in sales, operating expenses, general and administrative expenses,
interest and warehouse reorganization expense relates to Interpak Terminals
which is included in the 1997 period through July 31(date of sale) as compared
to the full quarter for the 1996 period (see note 5).
NINE MONTH PERIODS ENDED SEPTEMBER 30, 1997 AND 1996
Income from continuing operations for the nine months ended September 30,
1997 was $2,738,000 compared to a loss of $577,000 for the nine month period of
1996 or a net change of $3,315,000. The net change is attributable to a gain on
the sale of Interpak Terminals of $2,324,000, $501,000 representing the
Company's share of the increase in the underlying equity of Intersystems, Inc.
and a net change in the income of Interpak terminals of $568,000. The decreases
in sales, operating expenses, general and administrative expenses, interest,
provision for settlement of liquidation and warehouse reorganization expense
relates to Interpak Terminals which is included for seven months in the 1997
period and for nine months in the 1996 period (see note 5).
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Impact of Inflation
Inflation has not had a significant impact on the Company s operations.
Liquidity and Capital Resources
Operating activities used cash of $424,000. The sale of Interpak provided
$1,950,000, 411,000 was received from sales of securities and $282,000 was used
to repay debt all of which provided a net increase in cash of $1,655,000.
Future liquidity sources for the parent company will consist of
reimbursement of general and administrative expenses from subsidiaries and
affiliates, and possible sales of investment securities. On a longer term basis,
the Company maybe required to seek additional liquidity through debt and equity
offerings of the Company and/or its subsidiaries or affiliates.
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PART II
Item 5. Other Information
On July 31, 1997, the Company's subsidiary, Interpak Holdings, Inc., a
Delaware corporation, completed the sale of all of the capital stock of its
subsidiaries, Interpak Terminals, Inc., a Delaware corporation doing business in
New Jersey, and Interpak Terminals, Inc., a Texas corporation doing business in
Houston, to Katoen Natie U.S.A., Inc., a domestic subsidiary of a privately-held
Belgium corporation, for a $2.2 million cash purchase price.
Interpak is a provider of custom packaging and distribution services to
manufacturers of thermoplastic resins. For the years ended December 31, 1996 and
1995, Interpak had revenues of $18,065,361 and $15,066,502, respectively. On a
consolidated basis, Interpak's revenues constitute substantially all of the
revenues reported by Helm, and Interpak's assets constitute a significant
percentage of Helm's assets.
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned there unto duly authorized.
HELM CAPITAL GROUP , INC.
November 14, 1997 /s/ Daniel T. Murphy
---------------------
Daniel T. Murphy
Executive Vice President
Chief Accounting and
Financial Officer
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