10QSB 1 y42753e10qsb.txt HELM CAPITAL GROUP INC. 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, 2000 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 13, 2000, there were 3,779,000 shares of the Company's common stock, par value $.01 per share, outstanding. Page 1 of 13 2 PART I - FINANCIAL INFORMATION HELM CAPITAL GROUP, INC., AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET SEPTEMBER 30, 2000 (IN THOUSANDS) (UNAUDITED)
ASSETS CURRENT ASSETS: Cash and cash equivalents $ 14 Participation in receivables of affiliate 1,016 Prepaid expenses 18 Due from related party 50 Other 23 TOTAL CURRENT ASSETS 1,121 INVESTMENTS IN AFFILIATES 1,169 ------ $2,290 ======
Page 2 of 13 3 HELM CAPITAL GROUP, INC., AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET SEPTEMBER 30, 2000 (IN THOUSANDS) (UNAUDITED)
LIABILITIES AND SHAREHOLDERS' (DEFICIENCY) CURRENT LIABILITIES: Accrued expenses $ 465 Notes due to related parties 120 Subordinated debentures due currently 25 Loan payable to bank 202 -------- TOTAL CURRENT LIABILITIES 812 SUBORDINATED DEBENTURES 800 SUBORDINATED DEBENTURES AND ACCRUED INTEREST DUE TO OFFICERS 1,375 ACCRUED EXPENSES PAYABLE IN COMMON STOCK 575 OTHER LIABILITIES 45 -------- TOTAL LIABILITIES 3,607 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 (22,049) -------- (1,288) Less: 6 shares of treasury stock, at cost (29) -------- TOTAL SHAREHOLDERS' CAPITAL (DEFICIT) (1,317) -------- $ 2,290 ========
Page 3 of 13 4 HELM CAPITAL GROUP, INC., AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts) (unaudited)
Three Months Ended September 30, 2000 1999 ---- ---- REVENUES $ 41 $ 71 ------- ------- COSTS, EXPENSES, AND OTHER: Selling, general and administrative expenses 65 48 Gain on sale of securities -- (196) Equity in net (earnings) losses of affiliates 43 32 Interest and debt expense 62 67 ------- ------- TOTAL COSTS, EXPENSES AND OTHER 170 (49) ------- ------- NET INCOME (LOSS) $ (129) $ 120 ======= ======= Earnings Per Share - Basic and Diluted $ (.04) $ .02 ======= ======= Average common shares outstanding 3,779 3,779 ======= =======
Page 4 of 13 5 HELM CAPITAL GROUP, INC., AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts) (unaudited)
Nine Months Ended September 30, 2000 1999 ---- ---- REVENUES $ 179 $ 186 ------- ------- COSTS, EXPENSES, AND OTHER: Selling, general and administrative expenses 184 146 Gain on sale of securities -- (196) Equity in net (earnings) losses of affiliates 83 140 Interest and debt expense 190 217 ------- ------- TOTAL COSTS, EXPENSES AND OTHER 457 307 ------- ------- INCOME (LOSS) FROM CONTINUING OPERATIONS (278) (121) CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPAL -- (20) ------- ------- NET (LOSS) INCOME $ (278) $ (141) ======= ======= Earnings Per Share - Basic and Diluted Continuing operations $ (.10) $ (.06) Cumulative effect of change in accounting principal -- -- ------- ------- $ (.10) $ (.06) ======= ======= Average common shares outstanding 3,779 3,779 ======= =======
Page 5 of 13 6 HELM CAPITAL GROUP, INC., AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) (UNAUDITED)
Nine Months Ended September 30, 2000 1999 ---- ---- Net cash (used by) operating activities $ (21) $(112) ------- ----- Cash flows from investing activities Collections on loans 1,105 -- Proceeds from sale of securities -- 196 ------- ----- 1,105 196 ------- ----- Cash flow from financing activities: Payments on notes to related parties (250) -- Payment on loan payable to bank (198) (20) Repayment of Subordinated debentures (650) -- Loan (to) from affiliate -- (63) ------- ----- (1,098) (83) NET INCREASE (DECREASE) IN CASH (14) 1 CASH BEGINNING OF PERIOD 28 15 ------- ----- CASH END OF PERIOD $ 14 $ 16 ======= ===== Supplemental disclosure of cash flow information: Cash paid for taxes -- -- Cash paid for interest 93 91
Page 6 of 13 7 HELM CAPITAL GROUP, INC., AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2000 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. The following illustrates income (loss) utilized in the computation of earnings (loss) per share (in thousands):
Three Months Nine Months Ended September 30, Ended September 30, 2000 1999 2000 1999 ---- ---- ---- ---- Income (loss) from continuing operations $(129) $ 120 $(278) $(121) Dividends on preferred stock (30) (30) (90) (90) ----- ----- ----- ----- Numerator for basic and diluted income (loss) from continuing operations $(159) $ 90 $(368) $(211) ===== ===== ===== =====
Page 7 of 13 8 For the three and nine months ended September 30, 2000 and 1999, certain securities were not included in the calculation of diluted earnings because of their antidilutive effect. Those securities are as follows (shares in thousands):
Three Months Nine Months 2000 1999 2000 1999 ---- ---- ---- ---- Stock options 467 437 467 437 Stock warrants 299 299 299 299 Shares issuable on conversion of preferred shares 1,585 1,585 1,585 1,585 Shares issuable on conversion of subordinated debentures 493 753 493 753 Shares issuable on conversion of promissory notes 300 300 300 300 ----- ----- ----- ----- 3,144 3,374 3,144 3,374 ===== ===== ===== =====
Page 8 of 13 9 Note 3. Summarized Financial Data (in thousands):
Intersystems, Inc. Three Months Nine Months Ended September 30, Ended September 30, 2000 1999 2000 1999 ---- ---- ---- ---- REVENUES $ 4,044 $ 3,607 $ 12,377 $ 10,600 ------- ------- -------- -------- Operating expenses 2,937 2,441 8,842 7,170 Selling, general and administrative expenses 1,038 996 3,039 2,755 Interest expense (net) 344 453 1,050 1,308 ------- ------- -------- -------- TOTAL COST AND EXPENSES 4,319 3,890 12,931 11,233 ------- ------- -------- -------- Income (loss) from continuing operations (275) (283) (554) (633) Discontinued operation-Inter systems Nebraska -- 384 -- 745 Cumulative effect of change in accounting principle -- -- -- (134) ------- ------- -------- -------- Net income (loss) $ (275) $ 101 $ (554) $ (22) ======= ======= ======== ========
Page 9 of 13 10 Note 4. Stockholders (Deficit) (in thousands)
Common Stock Additional Preferred Stock $.01 par value paid Shares Amount Shares Amount in capital --------- ------ -------- ------ ---------- Balance Jan. 1, 2000 29 $-- 3,779 $38 $20,723 Net loss -- -- -- -- -- -- ---- ----- --- ------- Balance September 30, 2000 29 $-- 3,779 $38 $20,723 -- ---- ----- --- -------
Retained Earnings (Deficit) Treasury Stock Total --------- -------------- ----- Balance January 1, 2000 $(21,771) $(29) $(1,039) Net loss (278) -- (278) -------- ---- ------- Balance September 30, 2000 $(22,049) $(29) $(1,317) -------- ---- -------
Note 5. 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 13 11 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS THREE MONTH PERIODS ENDED September 30, 2000 AND 1999 The net loss of $129,000 for three months ended September 30,2000 compared to income of $81,000 for the three months ended September 31, 1999. The increased loss was the result of a gain on sale of securities of $196,000 included in the 1999 period and lower revenues, which decreased by $31,000, in the 2000 period. NINE MONTH PERIODS ENDED September 30, 2000 AND 1999 The net loss for the nine months ended September 30, 2000, increased by $137,000 from the loss for the nine months ended September 30, 1999. The primary factors were the inclusion of a $196,000 gain on sale of securities in the 1999 period, offset by a reduction of $57,000 in equity loss of affiliates and a reduction of $27,000 in interest expense due to lower borrowings in the 2000 period. 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, 2000 used cash of $21,000. Collections on loans was $1,105,000 and $1,098,000 was used to repay notes. Cash decreased by $14,000 for the period. Future liquidity sources for the Company will consist of revenues generated from its financial service activities, reduction in selling, general and administrative expenses, reimbursement of general and administrative expenses from affiliates, and sales of investment securities. On a longer term basis, the Company may be required to seek additional liquidity through debt or equity offerings. The Company's independent certified public accountants have not reviewed the Company's 10QSB for the period ended September 30, 2000. Page 11 of 13 12 YEAR 2000 COMPLIANCE During 1999, the Company completed its Year 2000 ("Y2K") compliance project to prepare its computer systems, applications and software products for the year 2000 at an insignificant cost. Subsequent to December 31, 1999, the Company has not experienced any Y2K disruptions, either internally or from suppliers or other outside sources that had an adverse impact on the Company's operations or financial condition. The Company has no reason to believe that Y2K failures will materially affect it in the future. However, since it may take several additional months before it is known whether the Company or its suppliers, vendors or customers may have undergone Y2K problems, no assurances can be given that the Company will not experience losses or disruption due to Y2K computer-related problems. The Company will continue to monitor the operation of its software products, computers and microprocessor-based devises for any Y2K problems. FORWARD LOOKING STATEMENTS This quarterly report for the period ended September 30, 2000 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 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. Page 12 of 13 13 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 thereunto duly authorized. HELM CAPITAL GROUP, INC. Date: November 13, 2000 /s/ Herbert M. Pearlman ----------------------------------- Herbert M. Pearlman President and Chief Executive Officer Page 13 of 13