U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[ X ] Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended September 30, 1997
[ ] Transition report under Section 13 or 15(d) of the Exchange Act of 1934
For the transition period from to
Commission file number 1-9224
HELMSTAR GROUP, INC.
(Exact Name of Small Business Issuer as Specified in Its Charter)
DELAWARE 13-2689850
- ----------------------------------------- ------------------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
2 World Trade Center, Suite 2112, New York, N.Y. 10048
---------------------------------------------------------------------------
(Address of Principal Executive Offices)
212-775-0400
(Issuer's Telephone Number, Including Area Code)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 [ ]
The number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date.
Class Outstanding at October 30, 1997
----- -------------------------------
Common stock - par value $.10 5,516,373 shares
- ----------------------------- ----------------
<PAGE>
PART I
FINANCIAL INFORMATION
Item l. Financial Statements.
The following consolidated financial statements of Helmstar Group, Inc.
and subsidiaries (collectively referred to as the "Company," unless the context
requires otherwise) are prepared in accordance with the rules and regulations of
the Securities and Exchange Commission for Form 10-QSB and reflect all
adjustments (consisting of normal recurring accruals) and disclosures which, in
the opinion of management, are necessary for a fair statement of results for the
interim periods presented. It is suggested that these financial statements be
read in conjunction with the financial statements and notes thereto included in
the Company's Form 10-KSB for the year ended December 31, 1996, which was filed
with the Securities and Exchange Commission.
The results of operations for the three months and nine months ended
September 30, 1997 are not necessarily indicative of the results to be expected
for the current year.
<PAGE>
<TABLE>
<CAPTION>
HELMSTAR GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Restated)
September 30, December 31,
1997 1996
(Unaudited)
ASSETS
<S> <C> <C>
Cash and cash equivalents ................ $ 609,639 $ 165,858
Due from buyer of
assets of joint ventures ............. 4,533,240
Due from buyer of subsidiary.............. 264,607
Marketable securities .................... 2,358,237 1,350,441
Joint ventures ........................... 311,109 1,418,383
Other investments ........................ 35,000
Furniture, equipment and
leasehold improvements - at cost,
less accumulated depreciation and
amortization of $235,815 in
1997 and $218,503 in 1996 ............ 112,879 97,811
Other assets ............................. 366,974 644,536
Assets of disposed subsidiary ............ 4,611,869
Due from disposed subsidiary ............. 1,100,000
------------ ------------
TOTAL ........................... $ 8,591,685 $ 9,388,898
============ ============
LIABILITIES
Accrued expenses and other
liabilities .......................... $ 912,962 $ 746,709
Liabilities of disposed
subsidiary ........................... 3,579,261
------------ ------------
Total liabilities ............... 912,962 4,325,970
------------ ------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
HELMSTAR GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Restated)
Sept 30, December 31,
1997 1996
(Unaudited)
<S> <C> <C>
STOCKHOLDERS' EQUITY
Common stock - authorized
10,000,000 shares, par value
$.10; issued 6,749,600 shares ........ 674,960 674,960
Paid-in surplus .......................... 14,984,510 14,984,510
(Accumulated deficit) .................... (5,052,149) (7,683,718)
------------ ------------
Total ........................... 10,607,321 7,975,752
Less treasury stock, at cost -
1,233,227 shares in 1997 and
1,213,227 shares in 1996 ............. (2,928,598) (2,912,824)
------------ ------------
Total stockholders' equity ...... 7,678,723 5,062,928
------------ ------------
TOTAL ........................... $ 8,591,685 $ 9,388,898
============ ============
</TABLE>
See Notes to Condensed Consolidated Financial Statements (Unaudited).
December 31, 1996 has been restated to account for the sale of a discontinued
operation.
<PAGE>
<TABLE>
<CAPTION>
HELMSTAR GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Nine Months Ended
Sept 30, Sept 30,
--------------------------------------------------------------
1997 1996 1997 1996
----------- ----------- ----------- -----------
Restated Restated
<S> <C> <C> <C> <C>
Revenues:
Profit from joint ventures ...... $ 5,377,474 $ 109,465 $ 5,741,325 $ 530,210
Financial consulting fees ....... 60,000 150,000
Interest income ................. 65,341 34,367 170,351 165,810
Investment (loss) income ........ (489,044) (64,049) (435,644) 127,545
Other income .................... 3,000
----------- ----------- ----------- -----------
Total Revenues ............. 5,013,771 79,783 5,626,032 826,565
----------- ----------- ----------- -----------
Expenses:
Compensation and related costs .. 314,345 320,217 943,091 1,102,075
Occupancy cost .................. 39,920 44,122 123,371 145,152
General and administrative ...... 66,299 41,432 302,372 316,426
Professional fees and
litigation expenses ........ 42,785 33,020 131,982 88,193
Interest ........................ 12,641 990 82,260 46,557
----------- ----------- ----------- -----------
Total Expenses ............. 475,990 439,781 1,583,076 1,698,403
----------- ----------- ----------- -----------
Profit (loss) before taxes .......... 4,537,781 (359,998) 4,042,956 (871,838)
Income tax (benefit) ................ 422,000 (24,623) 425,016 (6,904)
----------- ----------- ----------- -----------
Net profit (loss) from
continuing operations ........... 4,115,781 (335,375) 3,617,940 (864,934)
Loss from discontinued operations ... (152,352) (392,456) (755,209) (1,079,300)
Loss on the sale of a subsidiary .... (231,161) (231,161)
----------- ----------- ----------- -----------
NET INCOME (LOSS) ................... $ 3,732,268 $ (727,831) $ 2,631,570 $(1,944,234)
=========== =========== =========== ===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
HELMSTAR GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(continued)
Three Months Ended Nine Months Ended
Sept 30, Sept 30,
--------------------------------------------------------------
1997 1996 1997 1996
----------- ----------- ----------- -----------
Restated Restated
<S> <C> <C> <C> <C>
Net earnings (loss) per common share:
From Continuing Operations ...... $ .74 $ (.06) $ .65 $ (.16)
From Discontinued Operations .... (.07) (.07) (.18) (.19)
----------- ----------- ----------- -----------
Net Income (Loss) ............... $ .67 $ (.13) $ .47 $ (.35)
=========== =========== =========== ===========
Weighted average number of
common shares outstanding ....... 5,535,123 5,544,174 5,541,233 5,544,174
=========== =========== =========== ===========
</TABLE>
See Notes to Condensed Consolidated Financial Statements (Unaudited).
The Three Month Period and the Nine Month Period for 1996 have been Restated to
Reflect the Effect of the Discontinued Operation.
<PAGE>
<TABLE>
<CAPTION>
HELMSTAR GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
September 30
------------------------------
1997 1996
----------- -----------
Restated
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) .............................................. $ 2,631,570 $ (1,944,234)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization ................................ 20,827 13,580
Unrealized (gain) on joint ventures
and other investments ....................................... (463,062) (530,210)
(Gain) on settlement, sale or disposal of
joint ventures and investments .............................. (5,278,263)
Loss on abandonment of fixed assets .......................... 2,653
Provision for loan reserve ................................... 50,000
Changes in operating assets and liabilities:
(Increase) in receivable due to sale of business segment ..... (264,607)
Decrease in other assets ..................................... 277,561 440,122
(Purchase) of marketable securities .......................... (1,007,796) (2,111,787)
Increase (decrease) in accrued expenses ...................... 166,253 (495,553)
Decrease in assets & liabilities of disposed subsidiary ...... 2,132,608 1,114,379
----------- -----------
Net cash (used in) operating activities .......................... (1,732,256) (3,513,703)
----------- -----------
Cash flows from investing activities:
(Purchase) of investment securities ............................ (1,686,692)
Distributions from joint ventures and other investments ........ 2,315,359 363,677
Purchase of other investments .................................. (35,000)
Purchase of fixed assets ....................................... (38,548) (19,405)
Loan to debtor in possession ................................... (50,000)
----------- -----------
Net cash provided by (used in) investing activities .............. 2,191,811 (1,342,420)
----------- -----------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
HELMSTAR GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
September 30,
------------------------------
1997 1996
----------- -----------
<S> <C> <C>
Cash flows from financing activities:
Proceeds from short term borrowings - net ...................... 4,721,298
Purchase of treasury stock ..................................... (15,774) (1,729)
----------- -----------
Net cash (used in) provided by financing activities .............. (15,774) 4,719,569
----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ............. 443,781 (136,554)
Cash and cash equivalents at beginning of period ................. 165,858 321,337
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ....................... $ 609,639 $ 184,783
=========== ===========
Supplemental schedule of noncash investing and
financing activities:
During the period ended September 30, 1997, the
Company recorded a receivable from the sale of the
joint ventures assets............................................ $ 4,533,240
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest ..................................................... $ 82,260 $ 46,557
Taxes ........................................................ 688 16,415
</TABLE>
See Notes to Condensed Consolidated Financial Statements (Unaudited).
The Nine Month Period for 1996 has been Restated to Reflect the Effect of the
Discontinued Operation.
<PAGE>
HELMSTAR GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
l. SIGNIFICANT ACCOUNTING POLICIES
The accounting policies followed by the Company are set forth in the
notes to the Company's financial statements included in its Form 10-KSB, for the
year ended December 3l, 1996, which was filed with the Securities and Exchange
Commission (the "SEC").
2. SALE OF CITIZENS
During the third quarter 1997, the Company sold its wholly-owned
subsidiary, Citizens Mortgage Service Company ("Citizens"), to IMN Financial
Corp. for approximately $375,000. The purchase price may be increased based on
the outcome of certain transactions still in progress. The Company recorded an
operational loss of approximately $152,000 during the third quarter of 1997 and
a year-to-date loss of approximately $755,000. A loss of approximately $231,000
was also recorded on the sale.
The Statements of Operations for the current and prior periods have
been restated to remove Citizens discontinued operations from continuing revenue
and expense accounts and to record Citizens' results as discontinued operations.
The December 31, 1996 Balance Sheet has been restated to transfer all
assets and liabilities of Citizens out of individual accounts and into "Assets
of Disposed Subsidiary" and "Liabilities of Disposed Subsidiary."
Helmstar Group, Inc. ("Helmstar") had guaranteed certain warehouse
lines of credit utilized by Citizens in connection with its mortgage loan
activities. A warehouse lender could finance up to 98% of the face amount of an
individual mortgage loan held for sale. The advance would be repaid from the
purchase price paid by the investor who had committed to purchase the applicable
mortgage loan.
Pursuant to the sales agreement, Helmstar agreed to continue to
maintain its guarantees of any such lines until (1) a line was cancelled by
Citizens or (2) a release of Helmstar as guarantor of a line was delivered. At
any time after 60 days following the closing date (September 5, 1997) of the
sale, Helmstar could terminate any remaining guarantees. As of November 7, 1997,
Helmstar has guaranteed $2.9 million to a single lender relating to advances
made prior to the termination of Helmstar's guarantee. Helmstar will not be
responsible for future advances, if any, made pursuant to the warehouse lines of
credit.
<PAGE>
HELMSTAR GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
3. JOINT VENTURES
During the quarter ended September 30, 1997, two partnerships in which
the Company has a majority financial interest and a 50% voting interest sold
their manufacturers outlet shopping malls. The Company has recorded a profit of
approximately $5.3 million before tax on this sale.
Summary combined operating results of the joint ventures in which the
Company is a co-venturer are as follows:
<TABLE>
<CAPTION>
Company's Share of Profit
from Joint Ventures:
Three Months Ended September 30
----------------------------------
1997 1996
---- ----
<S> <C> <C>
Income from operations $ 99,211 $ 109,465
Profit on sale of
Outlet Malls 5,278,263
---------- ---------
$5,377,474 $ 109,465
========== =========
<CAPTION>
Nine Months Ended September 30
----------------------------------
1997 1996
---- ----
<S> <C> <C>
Income from operations $ 383,651 $ 330,210
Gain from receiving cash
distribution in excess of the
book value of the Company's
interest in a joint venture 79,911
Profit on sale of
Outlet Malls 5,278,263
Fully reserve an investment
which was contingent on a
project being built (500)
Receipt from the guarantors
of a co-venturer's obligations
in connection with the
development of a project
which had been sold at a
foreclosure sale in 1992 200,000
---------- ----------
$5,741,325 $ 530,210
========== =========
</TABLE>
<PAGE>
HELMSTAR GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
4. INCOME (LOSS) PER SHARE
Income (loss) per share is based on the weighted average number of
common shares outstanding and common stock equivalents based on the treasury
stock method when dilutive.
5. LITIGATION
The Company is a defendant in various lawsuits. In those instances in
which liability can be estimated, provisions have been reflected in the
financial statements. The ultimate outcome of the remaining lawsuits cannot
presently be determined, and no provision for any liability that may result has
been made in the financial statements, since the amounts, if any, cannot be
determined. There were no significant changes in the status of litigation during
the three months ended September 30, 1997.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The Statements of Operations for the current and prior periods
have been restated to record Citizens results as discontinued
operations.
A. Three Months Ended September 30, 1997 Compared
with Three Months Ended September 30, 1996
Total revenues increased to $5,013,771 for the three months
ended September 30, 1997 from $79,783 for the three months
ended September 30, 1996.
Profit from joint ventures increased to $5,377,474 for the
three months ended September 30, 1997 from $109,465 for the
three months ended September 30, 1996, primarily as a result
of the sale of the outlet shopping malls by two partnerships
in which the Company has a majority financial interest.
Financial consulting fees were $60,000 for the three months
ended September 30, 1997 compared to nil for the three months
ended September 30, 1996. Although providing financial
structuring advice to clients on a fee basis remains an
integral component of the Company's merchant banking business,
significant variations in revenues are likely because of the
transactional nature of this business. The Company currently
is engaged in advising clients with respect to the structuring
of transactions which are expected to generate fees later in
1997.
Interest income increased to $65,341 for the three
months ended September 30, 1997 from $34,367 for the three
months ended September 30, 1996, due in part to an increase in
interest earning assets and earnings generated through cash
management and investing activities.
Investment income decreased to a negative $489,044 for the
three months ended September 30, 1997 compared to a negative
$64,049 for the three months ended September 30, 1996. This
category principally consists of net income or loss from cash
management and investing in futures, puts, calls, equities,
municipal securities, and other securities activities. Large
swings can occur due to volatility in the financial markets.
Total expenses increased to $475,990 for the three months
ended September 30, 1997 from $439,781 for the three months
ended September 30, 1996.
Compensation and related costs decreased to $314,345 for the
three months ended September 30, 1997 from $320,217 for the
three months ended September 30, 1996.
<PAGE>
Occupancy costs decreased to $39,920 for the three months
ended September 30, 1997 from $44,122 for the three months
ended September 30, 1996. This reduction resulted from the
termination of the lease for a small office for the viatical
settlements activity which closed in the fourth quarter of
1996.
General and administrative expenses increased to $66,299 for
the three months ended September 30, 1997 from $41,432 for the
three months ended September 30, 1996. Expenses were
approximately the same for both periods except for a 1996
accounting adjustment which reduced this category.
Professional fees increased to $42,785 for the three months
ended September 30, 1997 from $33,020 for the three months
ended September 30, 1996. The increase is due in large part to
increased accounting and income tax consulting and preparation
fees.
Interest expense increased to $12,641 for the three months
ended September 30, 1997 from $990 for the three months ended
September 30, 1996. This increase was incurred in connection
with the cash management and investing activities of the
Company.
On a pre-tax basis, from continuing operations the Company had
a profit of $4,537,781 for the three months ended September
30, 1997 compared with a loss of $359,998 for the three months
ended September 30, 1996. Provision for income taxes for the
three months ended September 30, 1997 was $422,000 compared
with a benefit of $24,623 for the three months ended September
30, 1996. The current provision consists solely of state and
local taxes incurred in connection with the sale of the outlet
shopping malls. During prior periods, the partnerships paid
local taxes on behalf of the partners and the Company recorded
profit from joint ventures net of tax with no tax provision.
Such tax provisions were immaterial in prior years. For
Federal income tax purposes, as of December 31, 1996, the
Company had net operating loss carryforwards of approximately
$13,750,000 available to reduce future taxable income. These
carryforwards expire in the years 2005 through 2011.
The third quarter 1997 operating loss for Citizens was
$152,352 and is recorded as "Loss from Discontinued
Operations." Loss on the sale was recorded as $231,161 but may
decrease based on the outcome of certain transactions in
process as of the end of the quarter.
The Company's net income for the three months ended September
30, 1997 was $3,732,268 compared with net loss of $727,831 for
the three months ended September 30, 1996. For the three
months ended September 30, 1997, net income from continuing
operations was $.74 per share reduced by a net loss from
discontinued operations of $(.07) per share, resulting in a
net income of $.67 per share. For the three months ended
<PAGE>
September 30, 1996, net income from continuing operations was
$(.06) per share increased by a net loss from discontinued
operations of $(.07) per share, resulting in a net loss of
$(.13) per share. Income per share for the three months ended
September 30, 1997 is computed based on the weighted average
number of shares actually outstanding plus the shares that
would be outstanding assuming the exercise of stock options
relating to the Company's incentive compensation plan which
are considered to be common stock equivalents. The assumed
exercise of stock options relating to the Company's incentive
compensation plan were not included in the computation for
September 30, 1996, because the effect of their inclusion
would be antidilutive. The number of shares used in the
computations were 5,535,123 for the three months ended
September 30, 1997 and 5,544,174 for the three months ended
September 30, 1996.
Nine Months Ended September 30, 1997 Compared
with Nine Months Ended September 30, 1996
Total revenues increased to $5,626,032 for the nine months
ended September 30, 1997 from $826,565 for the nine months
ended September 30, 1996.
Profit from joint ventures increased to $5,741,325 for the
nine months ended September 30, 1997 from $530,210 for the
nine months ended September 30, 1996, pimarily as a result of
the sale of the outlet shopping malls by two partnerships in
which the Company has a majority financial interest. In
addition, in June 1997, the Company refinanced the mortgage
debt on its Nags Head venture and received cash distributions
in excess of book value which caused a profit of approximately
$80,000 which is included in this category. Also, during the
nine months ended September 30, 1996, this category included
$200,000 received from certain individuals who had guaranteed
the obligations of the co-venturer in Stoneledge with respect
to a project which had been sold at a foreclosure sale in
1992.
Financial consulting fees were $150,000 for the nine months
ended September 30, 1997 versus nil for the nine months ended
September 30, 1996. Although providing financial structuring
advice to clients on a fee basis remains an integral component
of the Company's merchant banking business, significant
variations in revenues are likely because of the transactional
nature of this business. The Company currently is engaged in
advising clients with respect to the structuring of
transactions which are expected to generate fees later in
1997.
Interest income increased to $170,351 for the nine months
ended September 30, 1997 from $165,810 for the nine months
ended September 30, 1996. The Company earns interest on its
assets and through its cash management program.
<PAGE>
Investment income decreased to a negative $435,644 for the
nine months ended September 30, 1997 from income of $127,545
for the nine months ended September 30, 1996. This category
primarily consists of: net income or loss from cash management
and investing in futures, puts, calls, equities, municipal
securities and other securities activities.
Total expenses decreased to $1,583,076 for the nine months
ended September 30, 1997 from $1,698,403 for the nine months
ended September 30, 1996.
Compensation and related costs decreased to $943,091 for the
nine months ended September 30, 1997 from $1,102,075 for the
nine months ended September 30, 1996. The decrease is due
principally to the elimination of the salaries incurred in
connection with the Company's viatical settlements business
which had terminated in the fourth quarter of 1996.
Occupancy costs decreased to $123,371 for the nine months
ended September 30, 1997 from $145,152 for the nine months
ended September 30, 1996. This reduction resulted from the
termination of the lease for a small office for the viatical
settlement activity which closed in the fourth quarter of
1996.
General and administrative expenses decreased to $302,372 for
the nine months ended September 30, 1997 from $316,426 for the
nine months ended September 30, 1996. This decrease was caused
primarily by savings realized with the curtailment of the
viatical settlement business in the fourth quarter of 1996.
This decrease was somewhat mitigated by the creation of a
reserve for advances made to a debtor in possession during the
second quarter of 1997.
Professional fees increased to $131,982 for the nine months
ended September 30, 1997 from $88,193 for the nine months
ended September 30, 1996. The increase is due in large part to
legal fees incurred in connection with a potential
acquisition, together with higher accounting and income tax
consulting and preparation fees.
Interest expense increased to $82,260 for the nine months
ended September 30, 1997 from $46,557 for the nine months
ended September 30, 1996. The increase was in connection with
the cash management and investing activities of the Company.
On a pre-tax basis from continuing operations, the Company had
income of $4,042,956 for the nine months ended September 30,
1997 compared with a loss of $871,838 for the nine months
ended September 30, 1996. Provision for income taxes for the
nine months ended September 30, 1997 was $423,016 compared
with a benefit of $6,904 for the nine months ended September
30, 1996. The current provisions consist mostly of state and
local taxes incurred in connection with the sale of the outlet
shopping malls. During prior periods, the partnerships paid
local taxes on behalf of the partner and the Company recorded
<PAGE>
profit from joint ventures net of tax with no tax provision.
Such tax provisions were immaterial in prior years. For
Federal income tax purposes, as of December 31, 1996, the
Company has net operating loss carryforwards aggregating
approximately $13,750,000 available to reduce future taxable
income. These carryforwards expire in the years 2005 through
2011.
For the nine months ended September 30, 1997, the operating
loss for Citizens was $755,209 and is recorded as "Loss from
Discontinued Operations." Loss on the sale was recorded as
$231,161 but may decrease based on the outcome of certain
transactions in process as of the end of the period.
The Company's net income for the nine months ended September
30, 1997 was $2,631,570 compared with a net loss of $1,944,234
for the nine months ended September 30, 1996. For the nine
months ended September 30, 1997, net income from continuing
operations was $.65 per share reduced by a net loss from
discontinued operations of $(.18) per share, resulting in a
net income of $.47 per share. For the nine months ended
September 30, 1996, net loss from continuing operations was
$(.16) per share increased by a net loss from discontinued
operations of $(.19) per share, resulting in a net loss of
$(.35) per share. Income per share for the nine months ended
September 30, 1997 is computed based on the weighted average
number of shares actually outstanding plus the shares that
would be outstanding assuming the exercise of stock options
relating to the Company's incentive compensation plan which
are considered to be common stock equivalents. The assumed
exercise of stock options relating to the Company's incentive
compensation plan were not included in the computation for the
nine months ended September 30, 1996, because the effect of
their inclusion would be antidilutive. The number of shares
used in the computations were 5,541,233 for the nine months
ended September 30, 1997 and 5,544,174 for the nine months
ended September 30, 1997.
B. Liquidity and Capital Resources
Management of the Company believes that funds generated from
operations and cash distributions from joint ventures,
supplemented by its available assets, will provide it with
sufficient resources to meet all present and reasonably
foreseeable future capital needs. Currently, the Company's
assets consist primarily of cash and assets readily
convertible into cash.
The Company invests excess funds in liquid, short- term
financial instruments in order to maximize its current cash
return with minimum interest rate risk, while preserving the
ability to move quickly in funding attractive merchant banking
ventures. Such investments primarily include U.S. Government
obligations, municipal securities, commodity futures
contracts, and money market funds.
<PAGE>
While the Company believes that currently available funds will
provide it with sufficient resources to meet all present and
reasonably foreseeable future capital needs, the Company may
seek various forms of credit in order to finance its merchant
banking or other activities in the future. The Company does
not have any material commitments for capital expenditures as
of September 30, 1997.
The Company is a defendant in various lawsuits. Although the
Company has reached settlements in some instances, an
unfavorable result in those remaining could have a significant
adverse effect upon the Company's liquidity and capital
resources.
<PAGE>
PART II
OTHER INFORMATION
Item 1. Legal Proceedings.
Cross Creek Village v. Housing Authority of the County of
Riverside, et al., Case No. 236813, Superior Court of the
State of California, County of Riverside, July 9, 1993.
A status conference has been scheduled in this case for
January 8, 1998.
Fred W. Wasserman et al v. Jeffrey P. Christopher et al., Case
No. 278699, Superior Court of the State of California, County
of Riverside, March 19, 1996.
On September 9, 1997, the Federal Deposit Insurance
Corporation, as receiver for First RepublicBank Houston, N.A.
(formerly known as InterFirst Bank Houston, N.A.), filed a
removal petition removing this case to the United States
District Court of the Central District of California. On
October 8, 1997, the FDIC moved to transfer venue of the case
to the United States District Court for the Southern District
of Texas. That motion is currently pending with the court.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits: A statement regarding the computation of per
share earnings is omitted because the computation is described
in Note 3 of the Notes to Condensed Consolidated Financial
Statements (Unaudited) of this Form 10-QSB.
Exhibit 27 - Financial Data Schedule -- See below.
(b) Reports on Form 8-K:
-- September 19, 1997, announced sale of all the stock of
wholly-owned subsidiary, Citizens Mortgage Service Company
to IMN Financial Corp.
-- October 10, 1997, press release announced the sale of
Blowing Rock Outlet Partners and Nags Head Outlet Partners
by partnerships in which the Company has an interest.
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
HELMSTAR GROUP, INC.
Date: November 14, 1997 /s/ George W. Benoit
--------------------
George W. Benoit
Chairman of the Board of
Directors, President,
Chief Executive Officer
Date: November 14, 1997 /s/ Roger J. Burns
------------------
Roger J. Burns
First Vice President,
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM HELMSTAR
GROUP, INC. AND SUBSIDIARIES' CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
AND CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) FOR THE INTERIM
9 MONTH PERIOD ENDED SEPTEMBER 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 609,639
<SECURITIES> 2,358,237
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 348,694
<DEPRECIATION> 235,815
<TOTAL-ASSETS> 8,591,685
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 674,960
<OTHER-SE> 7,003,763
<TOTAL-LIABILITY-AND-EQUITY> 8,591,685
<SALES> 0
<TOTAL-REVENUES> 5,626,032
<CGS> 0
<TOTAL-COSTS> 1,583,076
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 4,042,956
<INCOME-TAX> 425,016
<INCOME-CONTINUING> 3,617,940
<DISCONTINUED> (986,370)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,361,570
<EPS-PRIMARY> .47
<EPS-DILUTED> .47
</TABLE>
