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, 1999
[ ] 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 31, 1999
----- -------------------------------
Common stock - par value $.10 5,435,673 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, 1998, which was filed
with the Securities and Exchange Commission.
The results of operations for the three months ended September 30, 1999
are not necessarily indicative of the results to be expected for the entire
fiscal year.
<PAGE>
<TABLE>
<CAPTION>
HELMSTAR GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
Sept 30, December 31,
1999 1998
------------ ------------
(Unaudited)
ASSETS
<S> <C> <C>
Cash and cash equivalents .................. $ 1,097,271 $ 1,040,955
Marketable securities ...................... 6,327,870 7,856,410
Other short term investments
restricted ............................. 18,348,582 52,020,895
Real estate to be leased, under
development ............................ 64,531,420 19,979,854
Furniture, equipment and
leasehold improvements - at cost,
less accumulated depreciation and
amortization of $412,459 in
1999 and $302,482 in 1998 .............. 659,128 211,634
Deferred financing costs, less
accumulated amortization of $191,672
in 1999 and $109,998 in 1998 ........... 1,734,503 1,816,177
Other assets ............................... 1,351,610 614,210
------------ ------------
TOTAL ............................. $ 94,050,384 $ 83,540,135
============ ============
LIABILITIES
Bonds payable .............................. $ 72,750,000 $ 72,750,000
Accrued expenses and other
liabilities ............................ 14,633,903 3,260,661
------------ ------------
Total liabilities ................. 87,383,903 76,010,661
------------ ------------
Due to Preferred Member .................... 2,250,000 1,500,000
------------ ------------
STOCKHOLDERS' EQUITY
Common stock - authorized
10,000,000 shares, par value
$.10; issued 6,749,600 shares
in 1999 and 1998 ....................... 674,960 674,960
Paid-in surplus ............................ 14,984,510 14,984,510
(Deficit) .................................. (8,195,280) (6,605,467)
------------ ------------
Total ............................. 7,464,190 9,054,003
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Less treasury stock, at cost -
1,313,927 shares in 1999 and
1,296,227 shares in 1998 ............... (3,047,709) (3,024,529)
------------ ------------
Total stockholders' equity ........ 4,416,481 6,029,474
------------ ------------
TOTAL ............................. $ 94,050,384 $ 83,540,135
============ ============
</TABLE>
See Notes to Condensed Consolidated Financial Statements (Unaudited).
<PAGE>
<TABLE>
<CAPTION>
HELMSTAR GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Nine Months Ended
Sept 30, Sept 30,
---------------------------- ----------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues:
Profit from joint ventures ...... $ -- $ -- $ -- $ 9,527
Financial consulting fees ....... -- -- 51,578 --
Technology placement and
consulting fees ............... 150,042 -- 390,478 --
Interest income ................. 388,155 942,442 1,646,172 3,071,594
Investment income ............... 251,105 717,291 1,332,960 1,630,794
Other income .................... 225,000 1,500 225,000 1,500
----------- ----------- ----------- -----------
Total Revenues ............. 1,014,302 1,661,233 3,646,188 4,713,415
----------- ----------- ----------- -----------
Expenses:
Compensation and related costs .. 658,244 352,687 1,778,490 926,565
Occupancy cost .................. 56,612 46,357 140,576 133,726
General and administrative ...... 535,685 115,307 848,845 297,405
Professional fees ............... 84,774 93,191 327,866 221,218
Interest ........................ 421,283 1,086,435 2,126,702 3,427,141
----------- ----------- ----------- -----------
Total Expenses ............. 1,756,598 1,693,977 5,222,479 5,006,055
----------- ----------- ----------- -----------
Profit (loss) before taxes .......... (742,296) (32,744) (1,576,291) (292,640)
Income tax (benefit) ................ -- (110,271) 13,523 (86,334)
----------- ----------- ----------- -----------
NET INCOME (LOSS) ................... $ (742,296) $ 77,527 $(1,589,814) $ (206,306)
Per common share - basic and diluted
Net income (loss) ................. $ (.14) $ .01 $ (.29) $ (.04)
=========== =========== =========== ===========
Weighted average number of
common shares outstanding - basic 5,435,673 5,473,373 5,435,964 5,501,371
Effect of dilutive employee
stock options ................... -- 71,000 -- --
----------- ----------- ----------- -----------
Weighted average number of
common shares - diluted
income (loss) per share ......... 5,435,673 5,544,373 5,435,964 5,501,371
=========== =========== =========== ===========
</TABLE>
See Notes to Condensed Consolidated Financial Statements (Unaudited).
<PAGE>
<TABLE>
<CAPTION>
HELMSTAR GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
September 30,
------------------------------
1999 1998
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net (loss) income ..................................... $ (1,589,814) $ (206,306)
Adjustments to reconcile net (loss) income to net
cash provided by (used in) operating activities:
Depreciation and amortization ....................... 191,651 55,825
Unrealized (gain) from joint ventures
and other investments .............................. -- (9,527)
Loss on sale or abandonment of fixed assets ......... -- 3,746
Changes in operating assets and liabilities:
(Increase) decrease in other assets ................. (737,400) 3,695
Sale (purchase) of marketable securities - net ...... 1,528,540 (394,640)
Increase (decrease) in accrued expenses ............. 11,373,243 (517,289)
------------ ------------
Net cash provided by (used in) operating activities ..... 10,766,220 (1,064,496)
------------ ------------
Cash flows from investing activities:
Sale of investment securities - net ................... 33,672,313 11,466,853
Distributions from joint ventures and other investments -- 195,391
Purchase of land ...................................... (3,361,448) (10,097,315)
Increase in construction in progress .................. (41,190,118) (316,218)
Increase in deferred financing costs .................. -- (21,237)
Purchase of fixed assets .............................. (557,471) (181,381)
Proceeds from the sale of fixed assets ................ -- 2,350
------------ ------------
Net cash (used in) provided by investing activities ..... (11,436,724) 1,048,443
------------ ------------
Cash flows from financing activities:
Increase in Preferred Member Capital .................. 750,000 --
Purchase of treasury stock ............................ (23,180) (95,930)
------------ ------------
Net cash provided by (used in) financing activities ..... 726,820 (95,930)
------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS .... 56,316 (111,983)
Cash and cash equivalents at beginning of period ........ 1,040,955 802,352
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD .............. $ 1,097,271 $ 690,369
============ ============
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest (net of amounts capitalized) ............... $ 2,442,572 $ 3,165,302
Income taxes ........................................ $ 7,375 $ 69,718
</TABLE>
See Notes to Condensed Consolidated Financial Statements (Unaudited).
<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, 1998, which was filed with the Securities and Exchange
Commission.
2. INCOME (LOSS) PER SHARE
Basic income (loss) per share is based on the weighted average number
of common shares outstanding. Employee stock options did not have an effect on
the computation of diluted earnings per share since they were anti-dilutive.
3. REAL ESTATE TO BE LEASED, UNDER DEVELOPMENT
Real Estate to be Leased, Under Development consists of the following:
Sept 30, December 31
1999 1998
----------- -----------
(Unaudited)
Land $17,058,866 $13,697,418
Construction in progress 47,472,554 6,282,436
----------- -----------
Total $64,531,420 $19,979,854
=========== ===========
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Certain statements in the "Management's Discussion
and Analysis of Financial Condition and Results of Operations"
and elsewhere in this Form 10-QSB constitute "forward-looking
statements" within the meaning of the Reform Act. See Part II,
Other Information - Item 5.
A. Three Months Ended September 30, 1999 Compared
----------------------------------------------
with Three Months Ended September 30, 1998
------------------------------------------
Total revenues decreased to $1,014,302 for the three
months ended September 30, 1999 from $1,661,233 for the three
months ended September 30, 1998.
Technology placement and consulting fees increased to
$150,042 for the three months ended September 30, 1999 from
nil for the three months ended September 30, 1998 due to the
operations of the Company's technology related subsidiary,
CareerEngine, Inc., and its affiliates.
Interest income decreased to $388,155 for the three
months ended September 30, 1999 from $942,442 for the three
months ended September 30, 1998 as the Company commenced
development of its multiplex movie theaters in the fourth
quarter of 1998 which continuously reduces the amount of funds
available for investment in interest-bearing obligations.
Investment income decreased to $251,105 for the three
months ended September 30, 1999 compared to $717,291 for the
three months ended September 30, 1998 principally from the
results of the Company's cash management and investing
activities. These activities include transactions involving
futures, puts, calls, equities, municipal securities, and
other investment instruments.
Other income increased to $225,000 for the three
months ended September 30, 1999 from $1,500 for the three
months ended September 30, 1998, due to the receipt of a
reserved receivable relating to the sale of a former
subsidiary of the Company.
Total expenses increased to $1,756,598 for the three
months ended September 30, 1999 from $1,693,977 for the three
months ended September 30, 1998.
Compensation and related costs increased to $658,244
for the three months ended September 30, 1999 from $352,687
for the three months ended September 30, 1998, primarily due
to the increase in the number of employees in the Company's
technology related businesses.
Occupancy costs increased to $56,612 for the three
months ended September 30, 1999 from $46,357 for the three
months ended September 30, 1998.
<PAGE>
General and administrative expenses increased to
$535,685 for the three months ended September 30, 1999 from
$115,307 for the three months ended September 30, 1998. The
increase was due primarily to the operations of the Company's
technology related businesses.
Professional fees decreased to $84,774 for the three
months ended September 30, 1999 from $93,191 for the three
months ended September 30, 1998.
Interest expense decreased to $421,283 for the three
months ended September 30, 1999 from $1,086,435 for the three
months ended September 30, 1998 due to capitalization of
related interest expense during the 24-month development phase
of the multiplex movie theaters.
On a pre-tax basis, the Company had a loss of
$742,296 for the three months ended September 30, 1999
compared with a loss of $32,744 for the three months ended
September 30, 1998. Provision for income taxes for the three
months ended September 30, 1999 decreased to nil compared to a
benefit of $110,271 for the three months ended September 30,
1998. The benefit for the three months ended September 30,
1998 was due to an adjustment for a prior period. For Federal
income tax purposes, as of December 31, 1998, the Company had
net operating loss carryforwards of approximately $12,166,000
available to reduce future taxable income. These carryforwards
expire in the years 2005 through 2018.
The Company's net loss for the three months ended
September 30, 1999 was $742,296 compared with a net profit of
$77,527 for the three months ended September 30, 1998. For the
three months ended September 30, 1999, net loss was $.14 per
share. For the three months ended September 30, 1998, net
profit was $.01 per share.
<PAGE>
Nine Months Ended September 30, 1999 Compared
---------------------------------------------
with Nine Months Ended September 30, 1998
-----------------------------------------
Total revenues decreased to $3,646,188 for the nine
months ended September 30, 1999 from $4,713,415 for the nine
months ended September 30, 1998.
There was no profit or loss from joint ventures for
the nine months ended September 30, 1999, as opposed to a
profit of $9,527 for the nine months ended September 30, 1998.
The properties underlying the joint ventures were sold in the
fourth quarter of 1997 and the profit for the nine months
ended September 30, 1998 represented final adjustments per the
terms of the sales contract.
Financial consulting fees were $51,578 for the nine
months ended September 30, 1999 compared to nil for the nine
months ended September 30, 1998. Significant variations in
this category of revenue are likely to occur due to the
transactional nature of the Company's financial consulting
business.
Technology placement and consulting fees increased to
$390,478 for the nine months ended September 30, 1999 from nil
for the nine months ended September 30, 1998 due to the
operations of the Company's technology related subsidiary,
CareerEngine, Inc., and its affiliates.
Interest income decreased to $1,646,172 for the nine
months ended September 30, 1999 from $3,071,594 for the nine
months ended September 30, 1998 as the Company commenced
development of its multiplex movie theaters in the fourth
quarter of 1998 which continuously reduces the amount of funds
available for investment in interest-bearing obligations.
Investment income decreased to $1,332,960 for the
nine months ended September 30, 1999 compared to $1,630,794
for the nine months ended September 30, 1998 principally due
to the results of the Company's cash management and investing
activities. These activities include transactions involving
futures, puts, calls, equities, municipal securities, and
other investment instruments.
Other income increased to $225,000 for the nine
months ended September 30, 1999 compared to $1,500 for the
nine months ended September 30, 1998, due to the receipt of a
reserved receivable relating to the sale of a former
subsidiary of the Company.
Total expenses increased to $5,222,479 for the nine
months ended September 30, 1999 from $5,006,055 for the nine
months ended September 30, 1998.
<PAGE>
Compensation and related costs increased to
$1,778,490 for the nine months ended September 30, 1999 from
$926,565 for the nine months ended September 30, 1998,
primarily due to the increase in the number of employees in
the Company's technology related businesses.
Occupancy costs increased to $140,576 for the nine
months ended September 30, 1999 from $133,726 for the nine
months ended September 30, 1998.
General and administrative expenses increased to
$848,845 for the nine months ended September 30, 1999 from
$297,405 for the nine months ended September 30, 1998. The
increase was due primarily to the operations of the Company's
technology related businesses.
Professional fees increased to $327,866 for the nine
months ended September 30, 1999 from $221,218 for the nine
months ended September 30, 1998. The increase is due to the
incurrence of direct costs associated with consulting fees
earned, and increased legal and accounting fees for the nine
months ended September 30, 1999.
Interest expense decreased to $2,126,702 for the nine
months ended September 30, 1999 from $3,427,141 for the nine
months ended September 30, 1998 due to capitalization of
related interest expense during the 24-month development phase
of the multiplex movie theaters.
On a pre-tax basis, the Company had a loss of
$1,576,291 for the nine months ended September 30, 1999
compared with a loss of $292,640 for the nine months ended
September 30, 1998. Provision for income taxes for the nine
months ended September 30, 1999 decreased to $13,523 compared
to a benefit of $86,334 for the nine months ended September
30, 1998. The provision consists solely of state and local
taxes for the current period. For Federal income tax purposes,
as of December 31, 1998, the Company had net operating loss
carryforwards of approximately $12,166,000 available to reduce
future taxable income. These carryforwards expire in the years
2005 through 2018.
The Company's net loss for the nine months ended
September 30, 1999 was $1,589,814 compared with a net loss of
$206,306 for the nine months ended September 30, 1998. For the
nine months ended September 30, 1999, net loss was $.29 per
share. For the nine months ended September 30, 1998, net loss
was $.04 per share.
B. Liquidity and Capital Resources
-------------------------------
Management of the Company believes that funds
generated from operations, supplemented by its available
assets, will provide it with sufficient resources to meet all
present and reasonably foreseeable future capital needs. These
available assets consist primarily of cash, and investments
which are readily convertible into cash.
<PAGE>
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 include U.S.
Government and municipal obligations, futures contracts and
money market funds.
The Company issued $72,750,000 of adjustable rate
tender securities due November 1, 2015 (the "Bonds") during
1997. The Bonds were issued to finance 97% of the cost of the
Company's Real Estate Development Program. The 3% balance,
$2,250,000, is being provided as a capital contribution from
the Preferred Member of the Company's Lessor subsidiary,
Movieplex Realty Leasing, L.L.C.
The Bonds pay interest from the date of delivery on
the first Monday of each month for the preceding four or five
week period commencing January 5, 1998 and principal annually
on the first Monday of November commencing in the year 2000.
Various commercial banks which provided letters of credit
securing payment on the Bonds are due letter of credit ("LOC")
fees which are payable on the same dates as the Bond interest
commenced in 1998. In addition, a preferred return on capital
contributed is due to the Preferred Member, payable on the
same due dates as is the interest on the Bonds but commencing
in January of the year 2000.
All debt service on the Bonds, while bank letters of
credit are effectively in force, is paid directly from draws
on those LOCs. The banks are then reimbursed by the Lessor
directly. During the period from November 1997 through
November 1999, all reimbursements to the banks and bank fees
will be paid from Bond proceeds. Thereafter all reimbursements
to the banks for debt service on the Bonds as well as fees and
the preferred return to the Preferred Member will be paid from
rent which commences on November 20, 1999. In addition, the
rent will cover all other costs of owning and operating the
real estate other than Federal, state or local income taxes
due on a net income basis. Prior to the utilization of these
proceeds to pay for the costs in connection with the
construction of multiplex movie theaters, they are invested in
liquid short-term instruments.
While the Company believes that currently available
funds will provide it with sufficient resources to meet all
present and reasonably foreseeable future capital needs, as
well as future operational costs of the newly formed
technology and consulting focused ventures, 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, 1999, except for the development of the
multiplex movie theaters with funds provided by the issuance
of the Bonds.
<PAGE>
Year 2000 Issue
---------------
The Company has reviewed all of its computer systems
(hardware and related software) and does not anticipate that
the cost of addressing the "Year 2000" issue will be material
to its future operating results or financial condition.
<PAGE>
PART II
OTHER INFORMATION
Item 5. Other Information.
Certain statements under the caption "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" and elsewhere in this Form 10-QSB constitute
"forward looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Such forward looking
statements are based on current expectations and information
available to management at this time. They may involve known
risks, uncertainties, and other factors which may cause the
actual results, performance or achievements of the Company to
be materially different from any future results, performance
or achievements expressed or implied by such forward looking
statements. Factors which could cause actual results to differ
from the forward looking statements include, among others, the
following: general economic and business conditions;
competition; the success of operating initiatives relating to
the Company's technology related subsidiary and the Company's
financial consulting services; development and operating
costs; fluctuations in interest rates; the existence or
absence of adverse publicity; changes in business strategy or
development plans; quality of management; availability, terms
and deployment of capital; business abilities and judgment of
personnel; availability of qualified personnel; labor and
employee benefit costs; changes in or the failure to comply
with government regulations; and the Year 2000 issue.
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 2 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:
-- The Company did not file any reports on Form 8-K
during the three months ended September 30, 1999.
<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.
/s/ George W. Benoit
--------------------
Date: November 15, 1999 George W. Benoit,
Chairman of the Board of Directors,
President, Chief Executive Officer
/s/ Anthony S. Conigliaro
-------------------------
Date: November 15, 1999 Anthony S. Conigliaro,
Vice President and 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 STATEMENT OF OPERATIONS (UNAUDITED) FOR THE INTERIM 9
MONTH PERIOD ENDED SEPTEMBER 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 1,097,271
<SECURITIES> 24,676,452
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 25,773,723
<PP&E> 65,603,007
<DEPRECIATION> 412,459
<TOTAL-ASSETS> 94,050,384
<CURRENT-LIABILITIES> 14,633,903
<BONDS> 72,750,000
0
0
<COMMON> 674,960
<OTHER-SE> 3,741,521
<TOTAL-LIABILITY-AND-EQUITY> 94,050,384
<SALES> 0
<TOTAL-REVENUES> 3,646,188
<CGS> 0
<TOTAL-COSTS> 3,095,777
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,126,702
<INCOME-PRETAX> (1,576,291)
<INCOME-TAX> 13,523
<INCOME-CONTINUING> (1,589,814)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,589,814)
<EPS-BASIC> (.29)
<EPS-DILUTED> (.29)
</TABLE>
