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 March 31, 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.
The number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date.
Class Outstanding at April 30, 1999
----------------------------- -----------------------------
Common stock - par value $.10 5,498,673 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 March 31, 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
March 31, December 31,
1999 1998
------------ ------------
(Unaudited)
ASSETS
<S> <C> <C>
Cash and cash equivalents ....................... $ 923,507 $ 1,040,955
Marketable securities ........................... 7,317,712 7,856,410
Other short term investments -
restricted .............................. 43,800,104 52,020,895
Real estate to be leased, under
development ............................. 28,265,750 19,979,854
Furniture, equipment and
leasehold improvements - at cost,
less accumulated depreciation and
amortization of $323,573 in
1999 and $302,482 in 1998 ............... 241,056 211,634
Deferred financing costs, less
accumulated amortization of $137,222
in 1999 and $109,998 in 1998 ............ 1,788,953 1,816,177
Other assets .................................... 591,936 614,210
------------ ------------
TOTAL ........................... $ 82,929,018 $ 83,540,135
============ ============
LIABILITIES
Bonds payable ................................... $ 72,750,000 $ 72,750,000
Accrued expenses and other
liabilities ............................. 3,320,852 3,260,661
------------ ------------
Total liabilities ............... 76,070,852 76,010,661
------------ ------------
Due to Preferred Member ......................... 1,500,000 1,500,000
------------ ------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
HELMSTAR GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(continued)
March 31, December 31,
1999 1998
------------ ------------
(Unaudited)
STOCKHOLDERS' EQUITY
<S> <C> <C>
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) ....................................... (7,253,595) (6,605,467)
------------ ------------
Total ........................... 8,405,875 9,054,003
Less treasury stock, at cost -
1,313,927 shares in 1999 and
1,296,227 in 1998 ....................... (3,047,709) (3,024,529)
------------ ------------
Total stockholders' equity ...... 5,358,166 6,029,474
------------ ------------
TOTAL ........................... $ 82,929,018 $ 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
March 31,
----------------------------
1999 1998
----------- -----------
<S> <C> <C>
Revenues:
Profit from joint ventures ........... $ 68,682
Financial consulting fees ............ $ 51,578
Technology placement and
consulting fees .............. 56,512
Interest income ...................... 702,469 1,061,684
Income on securities transactions .... 191,841 117,228
----------- -----------
Total revenues ............... 1,002,400 1,247,594
----------- -----------
Expenses:
Compensation and related costs ....... 449,632 284,269
Occupancy cost ....................... 41,467 40,175
General and administrative ........... 123,087 96,745
Professional fees .................... 91,186 38,027
Interest ............................. 932,313 1,185,333
----------- -----------
Total expenses ............... 1,637,685 1,644,549
----------- -----------
Loss before taxes ............................ (635,285) (396,955)
Provision for income taxes ................... 12,843 45,945
----------- -----------
NET LOSS ..................................... $ (648,128) $ (442,900)
=========== ===========
Per common share - basic and diluted:
Net loss ............................. $ (.12) $ (.08)
=========== ===========
Weighted average number of
common shares outstanding -
basic and diluted .................... 5,436,539 5,516,373
</TABLE>
See Notes to Condensed Consolidated Financial Statements (Unaudited).
<PAGE>
<TABLE>
<CAPTION>
HELMSTAR GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
March 31,
------------------------------
1999 1998
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss ................................................ $ (648,128) $ (442,900)
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:
Depreciation and amortization ................... 48,315 6,257
Unrealized loss (gain) from marketable securities 191,635 (68,682)
Changes in operating assets and liabilities:
Sale of marketable securities ................... 374,563 211,271
(Increase) in other assets ...................... (5,226) (122,423)
(Decrease) increase in accrued expenses ......... 60,191 (390,875)
----------- -----------
Net cash (used in) provided by operating activities ............. 21,350 (62,650)
----------- -----------
Cash flows from investing activities:
Sale of other short term investments - restricted ....... 8,220,791 744,702
Distributions from joint ventures and other investments . 63,000
Purchase of land ........................................ (3,361,448)
Construction in progress ................................ (4,924,448)
Increase in deferred financing costs .................... (82,329)
Purchase of furniture and equipment ..................... (50,513)
----------- -----------
Net cash (used in) provided by investing activities ............. (115,618) (19,329)
----------- -----------
Cash flows from financing activities:
Purchase of treasury stock .............................. (23,180)
----------- -----------
Net cash provided by financing activities ....................... (23,180)
----------- -----------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS ............ (117,448) (81,979)
Cash and cash equivalents at beginning of period ................ 1,040,955 802,352
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ...................... $ 923,507 $ 720,373
=========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest ........................................ $ 1,163,952 $ 791,255
Taxes ........................................... 7,375 31,318
</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. LITIGATION
The Company is a defendant in a lawsuit. The ultimate outcome of the
lawsuit cannot presently be determined, and no provision for any liability that
may result has been made in the financial statements, since the amount, if any,
cannot be determined.
There were no significant changes in the status of this litigation
during the three months ended March 31, 1999.
4. REAL ESTATE TO BE LEASED, UNDER DEVELOPMENT
Real Estate to be Leased, Under Development consists of the following:
<TABLE>
<CAPTION>
March 31, December 31
1999 1998
----------- -----------
(Unaudited)
<S> <C> <C>
Land ................... $17,058,866 $13,697,418
Construction in progress 11,206,884 6,282,436
----------- -----------
Total .................. $28,265,750 $19,979,854
=========== ===========
</TABLE>
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
A. Three Months Ended March 31, 1999 Compared
with Three Months Ended March 31, 1998
Total revenues decreased to $1,002,400 for the three months
ended March 31, 1999 from $1,247,594 for the three months ended
March 31, 1998.
There was no profit or loss from joint ventures for the three
months ended March 31, 1999, as opposed to $68,682 for the three
months ended March 31, 1998. The properties underlying the joint
ventures were sold in the fourth quarter of 1997 and the income
in 1998 was the receipt of certain remainder rentals due the
Company.
Financial consulting fees were $51,578 for the three months
ended March 31, 1999 compared to nil for the three months ended
March 31, 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 $56,512 in
the quarter ended March 31, 1999 from nil for the quarter ended
March 31, 1998 due to the Company's establishment of a new
technology subsidiary, CareerEngine, Inc., in the third quarter
of 1998.
Interest income decreased to $702,469 for the three months ended
March 31, 1999 from $1,061,684 for the three months ended March
31, 1998 due to the reduced amount of development funds
available for investment as the Company commenced construction,
including purchases of land, of the multiplex movie theaters in
the fourth quarter of 1998.
Investment income increased to $191,841 for the three months
ended March 31, 1999 compared to $117,228 for the three months
ended March 31, 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 securities.
Total expenses decreased to $1,637,685 for the three months
ended March 31, 1999 from $1,644,549 for the three months ended
March 31, 1998.
Compensation and related costs increased to $449,632 for the
three months ended March 31, 1999 from $284,269 for the three
months ended March 31, 1998, primarily due to the increase in
the number of employees in our new technology related business.
Occupancy costs increased to $41,467 for the three months ended
March 31, 1999 from $40,175 for the three months ended March 31,
1998.
<PAGE>
General and administrative expenses increased to $123,087 for
the three months ended March 31, 1999 from $96,745 for the three
months ended March 31, 1998. The increase was due primarily to
the operations of the Company's new technology related business.
Professional fees increased to $91,186 for the three months
ended March 31, 1999 from $38,027 for the three months ended
March 31, 1998. The increase is substantially due to the direct
costs associated with the generation of technology consulting
income recorded in the quarter ending March 31, 1999.
Interest expense decreased to $932,313 for the three months
ended March 31, 1999 from $1,185,333 for the three months ended
March 31, 1998 due to the appropriate capitalization of certain
interest expenditures since the commencement of the development
of the multiplex movie theaters.
On a pre-tax basis, the Company had a loss of $635,285 for the
three months ended March 31, 1999 compared with a loss of
$396,955 for the three months ended March 31, 1998. Provision
for income taxes for the three months ended March 31, 1999
decreased to $12,843 compared to $45,945 for the three months
ended March 31, 1998. The current provision consists solely of
state and local taxes for the current period and an adjustment
for the 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 March 31, 1999
was $648,128 compared with a net loss of $442,900 for the three
months ended March 31, 1998. For the three months ended March
31, 1999, net loss was $.12 per share. For the three months
ended March 31, 1998, net loss was $.08 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. Currently the Company's assets
consist primarily of cash and investments which are 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 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.
<PAGE>
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 due
to the Preferred Members, 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
Preferred Members will be paid from rent which commen on
December 1, 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
(the "Theaters"), they will be 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 March 31, 1999, except for the
development of the Theaters with funds provided by the issuance
of the Bonds.
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 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 Consolidated
Financial Statements (Unaudited) in 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 March 31, 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: May 17, 1999 George W. Benoit,
Chairman of the Board
of Directors, President,
Chief Executive Officer
/s/ Anthony S. Conigliaro
-------------------------
Date: May 17, 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
PERIOD ENDED MARCH 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 923,507
<SECURITIES> 51,117,816
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 28,830,379
<DEPRECIATION> 323,573
<TOTAL-ASSETS> 82,929,018
<CURRENT-LIABILITIES> 0
<BONDS> 72,750,000
0
0
<COMMON> 674,960
<OTHER-SE> 4,683,206
<TOTAL-LIABILITY-AND-EQUITY> 82,929,018
<SALES> 0
<TOTAL-REVENUES> 1,002,400
<CGS> 0
<TOTAL-COSTS> 705,372
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 932,313
<INCOME-PRETAX> (635,285)
<INCOME-TAX> 12,843
<INCOME-CONTINUING> (648,128)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (648,128)
<EPS-PRIMARY> (.12)
<EPS-DILUTED> (.12)
</TABLE>
