UNITED STATES
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 ACT OF
1934 For the quarterly period ended: August 31, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the transition period from ______ to ______.
Commission file number: 0-17978
EDD HELMS GROUP, INC.
(Exact name of small business issuer as specified in its charter)
Florida 59-2605868
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
17850 N.E. 5th Avenue, Miami, Florida 33162-1008
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (305) 653-2520
HOTELECOPY, INC.
(Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark 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 [ ]
12,673,995 shares of Common Stock, par value $.01 per share, were outstanding at
October 12, 1999.
<PAGE>
EDD HELMS GROUP, INC.
AND SUBSIDIARIES
FORM 10-QSB
INDEX
PAGE
Part I-Financial Information
Item 1-Condensed Consolidated Financial Statements (unaudited)
Condensed Consolidated Balance Sheet - August 31, 1999 (unaudited) 1
Condensed Consolidated Statements of Income - Three Months ended
August 31, 1999 and 1998 (unaudited) 2
Condensed Consolidated Statements of Cash Flows - Three Months
ended August 31, 1999 and 1998 (unaudited) 3
Notes to Condensed Consolidated Financial Statements 5
Item 2-Management's Discussion and Analysis of Financial Condition
and Results of Operations 6
Part II-Other Information
Item 2 -Changes in Securities and Use of Proceeds 7
Item 4 -Submission of matters to a Vote of Securities Holders 7
Item 5 -Other Information 8
Item 6 -Exhibits and reports on Form 8-K 8
<PAGE>
EDD HELMS GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET - AUGUST 31, 1999 (UNAUDITED)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 310,657
Restricted cash-certificate of deposit 10,000
Accounts receivable, less allowance for doubtful accounts
of $ 51,966 1,028,198
Due from employees 15,063
Costs and estimated earnings in excess
of billings on uncompleted contracts 164,042
Inventories 554,916
Prepaid expenses 124,307
------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 2,207,183
------------------------------------------------------------------------------
PROPERTY AND EQUIPMENT, NET 658,959
------------------------------------------------------------------------------
OTHER ASSETS
Excess of cost over net assets of businesses acquired (Net) 247,365
Other 8,949
------------------------------------------------------------------------------
TOTAL OTHER ASSETS 256,314
------------------------------------------------------------------------------
TOTAL ASSETS $ 3,122,456
==============================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt $ 219,611
Accounts payable 349,222
Customer deposits 113,799
Accrued liabilities 347,870
Deferred revenue 13,403
Billings in excess of costs and estimated earnings
on uncompleted contracts 129,573
------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 1,173,478
LONG-TERM DEBT 262,074
------------------------------------------------------------------------------
TOTAL LIABILITIES 1,435,552
------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Common stock; $.01 par value; 20,000,000 shares authorized,
12,673,995 issued and outstanding 126,740
Additional paid-in capital 198,601
Retained earnings 1,361,563
------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 1,686,904
------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 3,122,456
==============================================================================
See accompanying notes.
<PAGE>
EDD HELMS GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME - THREE MONTHS ENDED AUGUST 31,
1999 AND 1998 (UNAUDITED)
1999 1998
----------- -----------
REVENUES EARNED $ 2,621,249 $ 2,375,651
COST OF REVENUES EARNED 1,814,358 1,686,712
------------------------------------------------------------------------------
GROSS PROFIT 806,891 688,939
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 622,217 629,444
------------------------------------------------------------------------------
INCOME FROM OPERATIONS 184,674 59,495
------------------------------------------------------------------------------
INTEREST AND INVESTMENT ACTIVITIES
Interest income 3,485 6,065
Interest expense (5,789) (4,474)
------------------------------------------------------------------------------
TOTAL INTEREST AND INVESTMENT ACTIVITIES (2,304) 1,591
------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 182,370 61,086
------------------------------------------------------------------------------
INCOME TAXES
Provision for federal and state income taxes (56,535) (20,769)
Tax benefit from utilization of net operating
loss carryforward 56,375 -
------------------------------------------------------------------------------
INCOME TAXES (160) (20,769)
------------------------------------------------------------------------------
NET INCOME $ 182,210 $ 40,317
==============================================================================
PER SHARE OF COMMON STOCK (BASIC AND DILUTED) $ .01 $ -
==============================================================================
*WEIGHTED AVERAGE SHARES OUTSTANDING (BASIC
AND DILUTED) 12,673,995 12,673,995
* Outstanding shares were retroactively restated to reflect the merger
===============================================================================
See accompanying notes.
<PAGE>
EDD HELMS GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - THREE MONTHS ENDED AUGUST 31,
1999 AND 1998(UNAUDITED)
For the three Months Ended August 31, 1999 1998
-------- ---------
RECONCILIATION OF NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
Net income $182,210 $ 40,317
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 49,379 34,017
Changes in assets (increase) decrease:
Accounts receivable (95,306) (52,335)
Costs and estimated earnings in excess
of billings on uncompleted contracts 11,417 5,607)
Inventories (26,425) -
Prepaid expenses and other current assets (61,965) (93,224)
Other assets (5,260) 3,970
Changes in liabilities increase (decrease):
Accounts payable (44,382) 22,466
Customer deposits 57,707
Accrued liabilities (2,316) 7,315
Income taxes payable - 20,769
Deferred revenues 8,808 -
Billings in excess of costs and estimated
earnings on uncompleted contracts (12,669) (73,201)
------------------------------------------------------------------------------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 61,198 (95,513)
------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (126,624) (33,220)
------------------------------------------------------------------------------
NET CASH USED BY INVESTING ACTIVITIES (126,624) (33,220)
------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of notes 133,443 24,606
Advances to affiliate 506 -
Principal payments on long-term debt and notes payable (70,600) (31,889)
Cash received for stock in merger 5,601 -
------------------------------------------------------------------------------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES 68,950 (7,283)
------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 3,524 (136,016)
CASH AND CASH EQUIVALENTS - BEGINNING 307,133 447,072
------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS - ENDING $310,657 $311,056
==============================================================================
See accompanying notes.
<PAGE>
EDD HELMS GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - THREE MONTHS ENDED AUGUST 31,
1999 AND 1998(UNAUDITED)(CONTINUED)
Supplemental disclosures of non-cash investing and financing transactions:
Interest paid $ 5,789 4,474
Interest received 3,485 6,065
Issuance of note payable in connection with
purchases of property and equipment 133,443 24,606
Issuance of common stock in connection with
merger:
Certificate of deposit (10,000)
Accounts receivable (824)
Deferred tax asset (179,176)
Deposits (2,265)
Other assets (539)
Goodwill (178,622)
Assumption of liabilities 69,334
Intercompany account 50,125
See accompanying notes.
<PAGE>
EDD HELMS GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1. GENERAL
The accompanying unaudited consolidated condensed financial statements of the
Company have been prepared in accordance with Rule 10-01 of Regulation S-X
promulgated by the Securities and Exchange Commission and do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, the
Company has made all adjustments necessary for a fair presentation of the
results of the interim periods, and such adjustments consist of only normal
recurring adjustments. The results of operations for such interim periods are
not necessarily indicative of results of operations for a full year.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
Effective July 30, 1999, the shareholders of Hotelecopy approved an agreement
and plan of merger by and between Hotelecopy, Inc. and Edd Helms, Incorporated
whereby Edd Helms, Incorporated was merged with and into Hotelecopy, and
Hotelecopy's name was changed to Edd Helms Group, Inc.
2. RECLASSIFICATION
Certain amounts recorded in the three months ended August 31, 1998, have been
reclassified to conform to the current period presentation.
3. BUSINESS COMBINATION
On July 8, 1999, Hotelecopy filed a proxy in connection with an anticipated
solicitation of its shareholders' proxies to approve an agreement and plan of
merger with Edd Helms, Incorporated, a Florida corporation ("EHI"). The merger
was accounted for as a reverse acquisition purchase, as if EHI had acquired
Hotelecopy. The shareholders of EHI each received 2178.6363 shares of
Hotelecopy's common stock in exchange for each outstanding share of EHI's common
stock they owned. The proxy statement also provided for the consideration and
vote upon the change of Hotelecopy's name to Edd Helms Group, Inc. as well as
consideration and vote upon an amendment to Hotelecopy's Articles of
Incorporation to increase the number of authorized shares of its common stock,
par value $.01 per share, to 20,000,000 shares.
The shareholders' meeting was held on July 30, 1999 and all proposals were
approved.
The consolidated condensed financial statements reflect Hotelecopy's activity
from the effective date of the reverse acquisition only, and the activities of
EHI for all prior periods concerned.
4. AMORTIZATION
Goodwill representing the acquisition of a communication business acquired
during the fiscal year ended May 31, 1999, is being amortized over 15 years
using the straight-line method. Goodwill resulting from the merger is being
amortized over 5 years using the straight-line method.
<PAGE>
EDD HELMS GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
5. NET INCOME PER COMMON SHARE
Net income per common share has been computed (basic and diluted) for all
periods presented and is based on the weighted average number of shares
outstanding during the period. There are no common stock equivalents resulting
from dilutive stock options.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
SAFE HARBOR STATEMENT
Certain statements in this Form 10-QSB, including information set forth under
Item 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations constitute 'forward-looking statements' within the meaning of the
Private Securities Litigation Reform Act of 1995 (the Act). Edd Helms Group,
Inc. desires to avail itself of certain 'safe harbor' provisions of the Act and
is therefore including this special note to enable us to do so. Forward-looking
statements in this Form 10-QSB or hereafter included in other publicly available
documents filed with the Securities and Exchange Commission, reports to our
stockholders and other publicly available statements issued or released by us
involve known and unknown risks, uncertainties and other factors which could
cause our actual results, performance (financial or operating) or achievements
to differ from the future results, performance (financial or operating) or
achievements expressed or implied by such forward-looking statements. Such
future results are based upon management's best estimates based upon current
conditions and most recent results of operations.
REVENUES EARNED
Revenues for the three months ended August 31, 1999, as compared to the three
months ended August 31, 1998, increased by approximately 10%. The increase is a
result of a general increase of business, in particularly service work. We have
an ongoing aggressive advertising campaign and believe these increases are
primarily due to our advertising campaign.
COST OF REVENUES EARNED
Costs of revenues increased approximately 7% for the three months ended August
31, 1999, as compared to the same period in 1998. Even though there was an
increase in costs, attributable to the increase in revenues, the gross profit
for the period increased slightly compared to the same period in 1998. We have
made a concerted effort to monitor our purchasing which has a direct effect on
our gross profit percentage.
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative expenses decreased insignificantly in the
three months ended August 31, 1999, as compared to the same period in 1998. Most
of the selling, general and administrative expenses remained the same or varied
slightly. Some expenses increased, some decreased, but there were no significant
fluctuations as compared to the same period in 1998.
NET INCOME
Net income increased significantly in the three-month period ended August 31,
1999, as compared to the three-month period ended August 31, 1998. This increase
is a result of an increase in revenues earned by the merged company and the tax
benefit from the utilization of net operating loss carryforwards of the merged
company.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Edd Helms Group, Inc. had working capital of approximately $1,030,000 and a
ratio of current assets to current liabilities of approximately 1.9 to 1 at
August 31, 1999. This compares with the August 31, 1998 working capital of
approximately $720,000 and a ratio of current assets to current liabilities of
1.6 to 1. During the quarter cash balances increased slightly. Accounts
receivable increased by approximately $95,000. Accounts payable decreased by
approximately $45,000 and customer deposits increased by approximately $57,000.
Cash was used to purchase additional vehicles in the continuing upgrade of our
fleet of service vehicles. Offsetting this cash utilization was approximately
$133,000 of proceeds from the issuance of notes, offset by the prepayment of
notes of approximately $70,000.
Historically, prior to the merger, Edd Helms, Inc. has financed its operation
and growth with internally generated working capital. Our primary requirement
for capital (other than that related to any future acquisition) consists of
purchasing vehicles, inventory and supplies used in the operation of the
business.
We anticipate that our cash flow from operations will provide cash in excess of
our normal working capital needs, debt service requirements and planned capital
expenditures for property and equipment in the year ahead. We also have a
$250,000 credit line that we have not currently used.
PRESENTATION
The condensed consolidated financial statements reflect Hotelecopy's activity
from the effective date of the reverse acquisition and the activities of Edd
Helms, Inc. for the three months ended August 31, 1999 (See Note 3).
PART II - OTHER INFORMATION
Item 2. Changes in Securities
During the quarter, and as a result of the merger between Hotelecopy and Edd
Helms, Incorporated (EHI) each outstanding share of EHI common stock was
converted into 2,178.6363 shares of Hotelecopy common stock effective August 2,
1999. A total of 10,740,677 shares of common stock were issued to three
shareholders. All such shares were issued without registration in reliance upon
the exemption from registration provided by Section 4(2) of the Securities Act
of 1933, as amended. Each shareholder has agreed not to further distribute the
shares and all stock certificates bear an investment legend to such effect.
Hotelecopy's authorized common stock was increased to 20,000,000 shares. The
information with respect to Change in Securities is incorporated herein by
reference to the proxy statement dated July 8, 1999.
Item 4. Submission of Matters to a Vote of Securities Holders
A special meeting of shareholders of Hotelecopy, Inc was held on July 30, 1999
approving the following:
1. The Agreement and Plan of Merger, dated as of March 26, 1999 between
Hotelecopy and Edd Helms, Incorporated, a Florida corporation ("EHI"), whereby
EHI was merged with and into Hotelecopy. The shareholders of EHI each received
2,178.6363 shares of Hotelecopy's common stock in exchange for each outstanding
share of EHI's common stock owned by them (the merger). The proposal was adopted
by a vote of 1,716,670 for 1,700 against and 100 abstaining.
2. The change of the name of Hotelecopy, Inc. to Edd Helms Group, Inc.
The proposal was adopted by a vote of 1,716,670 for 1,700 against and 100
abstaining.
3. An amendment to Hotelecopy's Articles of Incorporation increasing the number
of authorized shares of common stock, par value $.01 per share to 20,000,000
shares. The proposal was adopted by a vote of 1,715,170 for 2,200 against and
1,100 abstaining.
The information with respect to a Submission of Matters to a Vote of Security
Holders is incorporated herein by reference to the proxy statement dated July 8,
1999.
Item 5. Other Information
A proxy was filed on July 8, 1999, for a special meeting of shareholders to be
held on July 30, 1999:
1. To consider and vote upon the Agreement and Plan of Merger dated as of March
26, 1999, between Hotelecopy and Edd Helms, Incorporated, a Florida Corporation
("EHI"), whereby EHI would be merged with and into Hotelecopy. The shareholders
of EHI each received 2,178.6363 shares of Hotelecopy's common stock in exchange
for each outstanding share of EHI's common stock owned by them (the merger).
2. To consider and vote upon the change of Hotelecopy's name to Edd Helms Group,
Inc
3. To consider and vote upon an amendment to Hotelecopy's Articles of
Incorporation to increase the number of authorized shares of its common stock,
par value $.01 per share, to 20,000,000 shares.
4. To transact such other business as may properly come before the Special
Meeting. At that special shareholder meeting of July 30, 1999, the Registrant's
shareholders approved all of the above.
The proxy filed on July 8, 1999, is incorporated herein by reference.
Item 6. Exhibits and reports on Form 8-K
(a) Exhibits - Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K -
On August 3, 1999, the Company filed a current report on Form 8-K, which
disclosed the following:
Item 1. Changes in Control of Registrant
(a) Effective July 30, 1999, the Shareholders of Registrant approved an
Agreement and Plan of Merger by and between Registrant and Edd Helms
Incorporated, a Florida corporation ("EHI"), whereby Helms was merged with and
into Registrant. As a result of the merger, W. Edd Helms, Jr., who owned 44% of
the issued and outstanding common stock of Registrant prior to the merger now
owns, as a result of the merger, approximately 83% of Registrant's issued and
outstanding common stock. W. Edd Helms, Jr. was Chairman of the Board, President
and Chief Executive Officer of Registrant prior to the merger and remains so
subsequent to the merger.
Item 2. Acquisition or Disposition of Assets
The principles followed in determining the consideration to be received in the
Merger was based on the relative values of the two companies, and included
consideration of factors such as book value of Hotelecopy's and Edd Helms
Incorporated's shares, the value of Edd Helms Incorporated's business as a going
concern, the value that Hotelecopy might receive were it to sell itself as a
shell corporation to an unrelated third party, the benefits of the Merger to Edd
Helms Incorporated and its shareholders by providing a market for Edd Helms
Incorporated's shareholders' shares in the merged companies and a more visible
public presence for Edd Helms Incorporated's business. The Merger consideration
is not the result of arms' length bargaining between Hotelecopy and Edd Helms
Incorporated, nor was the opinion of any financial advisor sought.
No funds were obtained from any third party, including any bank, for the
transaction. All funds required were provided by Edd Helms Incorporated, as the
Registrant had no funds available for such purpose. The business of both the
Registrant and Edd Helms Incorporated are intended to be continued subsequent to
the merger.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
EDD HELMS GROUP, INC.
October 13, 1999 /s/ W. Edd Helms, Jr.
DATE W. EDD HELMS, JR.
PRESIDENT AND CHIEF EXECUTIVE OFFICER
/s/ Philip H. Kabot
PHILIP H. KABOT
CHIEF FINANCIAL OFFICER
<TABLE> <S> <C>
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<LEGEND>
(Replace this text with the legend)
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<CIK> 0000854883
<NAME> Edd Helms Group, Inc.
<CURRENCY> Dollar
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<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-31-2000
<PERIOD-START> JUN-01-1999
<PERIOD-END> AUG-31-1999
<EXCHANGE-RATE> 1
<CASH> 310,657
<SECURITIES> 0
<RECEIVABLES> 1,080,164
<ALLOWANCES> 51,966
<INVENTORY> 554,916
<CURRENT-ASSETS> 2,207,183
<PP&E> 1,822,263
<DEPRECIATION> 1,163,304
<TOTAL-ASSETS> 3,122,456
<CURRENT-LIABILITIES> 1,173,478
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0
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<COMMON> 126,740
<OTHER-SE> 1,560,164
<TOTAL-LIABILITY-AND-EQUITY> 3,122,456
<SALES> 2,621,249
<TOTAL-REVENUES> 2,621,249
<CGS> 1,814,358
<TOTAL-COSTS> 1,814,358
<OTHER-EXPENSES> 622,217
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<INTEREST-EXPENSE> 5,789
<INCOME-PRETAX> 182,370
<INCOME-TAX> 160
<INCOME-CONTINUING> 182,210
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