|-------------------------|
UNITED STATES | OMB |
SECURITIES AND EXCHANGE COMMISSION | APPROVAL |
Washington, D.C. 20549 |OMB Number:3235-0416 |
|Expires: May 31, 2000 |
FORM 10-QSB |Estimated average burden |
|hours per response:9708.0|
(Mark One) |-------------------------|
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT OF
1934
For the quarterly period ended: February 29, 2000
[ ] 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 (IRS Employer
incorporation or organization) Identification No.)
17850 N.E. 5th Avenue, Miami, Florida 33162-1008
------------------------------------------------
(Address of principal executive offices)
(305) 653-2520
------------------------------------------------
(Issuer's telephone number, including area code)
NA
- --------------------------------------------------------------------------
(Former Name, former address and former fiscal year, if changed since last
report)
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 [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 12,654,500 at April 10, 2000
Transitional Small Business Disclosure Format (check one) Yes [ ] No [X]
<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 - February 29, 2000 (unaudited) 1
Condensed Consolidated Statements of Income - Three and nine Months
Ended February 29, 2000 and February 28, 1998(unaudited)........... 2
Condensed Consolidated Statements of Cash Flows - nine Months ended
February 29, 2000 and February 28, 1998 (unaudited) ............... 3
Notes to Condensed Consolidated Financial Statements .............. 5
Item 2-Management's Discussion and Analysis or Plan of Operation ........... 6
Part II-Other Information
Item 5 -Other Information .................................................. 7
Item 6 -Exhibits and reports on Form 8-K ................................... 7
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
EDD HELMS GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET - FEBRUARY 29, 2000 (UNAUDITED)
ASSETS
CURRENT ASSETS
Cash and cash equivalents ......................................... $ 199,095
Restricted cash - certificate of deposit........................... 10,000
Accounts receivable, less allowance for doubtful accounts
of $ 49,502 .............................................. 1,248,483
Due from employees ................................................ 12,796
Costs and estimated earnings in excess
of billings on uncompleted contracts ..................... 312,969
Inventories ....................................................... 621,714
Refundable income taxes............................................ 36,828
Prepaid expenses .................................................. 76,676
----------
TOTAL CURRENT ASSETS .............................................. 2,518,561
----------
PROPERTY AND EQUIPMENT, NET ....................................... 761,835
----------
OTHER ASSETS
Excess of cost over net assets of businesses acquired (Net) ....... 227,253
Other ............................................................. 13,561
----------
TOTAL OTHER ASSETS ................................................ 240,814
----------
TOTAL ASSETS ...................................................... $3,521,210
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt .............................. $ 341,415
Accounts payable .................................................. 419,618
Accrued liabilities ............................................... 199,813
Deferred revenue .................................................. 3,445
Billings in excess of costs and estimated
earnings on uncompleted contracts ........................ 442,429
----------
TOTAL CURRENT LIABILITIES ......................................... 1,406,720
LONG-TERM DEBT .................................................... 260,485
----------
TOTAL LIABILITIES ................................................. 1,667,205
----------
STOCKHOLDERS' EQUITY
Common stock, $.01 par value, 20,000,000 shares authorized,
12,562,100 issued and outstanding ........................ 125,621
Additional paid-in capital ........................................ 183,854
Retained earnings ................................................. 1,544,530
----------
TOTAL STOCKHOLDERS' EQUITY ........................................ 1,854,005
----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ........................ $3,521,210
==========
See accompanying notes
<PAGE>
EDD HELMS GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME - THREE AND
NINE MONTHS ENDED FEBRUARY 29, 2000 AND FEBRUARY 28, 1999 (UNAUDITED)
Three Months Ended Nine Months Ended
Last day of February Last day of February
2000 1999 2000 1999
---------- ----------- ---------- ----------
REVENUES EARNED ..................$3,179,713 $2,633,695 $8,618,773 $7,454,498
COST OF REVENUES EARNED .......... 2,174,636 1,614,722 6,169,024 4,635,786
-------------------------------------------
GROSS PROFIT .................... 1,005,077 1,018,973 2,449,749 2,818,712
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES ........ 727,352 841,727 2,070,576 2,400,091
-------------------------------------------
INCOME (LOSS) FROM OPERATIONS ... 277,725 177,246 379,173 418,621
-------------------------------------------
INTEREST AND INVESTMENT ACTIVITIES
Interest income ................. 107 3,587 8,831 12,364
Interest expense ................ (10,121) (5,544) (22,670) (13,855)
-------------------------------------------
TOTAL INTEREST AND INVESTMENT
ACTIVITIES .............. (10,014) (1,957) (13,839) (1,491)
-------------------------------------------
INCOME (LOSS) BEFORE INCOME TAXES 267,711 175,289 365,334 417,130
-------------------------------------------
INCOME TAXES
Provision for federal and state
income taxes .................. - - (22,382) -
Tax benefit from utilization of net
operating loss carryforward ... - - (22,222) -
-------------------------------------------
INCOME TAXES ..................... - - ( 160) -
-------------------------------------------
NET INCOME (LOSS)................$ 267,711 $ 175,289 $ 365,174 $ 417,130
===========================================
PER SHARE OF COMMON STOCK
(BASIC AND DILUTED) ...........$ .03 $ .02 $ .03 $ .04
===========================================
*WEIGHTED AVERAGE SHARES
OUTSTANDING
(BASIC AND DILUTED) 12,662,160 10,740,677 12,218,741 10,740,677
===========================================
* 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 -
NINE MONTHS ENDED FEBRUARY 29, 2000 AND FEBRUARY 28, 1999 (UNAUDITED)
For the Nine Months Ended
Last day of February
2000 1999
--------- ---------
RECONCILIATION OF NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
Net income ........................................... $365,174 $417,130
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization ........................ 176,115 106,570
Changes in assets (increase) decrease:
Accounts receivable .................................. (315,080) (18,875)
Due from affiliate ................................... - (51,703)
Income taxes receivable............................... (36,828) -
Other receivables .................................... - -
Costs and estimated earnings in excess
of billings on uncompleted contracts ................. (137,510) (117,788)
Inventories .......................................... (93,223) (30,327)
Prepaid expenses and other current assets ............ (11,908) (59,224)
Other assets ......................................... (8,223) 8,695
Changes in liabilities increase (decrease):
Accounts payable ..................................... 10,875 (7,105)
Customer deposits .................................... (56,092) -
Accrued liabilities .................................. (142,750) 112,654
Income taxes payable ................................. (160) (63,247)
Deferred revenues .................................... (1,149) -
Billings in excess of costs and estimated
earnings on uncompleted contracts .................... 300,187 (34,758)
--------- ---------
NET CASH USED BY OPERATING ACTIVITIES ................ 49,428 262,022
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment ................... (336,126) (264,314)
--------- ---------
NET CASH USED BY INVESTING ACTIVITIES ................ (336,126) (264,314)
-------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of notes payable............... 343,257 190,019
Principal payments on long-term debt and notes payable (160,198) (81,974)
Cash received for stock in merger .................... 5,601 -
--------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES ............ 188,660 108,045
--------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS.. ( 98,038) 105,753
CASH AND CASH EQUIVALENTS - BEGINNING ................ 307,133 447,072
--------- ---------
CASH AND CASH EQUIVALENTS - ENDING ................... $209,095 $552,825
====================================================== ========= =========
Supplemental disclosures of non-cash investing and financing transactions:
Interest paid ....................................... $12,549 $ 8,778
Interest received ................................... 5,552 8,312
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
February 29, 2000 AND February 28, 1999 (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. The trading symbol is now
listed as EDDH, effective January 7, 2000.
2. RECLASSIFICATION
Certain amounts recorded in the three and nine months ended February 28, 1999,
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 2,178.6363 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.
6. COMMON STOCK
Treasury Stock. During this quarter, the Company purchased 92,393 shares of
its common stock for $4,658, pursuant to a commitment with its former employee
stock ownership plan, at a valuation effective as of the last fiscal year-end.
7. INCOME TAXES
The Company has a net operating loss carryforward of approximately $3,847,500
with expiration dates through 2019. The utilization of the carryforward is
dependent on the Company's ability to generate sufficient taxable income during
the carryforward periods and no further significant changes in ownership.
Item 2. Management's Discussion and Analysis or Plan of Operation.
SAFE HARBOR STATEMENT
Certain statements in this Form 10-QSB, including information set forth
under Item 2 - Management's Discussion and Analysis or Plan of Operation
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 that 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 nine months ended February 29, 2000, as compared to the nine
months ended February 28, 1999, increased by approximately 16%. The increase is
a result of a general increase of business, particularly service work, and the
addition of business generated by our data communications operations. We have an
ongoing aggressive advertising campaign and believe these increases are due
primarily to our advertising campaign.
COST OF REVENUES EARNED
Costs of revenues increased approximately 33% for the nine months ended February
29, 2000 as compared to the same period in 1999. Them was an increase in costs,
attributable to the increase in revenues1 however, the gross profit for the
period decreased by approximately 9% as compared to the same period in 1999.
This increase is a result of a mom competitive marketplace with a portion of the
Company's construction contract project. A higher percentage of the Company's
work in new construction existed In the current year versus 1999.
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative expenses decreased by 14% in the nine months
ended February 29, 2000, as compared to the same period in 1999. The Company
attributes a portion of this decrease to management's reduction of legal and
accounting expenses this year as opposed to those legal expenses required as the
Company was registering for its merger between Hotelecopy, Inc. and the Edd
Helms, Inc. companies.
NET INCOME
Net income decreased by 12% during the nine month period ending February 29,
2000 as compared to the nine month period ended February 28, 1999. This decrease
is principally the result of an increase in the percentage of the Company's work
directly in the construction arena which carried a lower markup percentage than
service and retrofit work.
LIQUIDITY AND CAPITAL RESOURCES
Edd Helms Group, Inc. had working capital of approximately $1,111,800 and a
ratio of current assets to current liabilities of approximately 1.8 to 1 at
February 29, 2000. This compares with the February 28, 1999 working capital of
approximately $939,092 and a ratio of current assets to current liabilities of
1.9 to 1. During the quarter cash balances increased by 12% while accounts
receivable declined by approximately $51,600. Accounts payable decreased by
approximately $140,000 and customer deposits decreased by approximately
$164,500.
Historically, before the merger, Edd Helms, Inc. has financed its operations 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, plus carrying costs of our work in progress on construction contracts
that have increased during this quarter.
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 of which $150,000 has been drawn.
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 nine months ended February 29, 2000 and February 28, 1999
(See Note 3).
PART II - OTHER INFORMATION
Item 5. Other Information
Effective January 7, 2000, the trading symbol for Edd Helms Group, Inc. became
"EDDH".
Item 6. Exhibits and reports on Form 8-K
(a) Exhibits - Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K - None.
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.
/s/ EDD HELMS GROUP, INC.
---------------------
Registrant
DATE: April 10, 2000 /s/ W. Edd Helms, Jr.
-----------------
W. EDD HELMS, JR.
PRESIDENT AND CHIEF EXECUTIVE OFFICER
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS FOR THE PERIOD ENDED FEBRUARY 29, 2000, AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000854883
<NAME> Edd Helms Group, Inc.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAY-31-2000
<PERIOD-START> JUN-01-1999
<PERIOD-END> FEB-29-2000
<CASH> 209,095
<SECURITIES> 0
<RECEIVABLES> 1,297,985
<ALLOWANCES> 49,502
<INVENTORY> 621,714
<CURRENT-ASSETS> 2,518,561
<PP&E> 2,435,134
<DEPRECIATION> 1,673,299
<TOTAL-ASSETS> 3,521,210
<CURRENT-LIABILITIES> 1,406,720
<BONDS> 0
0
0
<COMMON> 125,621
<OTHER-SE> 1,728,384
<TOTAL-LIABILITY-AND-EQUITY> 3,521,210
<SALES> 0
<TOTAL-REVENUES> 8,618,773
<CGS> 6,169,024
<TOTAL-COSTS> 6,169,024
<OTHER-EXPENSES> 2,070,576
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 22,670
<INCOME-PRETAX> 365,334
<INCOME-TAX> 160
<INCOME-CONTINUING> 365,174
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 365,174
<EPS-BASIC> .03
<EPS-DILUTED> .03
</TABLE>
