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UNITED STATES OMB APPROVAL
SECURITIES AND EXCHANGE COMMISSION ------------------------
Washington, D.C. 20549 OMB Number:3235-0416
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FORM 10-QSB Expires: April 30,2003
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Estimated average burden
hours per response: 32.0
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(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended August 31, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from ______ to ______.
Commission file number: 0-17978
EDD HELMS GROUP, INC.
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(Exact name of small business issuer as specified in its charter)
Florida 59-2605868
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(State or other jurisdiction of incorporation (IRS Employer Identification No.)
or organization)
17850 N.E. 5th Avenue, Miami, Florida 33162-1008
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(Address of principal executive offices)
(305) 653-2520
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(Issuer's telephone number)
(Former name, former address and former fiscal year, if changed since last
report.)
12,581,608 shares of common stock, par value $.01 per share, were outstanding at
October 19, 2000.
Transitional Small Business Disclosure Format (Check one): Yes[__] No[__]
<PAGE>
EDD HELMS GROUP, INC.
AND SUBSIDIARIES
FORM 10-QSB
INDEX
PAGE
PART I-FINANCIAL INFORMATION
Item 1-Consolidated Financial Statements (unaudited)
Consolidated Balance Sheet - August 31, 2000 and 1999 (unaudited) 1
Consolidated Statements of Income and Other Comprehensive Income-
Three Months ended August 31, 2000 and 1999 (unaudited) 2
Consolidated Statements of Cash Flows - Three Months
ended August 31, 2000 and 1999 (unaudited) 3
Notes to Consolidated Financial Statements 5
Item 2-Management's Discussion and Analysis or Plan of Operation 6
PART II-OTHER INFORMATION
Item 1 -Legal Proceedings 7
Item 2 -Changes in Securities 7
Item 3 -Defaults Upon Senior Securities 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>
PART I-FINANCIAL INFORMATION
Item 1-Consolidated Financial Statements (unaudited)
The financial statements in response to this item are as follows:
EDD HELMS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET - AUGUST 31,
(UNAUDITED)
2000 1999
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ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 386,071 $ 310,657
Restricted cash-certificate of deposit 10,000 10,000
Accounts receivable, less allowance for doubtful accounts
of $ 67,582 and $ 51,966 1,822,365 1,028,198
Available-for-sale equity security, at fair market value 86,970 -
Due from employees 14,022 15,063
Costs and estimated earnings in excess
of billings on uncompleted contracts 230,089 164,042
Inventories 543,724 554,916
Prepaid expenses 55,882 124,307
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TOTAL CURRENT ASSETS 3,149,123 2,207,183
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PROPERTY AND EQUIPMENT, NET 793,961 658,959
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OTHER ASSETS
Excess of cost over net assets of businesses acquired, net 207,142 247,365
Deferred income taxes 64,408 -
Other 12,134 8,949
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TOTAL OTHER ASSETS 283,684 256,314
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TOTAL ASSETS $4,226,768 $3,122,456
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt $ 289,193 $ 219,611
Credit arrangement 476,814 -
Accounts payable 734,454 349,222
Customer deposits - 113,799
Accrued liabilities 254,782 347,870
Deferred revenue - 13,403
Billings in excess of costs and estimated earnings
on uncompleted contracts 468,087 129,573
Deferred income taxes 64,408 -
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TOTAL CURRENT LIABILITIES 2,287,738 1,173,478
LONG-TERM DEBT 138,582 262,074
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TOTAL LIABILITIES 2,426,320 1,435,552
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STOCKHOLDERS' EQUITY
Common stock; $.01 par value; 20,000,000 shares
authorized; 12,673,995 issued and 12,581,608
and 12,673,995 outstanding 126,740 126,740
Additional paid-in capital 186,946 198,601
Retained earnings 1,517,722 1,361,563
Treasury stock, 92,387 shares at cost (3,890) -
Unrealized loss on available-for-sale equity security (27,070) -
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TOTAL STOCKHOLDERS' EQUITY 1,800,448 1,686,904
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $4,226,768 $3,122,456
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See accompanying notes.
<PAGE>
EDD HELMS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME
(UNAUDITED)
For the three Months Ended August 31, 2000 1999
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REVENUES EARNED $3,169,664 $2,621,249
COST OF REVENUES EARNED 2,363,541 1,814,358
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GROSS PROFIT 806,123 806,891
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 768,889 622,217
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INCOME FROM OPERATIONS 37,134 184,674
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INTEREST AND OTHER
Interest income 4,578 3,485
Interest expense (17,438) (5,789)
Sale of telephone number 163,867 -
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TOTAL INTEREST AND OTHER 151,007 (2,304)
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INCOME BEFORE INCOME TAXES 188,141 182,370
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INCOME TAXES
Provision for federal and state income taxes (65,849) (56,535)
Tax benefit from utilization of net operating
loss carryforward 65,849 56,375
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INCOME TAXES - (160)
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NET INCOME $ 188,141 $ 182,210
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OTHER COMPREHENSIVE INCOME
NET INCOME $ 188,141 $ 182,210
UNREALIZED LOSS ON AVAILABLE-FOR-SALE EQUITY SECURITY (27,070) -
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TOTAL COMPREHENSIVE INCOME $ 161,071 $ 182,210
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PER SHARE OF COMMON STOCK (BASIC AND DILUTED) $ 0.01 $ 0.01
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*WEIGHTED AVERAGE SHARES OUTSTANDING (BASIC
AND DILUTED) 12,581,608 12,673,995
* Outstanding shares were retroactively restated to reflect the merger
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See accompanying notes.
<PAGE>
EDD HELMS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the three Months Ended August 31, 2000 1999
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RECONCILIATION OF NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
Net income $ 188,141 $ 182,210
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 69,935 49,379
Available-for-sale equity security received for phone number(114,040) -
Changes in assets (increase) decrease:
Accounts receivable (255,201) (95,306)
Costs and estimated earnings in excess
of billings on uncompleted contracts 81,464 11,417
Inventories (77,674) (26,425)
Prepaid expenses and other current assets (25,665) (61,965)
Other assets (1,994) (5,260)
Changes in liabilities increase (decrease):
Accounts payable (101,998) (44,382)
Customer deposits (35,617) 57,707
Accrued liabilities (31,202) (2,316)
Deferred revenues - 8,808
Billings in excess of costs and estimated
earnings on uncompleted contracts 304,867 (12,669)
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NET CASH PROVIDED BY OPERATING ACTIVITIES 1,016 61,198
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (31,621) (126,624)
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NET CASH USED BY INVESTING ACTIVITIES (31,621) (126,624)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of notes 104,506 133,443
Advances to affiliate - 506
Principal payments on long-term debt and notes payable (49,746) (70,600)
Cash received for stock in merger - 5,601
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NET CASH PROVIDED BY FINANCING ACTIVITIES 54,760 68,950
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NET INCREASE IN CASH AND CASH EQUIVALENTS 24,155 3,524
CASH AND CASH EQUIVALENTS - BEGINNING 361,916 307,133
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CASH AND CASH EQUIVALENTS - ENDING $ 386,071 $ 310,657
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See accompanying notes.
<PAGE>
EDD HELMS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
THREE MONTHS ENDED AUGUST 31, 2000 AND 1999
(UNAUDITED)
Supplemental disclosures of non-cash investing and financing transactions:
Interest paid $ 17,438 $ 5,789
Interest received 4,578 3,485
Receipt of available-for-sale equity security in connection
with sale of telephone number 114,040 -
Issuance of note payable in connection with
purchases of property and equipment - 133,443
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
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See accompanying notes.
<PAGE>
EDD HELMS GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1. GENERAL
The accompanying unaudited consolidated 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.
NOTE 2. RECLASSIFICATION
Certain amounts recorded in the three months ended August 31, 1999, have been
reclassified to conform to the current period presentation.
NOTE 3. 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.
NOTE 4. SALE OF TELEPHONE NUMBER
During the quarter ended August 31, 2000, the Company sold a telephone number
used in the fax-mail division. The sales price was represented by the receipt of
marketable securities valued at $114,040 and cash of $49,827, for a total of
$163,867. This entire amount was reflected as income.
<PAGE>
EDD HELMS GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
NOTE 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.
NOTE 6. CONDENSED SEGMENT INFORMATION
The following condensed segment information includes allocations of certain
costs, including overhead and shared services which are allocated based on
revenues, payroll and other factors. These agreed-upon amounts between the
segments may differ from amounts that would be negotiated in an arms-length
transaction.
Air
Electric Conditioning Fax-mail Total
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Revenues earned - $ 1,748,983 $ 1,362,089 $ 58,592 $ 3,169,664
Cost of revenues earned (1,290,334) (1,034,608) (38,599) (2,363,541)
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Gross margins 458,649 327,481 19,993 806,123
Expenses (422,961) (325,956) (32,932) (781,849)
Sale of telephone number - - 163,867 163,867
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Income before income taxes $ 35,688 $ 1,525 $ 150,928 $ 188,141
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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 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, 2000, as compared to the three
months ended August 31, 1999, increased by approximately 21%. The increase is a
result of a general increase of business, in particularly contract work,
including a major construction project in Hallandale, Florida. We have an
ongoing aggressive advertising campaign and believe some of these increases are
due to our advertising campaign, with the balance the result of referrals and
previously satisfied customers.
COST OF REVENUES EARNED
Costs of revenues earned increased approximately 30% for the three months ended
August 31, 2000, as compared to the same period in 1999. Even though there was
an increase in costs, attributable to the increase in revenues, the gross profit
for the period remained almost constant compared to the same period in 1999. We
have made a concerted effort to monitor our purchasing which has a direct effect
on our gross profit percentage. However, certain projects undertaken by our air
conditioning division were not nearly as profitable as was originally projected
at the start of those jobs.
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative expenses increased significantly in the
three months ended August 31, 2000, as compared to the same period in 1999. Most
of the selling, general and administrative expenses remained the same or varied
slightly with general upward trends nationwide. However, a few expenses
increased significantly resulting in major fluctuations of approximately
$147,000 as compared to the same period in 1999. These expenses were:
General inflationary increases $ 27,000
Additional sales personal added, including benefits 60,000
Increased educational expenses 10,000
Advertising 10,000
Other items 40,000
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$ 147,000
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NET INCOME
Net income was about the same in the three-month period ended August 31, 2000,
as compared to the three-month period ended August 31, 1999. This was solely the
result of the sale of a telephone number to a fax-mail company for $163,867. Our
income from operations actually dropped approximately $147,000 due to the
increased expenses discussed above.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Edd Helms Group, Inc. had working capital of approximately $861,385 and a ratio
of current assets to current liabilities of approximately 1.4 to 1 at August 31,
2000. This compares with the August 31, 1999, working capital of approximately
$1,030,000 and a ratio of current assets to current liabilities of 1.9 to 1.
Compared to the same quarter last year, cash balances increased about $75,000.
Accounts receivable increased by approximately $794,000. Accounts payable
increased by approximately $385,000 and customer deposits decreased by
approximately $114,000.
Cash was used to purchase additional vehicles in the continuing upgrade of our
fleet of service vehicles. Offsetting this cash utilization was approximately
$132,000 of proceeds from the issuance of notes, offset by the prepayment of
notes of approximately $50,000.
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. However, we have
used $476,814 of our $500,000 credit line.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
On July 26, 2000, a former employee, filed suit for breach of his employment
agreement. The matter is pending in the Circuit Court of the Eleventh Judicial
Circuit, in and for Miami-Dade County, Florida. The former employee is seeking
compensatory damages, interest and attorneys' fees and costs, as well as a
declaratory judgment as to the restrictive covenant contained within the
employment agreement. The Company denies the allegations set forth in the
complaint. An agreed order granting Defendant's Motion to Dismiss, without
prejudice, has been submitted to the Court for entry. Discovery in this action
has not yet commenced.
The same former employee filed a charge of discrimination with the Equal
Employment Opportunity Commission against the Company, alleging that he was
discriminated against, in violation of the Americans With Disabilities Act of
1990, as amended. The Company's Position Statement regarding this Charge of
Discrimination is due to be submitted to the Equal Employment Opportunity
Commission on or before October 15, 2000.
The Company intends to vigorously defend against the former employee's claims.
Item 2. Changes in Securities
During the quarter ended there were no changes.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Securities Holders
No matters were submitted to a vote.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - 27 Financial Data Schedule
(b) Reports on Form 8-K - None
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.
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(Registrant)
Date October 20, 2000 /s/ W. Edd Helms, Jr.
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W. EDD HELMS, JR.
PRESIDENT AND CHIEF EXECUTIVE OFFICER
