|-------------------------|
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: November 30, 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 (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 January 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 - November 30, 1999 (unaudited) 1
Condensed Consolidated Statements of Income - Three and Six Months
Ended November 30, 1999 and 1998 (unaudited) ...................... 2
Condensed Consolidated Statements of Cash Flows - Six Months ended
November 30, 1999 and 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 - NOVEMBER 30, 1999 (UNAUDITED)
ASSETS
CURRENT ASSETS
Cash and cash equivalents ......................................... $ 177,797
Restricted cash - certificate of deposit .......................... 10,000
Accounts receivable, less allowance for doubtful accounts
of $ 49,924 .............................................. 1,300,125
Due from employees ................................................ 18,842
Costs and estimated earnings in excess
of billings on uncompleted contracts ..................... 275,385
Inventories ....................................................... 559,409
Prepaid expenses .................................................. 125,631
----------
TOTAL CURRENT ASSETS .............................................. 2,467,189
----------
PROPERTY AND EQUIPMENT, NET ....................................... 700,658
----------
OTHER ASSETS
Excess of cost over net assets of businesses acquired (Net) ....... 237,309
Other ............................................................. 8,455
----------
TOTAL OTHER ASSETS ................................................ 245,764
----------
TOTAL ASSETS ...................................................... $3,413,611
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt .............................. $ 369,824
Accounts payable .................................................. 559,382
Customer deposits ................................................. 164,540
Accrued liabilities ............................................... 261,085
Deferred revenue .................................................. 6,436
Billings in excess of costs and estimated
earnings on uncompleted contracts ........................ 201,871
----------
TOTAL CURRENT LIABILITIES ......................................... 1,563,138
LONG-TERM DEBT .................................................... 260,486
----------
TOTAL LIABILITIES ................................................. 1,823,624
----------
STOCKHOLDERS' EQUITY
Common stock, $.01 par value, 20,000,000 shares authorized,
12,654,500 issued and outstanding ........................ 126,545
Additional paid-in capital ........................................ 186,625
Retained earnings ................................................. 1,276,817
----------
TOTAL STOCKHOLDERS' EQUITY ........................................ 1,589,987
----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ........................ $3,413,611
==========
See accompanying notes
<PAGE>
EDD HELMS GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME - THREE AND
SIX MONTHS ENDED NOVEMBER 30, 1999 AND 1998 (UNAUDITED)
Three Months Ended Six Months Ended
November 30, November 30,
1999 1998 1999 1998
---------- ----------- ---------- ----------
REVENUES EARNED ..................$2,817,811 $2,350,836 $5,439,060 $4,726,487
COST OF REVENUES EARNED .......... 2,180,030 1,716,359 3,994,388 3,403,071
-------------------------------------------
GROSS PROFIT .................... 637,781 634,477 1,444,672 1,323,416
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES ........ 721,007 452,629 1,343,224 1,082,072
-------------------------------------------
INCOME (LOSS) FROM OPERATIONS ... (83,226) 181,848 101,448 241,344
-------------------------------------------
INTEREST AND INVESTMENT ACTIVITIES
Interest income ................. 5,239 2,744 8,724 8,809
Interest expense ................ (6,760) (3,837) (12,549) (8,311)
-------------------------------------------
TOTAL INTEREST AND INVESTMENT
ACTIVITIES .............. (1,521) (1,093) (3,825) 498
-------------------------------------------
INCOME (LOSS) BEFORE INCOME TAXES (84,747) 180,755 97,623 241,842
-------------------------------------------
INCOME TAXES
Provision for federal and state
income taxes .................. 34,153 (61,457) (22,382) (82,226)
Tax benefit from utilization of net
operating loss carryforward ... (34,153) - 22,222 -
-------------------------------------------
INCOME TAXES ..................... - (61,457) ( 160) (82,226)
-------------------------------------------
NET INCOME (LOSS)................$ (84,747) $119,298 $ 97,463 $ 159,616
===========================================
PER SHARE OF COMMON STOCK
(BASIC AND DILUTED) ...........$ (.01) $ .01 $ .01 $ .01
===========================================
*WEIGHTED AVERAGE SHARES
OUTSTANDING
(BASIC AND DILUTED) 12,669,798 10,740,677 11,563,093 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 -
SIX MONTHS ENDED NOVEMBER 30, 1999 AND 1998(UNAUDITED)
For the Six Months Ended
November 30,
1999 1998
--------- ---------
RECONCILIATION OF NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
Net income ........................................... $97,463 $159,616
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization ........................ 111,463 71,113
Stock repurchase ..................................... ( 4,658) -
Changes in assets (increase) decrease:
Accounts receivable .................................. (367,232) 150,339
Due from affiliate ................................... - (28,089)
Other receivables .................................... (9,037) (2,948)
Costs and estimated earnings in excess
of billings on uncompleted contracts ................. (99,926) (205,221)
Inventories .......................................... (30,918) (51,346)
Prepaid expenses and other current assets ............ (62,155) (106,582)
Other assets ......................................... - 1,806
Changes in liabilities increase (decrease):
Accounts payable ..................................... 165,731 (1,455)
Customer deposits .................................... 108,448 -
Accrued liabilities .................................. (96,568) (11,367)
Income taxes payable ................................. (160) 82,226
Deferred revenues .................................... 1,841 8,517
Billings in excess of costs and estimated
earnings on uncompleted contracts .................... 59,629 (81,150)
--------- ---------
NET CASH USED BY OPERATING ACTIVITIES ................ (126,079) ( 14,541)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment ................... (220,372) (120,717)
--------- ---------
NET CASH USED BY INVESTING ACTIVITIES ................ (220,372) (120,717)
-------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of notes payable............... 193,257 71,481
Principal payments on long-term debt and notes payable (131,746) (67,380)
Proceeds from credit line ............................ 150,000 -
Cash received for stock in merger .................... 5,604 -
--------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES ............ 217,115 4,101
--------- ---------
NET DECREASE IN CASH AND CASH EQUIVALENTS ............ (129,336) (131,157)
CASH AND CASH EQUIVALENTS - BEGINNING ................ 307,133 447,072
--------- ---------
CASH AND CASH EQUIVALENTS - ENDING ................... $177,797 $315,915
====================================================== ========= =========
See accompanying notes
<PAGE>
EDD HELMS GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS -
SIX MONTHS ENDED NOVEMBER 30, 1999 AND 1998(UNAUDITED)(CONTINUED)
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
(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 six months ended November 30, 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 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 19,472.73 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 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 six months ended November 30, 1999, as compared to the six
months ended November 30, 1998, increased by approximately 15%. 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
primarily due to our advertising campaign.
COST OF REVENUES EARNED
Costs of revenues increased approximately 17% for the six months ended November
30, 1999, as compared to the same period in 1998. There was an increase in
costs, attributable to the increase in revenues, the gross profit for the period
increased by approximately 9% as compared to the same period in 1998. This
increase is a result of increased sales and containment of the costs in relation
to those sales.
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative expenses increased by 24% in the six months
ended November 30, 1999, as compared to the same period in 1998. The Company
attributes a portion of this increase to increased costs as a result of the
addition of the data communications and of the Hotelecopy operations.
NET INCOME
Net income decreased by 39% during the six-month period ended November 30, 1999,
as compared to the six-month period ended November 30, 1998. This decrease is
principally the result of an increase in cost of revenues earned by the merged
company.
LIQUIDITY AND CAPITAL RESOURCES
Edd Helms Group, Inc. had working capital of approximately $904,051 and a ratio
of current assets to current liabilities of approximately 1.6 to 1 at November
30,1999. This compares with the November 30, 1998 working capital of
approximately $973,250 and a ratio of current assets to current liabilities of
2.1 to 1. During the quarter cash balances increased by 43% while accounts
receivable increased by approximately $272,000. Accounts payable increased by
approximately $210,000 and customer deposits increased by approximately $51,000.
Historically, prior to 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 financing of construction projects which 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 six months ended November 30, 1999 and 1998 (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: January 11, 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 NOVEMBER 30, 1999, AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000854883
<NAME> Edd Helms Group, Inc.
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-31-2000
<PERIOD-START> JUN-01-1999
<PERIOD-END> NOV-30-1999
<CASH> 177,797
<SECURITIES> 0
<RECEIVABLES> 1,350,049
<ALLOWANCES> 49,924
<INVENTORY> 559,409
<CURRENT-ASSETS> 2,467,189
<PP&E> 2,324,499
<DEPRECIATION> 1,623,841
<TOTAL-ASSETS> 3,413,611
<CURRENT-LIABILITIES> 1,563,138
<BONDS> 0
0
0
<COMMON> 126,545
<OTHER-SE> 1,463,442
<TOTAL-LIABILITY-AND-EQUITY> 3,413,611
<SALES> 0
<TOTAL-REVENUES> 5,439,060
<CGS> 3,994,388
<TOTAL-COSTS> 3,994,388
<OTHER-EXPENSES> 1,343,224
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,549
<INCOME-PRETAX> 97,623
<INCOME-TAX> 160
<INCOME-CONTINUING> 97,463
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 97,463
<EPS-BASIC> .01
<EPS-DILUTED> .01
</TABLE>
