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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) January 2, 1996
(December 18, 1995)
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HELMSTAR GROUP, INC.
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(Exact name of registrant as specified in its charter)
Delaware 1-9224 13-2689850
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(State or other (Commission File (IRS Employer
jurisdiction of Number) Identification No.)
incorporation)
2 World Trade Center, Suite 2112, New York, New York 10048
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 775-0400
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(Former name or former address, if changed since last report.)
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Item 2. Disposition of Assets.
On December 18, 1995, Citizens Mortgage Service Company ("Citizens
Mortgage"), a wholly-owned subsidiary of Helmstar Group, Inc. (the "Company"),
completed a bulk sale of substantially all of its mortgage servicing rights
(approximately 93%). The consideration for the sale of the mortgage servicing
rights was approximately $2,307,000 in cash. In addition, the purchaser
reimbursed Citizens for the transfer of certain advances previously made by
Citizens on behalf of mortgagors and mortgagees. These advances were
approximately $104,000. The direct expenses of the disposition were
approximately $119,000. In the future, Citizens may recover advances made on
behalf of mortgagors and mortgagees in connection with servicing certain
mortgage loans which are 90 days or more delinquent, in bankruptcy, or in
foreclosure at the time the servicing rights relating to such loans were
transferred. These advances aggregate approximately $349,000 and will be repaid
to Citizens when the purchaser recovers such sums from delinquent mortgagors or
foreclosure sales proceeds.
Citizens is in the process of selling the balance of its mortgage
servicing portfolio in unrelated transactions to other buyers. It will withdraw
from mortgage servicing as a separate activity and focus its efforts on mortgage
originations.
The sale of the mortgage servicing rights was completed pursuant to the
terms of a Loan Servicing Purchase and Sale Agreement, a copy of which is
attached hereto as Exhibit 10.9.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Financial statements of businesses acquired.
N/A
(b) Pro Forma Financial Information.
1. Pro Forma Condensed Consolidated Balance Sheet (Unaudited) as of
the end of the period covered by the Company's most recent Form
10-Q, three months ended September 30, 1995.
2. Pro Forma Condensed Consolidated Statements of Operations
(Unaudited) for the year ended December 31, 1994 and the nine months
ended September 30, 1995 giving effect to the sale of substantially
all of Citizens' mortgage servicing rights and the winding down of
mortgage servicing as a separate activity.
(c) Exhibits.
Exhibit 10.8E: Loan Servicing Purchase and Sale Agreement dated
November 6, 1995 by and between Atlantic Mortgage &
Investment Corporation and Citizens Mortgage Service
Company.
PRO FORMA CONDENSED BALANCE SHEET (UNAUDITED)
The following Pro Forma Condensed Consolidated Balance Sheet
(Unaudited) as of the nine months ended September 30, 1995 gives effect to the
bulk sale of substantially all of the mortgage servicing rights of Citizens
Mortgage Service Company ("Citizens") as if such transaction had occurred as of
the end of the aforementioned interim period. The mortgage servicing rights sold
in the transaction described in Item 2 on page 2 of this Form 8-K were
eliminated in this financial statement. The potential impact of the sale of the
remaining mortgage servicing rights and the cost of winding down the mortgage
servicing department as a separate activity have been ignored, since the net
effect on the financial statements of Helmstar Group, Inc. & Subsidiaries (the
"Company") would not be material. The pro forma information is based on the
historical statements of the Company, giving effect to the bulk sale and
adjustments in the accompanying Notes to the Pro Forma Condensed Consolidated
Balance Sheet (Unaudited) and the Pro Forma Condensed Consolidated Statements of
Operations (Unaudited).
The pro forma statement may not be indicative of the financial position
that actually would have occurred had the disposition taken place on September
30, 1995. The pro forma statement should be read in conjunction with the
financial statements and notes thereto of the Company in its Annual Report on
Form 10-KSB for the year ended December 31, 1994 and the Company's Quarterly
Report on Form 10-QSB for the interim period ended September 30, 1995.
HELMSTAR GROUP, INC. & SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
SEPTEMBER 30, 1995
Historical
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Helmstar Group, Inc. Pro Forma
& Subsidiaries Adjustments Pro Forma
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Cash and cash equivalents................................. $ 1,196,329 $ 2,292,032 (A) $ 3,488,361
Marketable securities .................................... 890,883 890,883
Joint ventures including advances......................... 1,465,513 1,465,513
Mortgage servicing rights - net of
accumulated amortization ............................. 1,859,768 (1,827,291)(B) 32,477
Other investments......................................... 734,979 734,979
Mortgage loans held for sale.............................. 1,751,203 1,751,203
Due for mortgage loans sold............................... 155,449 155,449
Furniture, equipment and
leasehold improvements - at cost,
less accumulated depreciation and
amortization of $348,576 ............................. 217,583 217,583
Other assets.............................................. 736,935 (104,001)(C) 632,934
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TOTAL............................................ $ 9,008,642 $ 360,740 $ 9,369,382
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LIABILITIES
Notes payable.............................................
Accrued expenses and other
liabilities........................................... $ 1,111,715 $ 1,111,715
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Total liabilities................................ 1,111,715 1,111,715
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(Continued)
HELMSTAR GROUP, INC. & SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
SEPTEMBER 30, 1995
(Continued)
Historical
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Helmstar Group, Inc. Pro Forma
& Subsidiaries Adjustments Pro Forma
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STOCKHOLDERS' EQUITY
Common stock - authorized
10,000,000 shares, par value
$.10; issued 6,749,600 shares......................... 674,960 674,960
Paid-in surplus........................................... 14,984,510 14,984.510
Unrealized gain on securities
available for sale.................................... 355,635 355,635
(Deficit)................................................. (5,214,468) $ 360,740 (D) (4,853,728)
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Total............................................ 10,800,637 360,740 11,161,377
Less treasury stock, at cost -
1,201,227 shares ..................................... (2,903,710) (2,903,710)
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Total stockholders' equity....................... 7,896,927 360,740 8,257,667
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TOTAL............................................ $ 9,008,642 $ 360,740 $ 9,369,382
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See Notes to Pro Forma Condensed Consolidated Balance Sheet (Unaudited) and
Pro Forma Condensed Consolidated Statements of Operations (Unaudited).
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
The following Pro Forma Condensed Consolidated Statements of Operations
(Unaudited) for the year ended December 31, 1994 and the nine months ended
September 30, 1995 give effect to the bulk sale of substantially all of the
mortgage servicing rights of Citizens as if such transaction had occurred as of
the beginning of the aforementioned periods. Additionally, the impact of
withdrawing from mortgage servicing as a separate activity has been reflected in
such financial statements. The results of the mortgage servicing department of
Citizens for the year ended December 31, 1994 and the nine months ended
September 30, 1995, respectively, are eliminated in these financial statements.
The pro forma information is based on the historical statements of the Company,
giving effect to the bulk sale and adjustments in the accompanying Notes to Pro
Forma Condensed Consolidated Balance Sheet (Unaudited) and the Pro Forma
Condensed Consolidated Statements of Operations (Unaudited).
These pro forma statements may not be indicative of the results of
operations that actually would have occurred had the disposition taken place at
the beginning of the period indicated. Additionally, they do not purport to
indicate the results which may be obtained in the future. These pro forma
statements should be read in conjunction with the financial statements and notes
thereto of the Company in its Annual Report on Form 10-KSB for the year ended
December 31, 1994 and the Company's Quarterly Report on Form 10-QSB for the
interim period ended September 30, 1995.
HELMSTAR GROUP, INC. & SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Year Ended December 31, 1994
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Historical
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Helmstar Group, Inc. Pro Forma
& Subsidiaries Adjustments Pro Forma
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Revenues:
Profit from joint ventures .......................... $ 339,317 $ 339,317
Financial consulting fees ........................... 599,700 599,700
Loan servicing fees ................................. 951,710 $ (951,710)(E)
Loan origination fees ............................... 319,146 319,146
Interest income ..................................... 156,015 (1,469)(F) 154,546
Investment income ................................... 380,962 380,962
Other income ........................................ 196,196 (94,628)(G) 101,568
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Total Revenues ................................. 2,943,046 (1,047,807) 1,895,239
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Expenses:
Compensation and related costs ...................... 2,142,891 (445,713)(H) 1,697,178
Occupancy cost ...................................... 380,773 380,773
Amortization of mortgage
servicing rights ............................... 467,093 (467,093)(I)
General and administrative .......................... 692,296 (127,965)(J) 564,331
Professional fees ................................... 311,846 (10,591)(K) 301,255
Interest ............................................ 30,348 (22,861)(L) 7,487
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Total Expenses ................................. 4,025,247 (1,074,223) 2,951,024
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(Loss) before taxes ..................................... (1,082,201) 26,416 (1,055,785)
Income tax (benefit) .................................... (32,457) (32,457)
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NET (LOSS) .............................................. $ (1,049,744) $ 26,416 $ (1,023,328)
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Net (loss)
per common share .................................... $ (.18) $ .01 $ (.17)
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Weighted average number of
common shares outstanding ........................... 5,997,171 5,997,171 5,997,171
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See Notes to Pro Forma Condensed Consolidated Balance Sheet (Unaudited) and
Pro Forma Condensed Consolidated Statements of Operations (Unaudited).
HELMSTAR GROUP, INC. & SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Nine Months ended September 30, 1995
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Historical
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Helmstar Group, Inc. Pro Forma
& Subsidiaries Adjustments Pro Forma
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Revenues:
Profit from joint ventures ............................ $ 1,917,160 $ 1,917,160
Financial consulting fees ............................. 460,000 460,000
Loan servicing fees ................................... 641,594 $ (641,594)(E)
Loan origination fees ................................. 383,144 383,144
Interest income ....................................... 279,066 (49,897)(F) 229,169
Investment income ..................................... 691,857 691,857
Other income .......................................... 263,589 (44,801)(G) 218,788
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Total Revenues ................................... 4,636,410 (736,292) 3,900,118
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Expenses:
Compensation and related costs ........................ 1,941,447 (295,326)(H) 1,646,121
Occupancy cost ........................................ 320,182 320,182
Amortization of mortgage
servicing rights ................................. 295,763 (295,763)(I)
General and administrative ............................ 584,924 (125,587)(J) 459,337
Professional fees and
litigation expenses .............................. 137,127 (9,511)(K) 127,616
Interest .............................................. 5,106 (4,468)(L) 638
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Total Expenses ................................... 3,284,549 (730,655) 2,553,894
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Profit before taxes ....................................... 1,351,861 (5,637) 1,346,224
Income tax provision ...................................... 62,022 62,022
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NET PROFIT ................................................ $ 1,289,839 $ (5,637) $ 1,284,202
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Net profit
per common share ...................................... $ .22 $ 0 $ .22
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Weighted average number of
common shares outstanding ............................. 5,906,025 5,906,025 5,906,025
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See Notes to Pro Forma Condensed Consolidated Balance Sheet (Unaudited) and
Pro Forma Condensed Consolidated Statements of Operations (Unaudited).
Notes to Pro Forma Condensed Consolidated Balance Sheet
(Unaudited) and Pro Forma Condensed Consolidated Statements
of Operations (Unaudited)
(1) For purposes of determining the pro forma effect of the bulk sale of
substantially all of Citizens' mortgage servicing rights on the Company's
Condensed Consolidated Balance Sheets, the following pro forma adjustments have
been made:
(A) Net increase in cash
from the disposition $ 2,292,032
(B) Elimination of mortgage
servicing rights -- net
of amortization (1,827,291)
(C) Elimination of receivables
from mortgagors and mortgagees
which were reimbursed by the
purchaser at closing (104,001)
(D) Adjustment to (Deficit) for
gain from sale of mortgage
servicing rights 360,740
(2) For purposes of determining the pro forma effect of the bulk sale of
substantially all of Citizens' mortgage servicing rights and the winding down of
mortgage servicing as a separate activity on the Company's Condensed
Consolidated Statements of Operations, the following pro forma adjustments have
been made:
Year Ended Nine Months
Dec. 31, Ended
1994 Sept. 30, 1995
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(E) Elimination of loan
servicing fees $ (951,710) $ (641,594)
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(F) (i) Increase in interest
income on net proceeds
from sale $ 106,931 $ 103,124
(ii) Elimination of interest
income on escrows maintained
in connection with mortgage
servicing (108,400) (153,021)
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$ (1,469) $ (49,897)
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Notes to Pro Forma Condensed Consolidated Balance Sheet (Unaudited)
and Pro Forma Condensed Consolidated Statements
of Operations (Unaudited)
(2) (continued)
Year Ended Nine Months
Dec. 31 Ended
1994 Sept. 30, 1995
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(G) Elimination of ancillary
revenue from mortgage
servicing $ (94,628) $ (44,801)
(H) Elimination of compensation
and related costs of mortgage
servicing personnel (445,713) (295,326)
(I) Elimination of amortization
of mortgage servicing rights (467,093) (295,763)
(J) Elimination of general
and administrative
expenses relating to
mortgage servicing (127,965) (125,587)
(K) Elimination of professional
fees incurred in connection
with mortgage servicing (10,591) (9,511)
(L) Elimination of interest
expense on working capital
line utilized in connection
with mortgage servicing (22,861) (4,468)
Income tax will not be incurred from the disposition or from any of the
pro forma adjustments because the Company has sufficient operating losses for
Federal and state income tax purposes to offset any gain. The accompanying
presentation does not give effect to the provision or benefit in the Pro Forma
Condensed Consolidated Statements of Operations (Unaudited) since such effects
are not considered to be significant.
(3) The gain on the disposition of the mortgage servicing rights does not have a
continuing impact on the results of operations and has been excluded from the
pro forma adjustments.
(4) Net profit (loss) per common share is based on the weighted average number
of common shares outstanding during each period. The assumed exercise of stock
options relating to the Company's incentive compensation plan have not been
included in the computation, because the effect of their inclusion would not be
dilutive.
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 hereunto duly authorized.
HELMSTAR GROUP, INC.
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(Registrant)
s/ George W. Benoit
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George W. Benoit
President
DATE: January 2, 1996