SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                   ----------

                                   FORM 10-KSB

(Mark One)

[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934 (Fee required)


                   For the fiscal year ended December 31, 1998
                                     

[  ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934 (No fee required)

             For the transition period from __________ to __________

                          Commission file number l-9224
                                 

                              HELMSTAR GROUP, INC.
--------------------------------------------------------------------------------
                 (Name of Small Business Issuer in Its Charter)

                DELAWARE                               13-2689850
--------------------------------------------------------------------------------
      (State or Other Jurisdiction of               (I.R.S. Employer
       Incorporation or Organization)              Identification No.)


2 World Trade Center, Suite 2112, New York, N.Y.              10048
--------------------------------------------------------------------------------
     (Address of Principal Executive Offices)              (Zip Code)

                                  212-775-0400
--------------------------------------------------------------------------------
                (Issuer's Telephone Number, including Area Code)

         Securities registered under Section 12(b) of the Exchange Act:

                                                    Name of Each Exchange
          Title of Each Class                        on Which Registered
          -------------------                       -----------------------
    Common stock - par value $.10                   American Stock Exchange

         Securities registered under Section 12(g) of the Exchange Act:

                                   None
                             (Title of Class)

         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[ ]

                           (Cover page 1 of 2 pages)
<PAGE>                                                    
         Check if there is no  disclosure  of  delinquent  filers in response to
Item 405 of Regulation S-B is not contained in this form, and no disclosure will
be contained,  to the best of  registrant's  knowledge,  in definitive  proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB.          

         Issuer's   revenues  for  1998,  its  most  recent  fiscal  year,  were
$6,508,859.

         As of February 28,  1999,  the  aggregate  market value of voting stock
held by non-affiliates of the Issuer was approximately $5,178,980.

         The number of shares  outstanding  of each of the  issuer's  classes of
common equity, as of the latest practicable date.

           Class                    Outstanding at February 28, 1999

Common stock - par value $.10                5,436,973 shares
-----------------------------                ----------------

                DOCUMENTS INCORPORATED BY REFERENCE

         Part  III of this  Form  l0-KSB  incorporates  by  reference  from  the
issuer's definitive proxy statement for the annual meeting of stockholders to be
held on June 3, l999.



                           (Cover page 2 of 2 pages)

<PAGE>
                                     PART I

Item l.  Description of Business.

                  Background and History
                  ----------------------

                  Helmstar  Group,  Inc.,  ("Group"),  through its  subsidiaries
                  (collectively  referred to as the "Company" unless the context
                  requires  otherwise),  is engaged primarily in the business of
                  merchant banking,  concentrating on real estate projects,  and
                  technology and consulting services.

                  Merchant Banking - General
                  --------------------------

                  Joint Venture Criteria
                  ----------------------

                  Since  1988,  the  Company  has  engaged in  merchant  banking
                  activities primarily concentrating on real estate projects and
                  real  estate-related  services  companies.  The Company  seeks
                  projects  that offer strong upside  potential  because of high
                  short-term  risk,   albeit   manageable  risk,  and  financial
                  leverage. Although real estate development,  rehabilitation or
                  "value-added"   transactions  are  of  primary  interest,  the
                  Company will  consider most  industries  with the exception of
                  those requiring a highly specialized scientific analysis.

                  The  Company's  exacting  standards of selecting  ventures and
                  co-venturers  are  directed  toward   middle-market   oriented
                  activities.  Co-venturers  must be thoroughly  experienced and
                  financially  stable,  as well as having a  demonstrated  track
                  record  in  the   particular   business   activity.   Talented
                  co-venturers are expected to execute each venture's day-to-day
                  management plan developed  through the combined efforts of the
                  Company and the co-venturers.

                  The  Company  does not  intend to take  excessive  risk in its
                  joint venture  activities either through a single venture or a
                  series of  interdependent  ventures  which result in excessive
                  risk when  taken in the  aggregate.  The  Company  intends  to
                  consider the risks of any potential undertaking  independently
                  as well as how the risks of the proposed venture impact on the
                  Company in light of its other  ventures.  This risk evaluation
                  is based on a facts and circumstances analysis at the time the
                  feasibility of a potential  joint venture is being  evaluated.
                  Facts and  circumstances  are  subject  to change  over  time.
                  Accordingly,  the Company has established flexible criteria in
                  selecting  its  venture  activities  to meet  changing  market
                  conditions.

                  The Company  plans to limit its equity  infusion in any single
                  transaction to a maximum of $3 million.  Also, a predetermined
                  exit  strategy  is  paramount.   The  holding   period  for  a
                  particular  venture will be based on facts and  circumstances,
                  including  maximizing the Company's potential return and other
                  opportunities available at the time of a possible disposition.
<PAGE>
                  Beginning in 1990,  drawing on its  experience  in real estate
                  project   finance,   the  Company  began  to  offer  financial
                  consulting  services to clients on a fee basis.  This  permits
                  the Company to increase its revenue by utilizing  its merchant
                  banking expertise  without  deploying a significant  amount of
                  capital.  The  Company's  primary  focus in this area has been
                  assisting  clients in realizing  lower cost of capital through
                  creative financial  structuring.  This business is transaction
                  oriented,  and potential  revenue therefrom is subject to wide
                  variation.  During 1998,  1997,  1996, and 1995  approximately
                  16%, 4%, 9%, and 12% of the Company's  total  revenues in each
                  year were  realized in  connection  with  providing  financial
                  consulting services.

                  Real Estate Development Program
                  -------------------------------

                  The Company is developing  and/or acquiring  state-of-the-art,
                  multiplex  movie  theaters (the  "Theaters") in various states
                  throughout the  continental  United States.  The cost and fair
                  market value of the  Theaters is expected to be  approximately
                  $75 million.  A major film exhibitor,  Carmike  Cinemas,  Inc.
                  (the "Lessee"),  will act as development agent for the Company
                  in this  endeavor  over  the  course  of a  two-year  "Project
                  Development Period" and will lease and operate each Theater as
                  it is completed.

                  All  leases  will  be  triple  net,  credit-type  leases  (the
                  "Leases"). Such Leases require that the Lessee, in addition to
                  paying Basic Rent,  also (i) pay all utilities,  insurance and
                  local  real  estate,   corporate  and  franchise  taxes;  (ii)
                  reimburse the Lessor for all of its  necessary and  reasonable
                  direct  expenses  incurred in fulfilling its role as Landlord;
                  and (iii) assume full operating, maintenance and environmental
                  responsibilities  for  the  preservation  and,  if  necessary,
                  restoration  of  the  Theaters.  Rents  will  commence  on all
                  Theaters  at the end of the  Project  Development  Period  and
                  extend over an ensuing initial Lease term of sixteen years. At
                  the end of the initial Lease term, the Lessee can purchase the
                  properties,  renew the Leases or vacate the Theaters, in which
                  event the  Company may sell or  re-lease  the  Theaters to any
                  third party of its choosing.

                  The Company's  subsidiary,  Movieplex  Realty Leasing,  L.L.C.
                  (the "Lessor"),  issued  $72,750,000 of adjustable rate tender
                  securities  due November 1, 2015 (the  "Bonds") to finance 97%
                  of the total  expected  cost of the  Theaters.  The Bonds bear
                  interest  from their date of delivery at a variable  base rate
                  indexed to the 30-day,  high-grade commercial paper rate. This
                  rate will be reset  weekly and  interest for the prior four or
                  five week period  will be payable on the first  Monday of each
                  calendar month commencing Monday,  January 5, 1998.  Principal
                  on the Bonds is payable  annually on the first  Monday of each
                  November. Prior to maturity,  $59,775,000 of the original Bond
                  principal  is  scheduled  to be  amortized.  The  Bonds may be
                  tendered at par by investors on any interest  rate reset date,
                  in which event the Remarketing Agent would try to remarket the
                  bonds to other investors.  The Bonds are issued in three sets.
<PAGE>
                  Each   set   is   secured   by    irrevocable,    direct   pay
                  letters-of-credit (the "LOCs") from a highly-rated  commercial
                  bank and each with an initial LOC term of five years.  In such
                  instances, the investors look to the financial strength of the
                  LOC banks  rather than to the  creditworthiness  of either the
                  Company as the Lessor or Carmike as the  Lessee.  The  Company
                  expects to  continue  to use LOCs of this nature to secure the
                  Bonds throughout their 18-year term.

                  The  remaining 3% of the cost of the Theaters came from equity
                  invested by the Lessor.  Subsidiaries  of the Company own 100%
                  of the  Common  Membership  (or  shareholding)  of the  Lessor
                  entity which is a Limited Liability Corporation.  In addition,
                  the same  subsidiaries  own 1% of the Preferred  Membership of
                  the Lessor in return for a cash  investment  of $22,500  and a
                  third party owns 99% of the Preferred Membership in return for
                  a cash investment of $2,227,500 (of which  $1,500,000 was paid
                  as of December 31, 1998, with the balance due prior to the end
                  of the Project Development Period).

                  During  1998,  the Company  purchased  land in Mobile,  AL, El
                  Paso, TX,  Franklin,  TN, Albany,  GA, and Delmont,  PA for an
                  aggregate cost of  $13,697,418 to be used for the  development
                  of  five  movie  theater  complexes.   The  Company  commenced
                  construction  on three of these sites  --Mobile,  AL, El Paso,
                  TX, and Franklin,  TN. See "Management Discussion and Analysis
                  - Liquidity and Capital Resources."

                  Technology Focused Venture
                  --------------------------

                  During 1998,  the Company  formed a  wholly-owned  subsidiary,
                  CareerEngine,  Inc. an information  technology focused venture
                  featuring   three   areas  of   concentration:   comprehensive
                  Internet-based job search services; a full-service  recruiting
                  and placement unit; and an information  technology consulting,
                  design and integration business.

                           Online Career Recruiting and Placement

                  CareerEngine   (www.careerengine.com)   offers  a  categorical
                  search  capability  on a job function  basis for employers and
                  job  applicants  so that  relevant  skills can be  efficiently
                  matched to available positions.  The firm is involved with all
                  level of searches,  including  programmers,  chief information
                  and chief  technology  officers,  as well as  consultants  for
                  clients with short-term project needs.

                  A significant characteristic of CareerEngine's web site is its
                  secure environment.  The site is able to attract  high-caliber
                  candidates  as a result of its ability to promote their skills
                  to potential  employers  without  revealing  their  individual
                  identities. The ability of prospects to register themselves in
                  the job market in this manner is a significant  advantage over
                  many online placement services.
<PAGE>
                  Resumes  have been  received  from  around the world,  and the
                  database  is rapidly  growing  through  the  establishment  of
                  numerous   partnerships,   including   "advertising   exchange
                  agreements"  that  incorporate  Web site  hyperlinks and print
                  advertising exposure within career fair and technology media.

                  Among   the   over  100   companies   registered   to   review
                  CareerEngine's  candidates'  resumes online are a select group
                  of  "featured   employers."  These  select  companies  receive
                  unlimited   and   prominent   job  postings  in  exchange  for
                  guaranteeing  that  CareerEngine  would be considered by these
                  firms as a vendor for any placement  agency  services they may
                  require.

                           Technology Consulting and Management

                  During 1998,  CareerEngine acquired Advanced Digital Networks,
                  Inc. ("ADN"), an established information technology consulting
                  firm  based in New  York,  New  York.  ADN  provides  software
                  consulting,  design,  and  integration  services  to  small to
                  midsize companies that are typically  underserved by the major
                  firms in this field. ADN's objective is to become a customer's
                  primary information  technology  consulting and implementation
                  partner.  The acquisition  created a synergistic  relationship
                  allowing ADN to reduce the cost of  recruiting  personnel  for
                  its consulting assignments while simultaneously  providing job
                  openings   for   posting   to   ITClassifieds.com,    one   of
                  CareerEngine's web sites.

                  ADN is currently  establishing  strategic  relationships  with
                  various  Internet  Access  Providers and  commercial  building
                  owners/managers  so as to  position  itself  as the  preferred
                  vendor  of  information  technology  services  (IT)  to  their
                  respective  customers.  The  Company  believes  that  small to
                  midsized  companies seek, and are extremely loyal to, reliable
                  IT vendors of high  quality,  such as ADN.  ADN  continues  to
                  develop IT services relevant to the business  challenges faced
                  by this market segment so as to build a strong customer base.

                  General
                  -------

                  The  Company was  incorporated  under the laws of the State of
                  Delaware  in  1968.  It  maintains  offices  at 2 World  Trade
                  Center, Suite 2112, New York, New York 10048 and its telephone
                  number  is  (2l2)  775-0400.   Unless  the  context   requires
                  otherwise,  the term "Company" refers to Helmstar Group,  Inc.
                  ("Group")  and  its  wholly-owned  subsidiaries:   Matthews  &
                  Wright,  Inc. ("Matthews & Wright");  Snider,  Williams & Co.,
                  Inc. ("Snider");  Randolph,  Hudson & Co., Inc.  ("Randolph");
                  Shaw Realty Company,  Inc.  ("Shaw");  Helmstar Funding,  Inc.
                  ("Funding");  Burrows, Hayes Company, Inc. ("Burrows"); Dover,
                  Sussex Company,  Inc.  ("Dover");  Housing Capital Corporation
                  ("Housing");  Randel,  Palmer & Co., Inc. ("Randel");  Parker,
                  Reld  & Co.,  Inc.  ("Parker"),  McAdam,  Taylor  & Co.,  Inc.
<PAGE>
                  ("McAdam");  Ryan, Jones & Co., Inc.  ("Ryan");  CareerEngine,
                  Inc. ("Career");  and Advanced Digital Networks, Inc. ("ADN").
                  The term  Company  also  includes  Movieplex  Realty  Leasing,
                  L.L.C.  ("Movieplex"),  a limited  liability  company,  all of
                  whose common membership  interests are indirectly owned by the
                  Company.

                  As of March l, 1999, the Company had 17 employees.

                  Competition
                  -----------

                  Competition  in the  Company's  business of  merchant  banking
                  focusing  on middle  market  oriented,  real  estate and other
                  businesses  is  widespread  and  highly  fragmented.   In  its
                  activities  as a  co-venturer  with a focus on  smaller,  more
                  specialized  ventures  having defined  markets,  institutional
                  joint venturers  including large public real estate or venture
                  capital  partnerships and real estate investment trusts should
                  not be significant  competitors.  Likely  competition  will be
                  encountered  from  small  syndicators;  individual  investors,
                  typically from the local market;  smaller insurance companies;
                  and  participating  mortgage  lenders.  Many of the  Company's
                  likely  competitors  have  greater  access to capital than the
                  Company. The Company encounters stiff competition from a broad
                  range of  financial  services  firms  when  seeking  financial
                  consulting assignments. Other major parties in the marketplace
                  for  off-balance   sheet  structures  are  large   developers,
                  commercial  banks with synthetic  lease  structures,  and real
                  estate investment trusts.

                  The Company's subsidiary, CareerEngine, Inc., and its web site
                  compete with numerous large and small  organizations and their
                  related web sites in the Internet-based  personnel  recruiting
                  market.   These  web  sites   can  be   described   as  either
                  "generalist" (a web site that covers employment  opportunities
                  in all industries) or "vertical/category specific" (a web site
                  that covers employment  opportunities in a specific industry).
                  The  Company  expects  to  have   significant   Internet-based
                  competition  for the  foreseeable  future.  Additionally,  the
                  traditional print media,  specifically  major city newspapers,
                  are  major  competitors  of  the  Company.  Almost  all of the
                  Company's  competitors  in this area are vastly  larger,  have
                  attained   significant   name   recognition,   possess   large
                  advertising   budgets,   and  have   established   significant
                  strategic alliances within the recruitment industry.

                  CareerEngine,  Inc.'s  subsidiary,  Advanced Digital Networks,
                  Inc. faces  competition from a very large number of entrenched
                  information   technology   service   providers   and  in-house
                  information  technology  departments.  Due  to  the  explosive
                  growth in new  information  technologies  and the  application
                  thereof,  competition  is  expected  to remain  fierce for the
                  well-positioned firm in the foreseeable future.
<PAGE>
                  Regulation
                  ----------

                  In the course of conducting its business of merchant  banking,
                  the Company may acquire  interests  in  regulated  activities.
                  Such regulation may be either  directly or indirectly  related
                  to the Company's interest.

                  With  respect to real estate joint  ventures,  the Company may
                  encounter  Federal,  state and local  regulation in connection
                  with land use, building code requirements,  environmental, and
                  similar restrictions on development and/or operations.





<PAGE>
Item 2.  Description of Property.


                  The Company leases  approximately  7,000 square feet of office
                  space at 2 World Trade Center,  New York, New York 10048 under
                  the terms of a lease that  expires  February  28,  2006.  This
                  office  is  utilized  as the  Company's  executive  office  in
                  addition to housing its merchant banking activities.

                  The future minimum annual base rental  commitments  under this
                  lease are  reflected  in the amounts  provided in Note G[1] in
                  Notes to Financial  Statements  included in Part II, Item 7 of
                  this Form 10-KSB.

                  The Company owns land at the aggregate  cost of $13,697,418 in
                  the following  locations:  Mobile,  AL, El Paso, TX, Franklin,
                  TN,  Albany,  GA,  and  Delmont,  PA.  The  Company is in the
                  process  of  developing  movie  theater   complexes  on  these
                  properties.

<PAGE>
Item 3.  Legal Proceedings.

                  Fred W. Wasserman,  et al. v. Jeffrey P. Christopher,  et al.,
                  ------------------  ---------------------------------  -------
                  Case No. 278699
                  ---------------

                  In May  1996,  the  Company  was  served  with a  summons  and
                  complaint in connection with a class action commenced in March
                  1996 against  multiple  parties.  This action was filed in the
                  Superior  Court of  California,  County  of  Riverside  and is
                  currently  pending in the court.  The plaintiffs  brought this
                  action on behalf of  themselves  and all other  purchasers  of
                  bonds  issued  by  the  Housing  Authority  of the  County  of
                  Riverside for the Whitewater Garden Apartments project and the
                  Ironwood  Apartments  project (the  "Bonds").  The  plaintiffs
                  maintain that in connection with the issuance and underwriting
                  of the  Bonds  the  defendants  negligently  and  fraudulently
                  misrepresented  that the interest on the Bonds would be exempt
                  from federal income tax. The  plaintiffs  are seeking  damages
                  for  taxes,  penalties,  and  interest  they  have paid or are
                  obligated to pay, attorneys fees, costs, punitive damages, and
                  other  relief the court deems just.  The  plaintiffs  maintain
                  that  taxes,  interest,  and  penalties  are in  excess  of $3
                  million or an amount to be proved at the time of trial.

                  The  Company  plans to defend  vigorously  against  all of the
                  plaintiffs'  allegations  involving  it.  It is too  early  to
                  assess the  potential  for,  and the amount of, any damages in
                  connection with this action.



<PAGE>


Item 4.  Submission of Matters to a Vote of Security-Holders.

                  None.





<PAGE>


                                     PART II

Item 5.  Market For Common Equity and Related Stockholder
         Matters.

                  Exchange Listing:

                  The common  stock of  Helmstar  Group,  Inc.  is listed on the
                  American Stock Exchange (trading symbol HLM).

                  The approximate  number of recordholders of Common Stock as of
                  February 28, 1999 was 278.


                                 Equity Sale Prices:

        1st Quarter      2nd Quarter      3rd Quarter       4th Quarter
        High    Low      High    Low      High    Low       High    Low
        ----    ---      ----    ---      ----    ---       ----    ---

1998    1 1/8   5/8    1 3/16    3/4      3 1/8   13/16       2      1

1997      1     3/4     15/16   11/16      7/8     5/8       1 1/4   3/4



                  Dividends:

                  The  Company has not  previously  paid cash  dividends  on its
                  common stock. The Board of Directors does not presently intend
                  to pay cash  dividends  on the  outstanding  shares  of common
                  stock  in the  foreseeable  future.  The  payments  of  future
                  dividends  and  the  amount   thereof  will  depend  upon  the
                  Company's earnings,  financial condition, capital requirements
                  and such other  factors as the Board of Directors may consider
                  relevant.
<PAGE>
Item 6.  Management's Discussion and Analysis.    

                  A. Results of Operations
                  ------------------------

                  1. 1998 Compared to 1997
                  ------------------------
 
                  Total revenue  increased to $6,508,859 for 1998 from 6,363,911
                  for 1997.

                  Profit from joint ventures  decreased to $22,101 for 1998 from
                  $5,656,080  for  1997.  This  classification   represents  the
                  Company's  share of income and losses,  computed in accordance
                  with the  equity  method of  accounting,  from  various  joint
                  ventures in which the Company is participating.

                  Profit for 1997  included  profit from  refinancing  Nags Head
                  Outlet  Partners  (Nags  Head)  in  June  1997,  the  sale  in
                  September  1997 of both  Nags  Head and  Blowing  Rock  Outlet
                  Partners (Blowing Rock), the two outlet shopping centers,  and
                  operating income through the time of sale.

                  The refinancing of Nags Head produced income of $79,911, while
                  the sale of Nags  Head and  Blowing  Rock  produced  income of
                  $5,193,018.  The  Company's  share  of  income  from  residual
                  operations  for 1998 totaled  $22,101  compared to  operations
                  through the sale in September 1997 of $383,651.

                  Financial  consulting  fees  increased to $1,040,000  for 1998
                  from  $255,938  for  1997.  The  Company  provides   financial
                  structuring advice on a fee basis. Typically, an engagement is
                  based on a specific assignment to assist a client to lower its
                  cost  of  capital.  Due to the  transactional  nature  of this
                  business, significant variations in revenue are likely.

                  Interest income increased to $3,919,885 for 1998 from $725,412
                  for  1997,   primarily  due  to  interest  earned  during  the
                  development  period on the proceeds from the $72,750,000  bond
                  offering made by the Company for the purpose of obtaining land
                  and constructing  Theaters,  and on the securities held in the
                  cash  management,  trading  and  investing  activities  of the
                  Company.

                  Investment income increased to a profit of $1,526,873 for 1998
                  from a loss of $273,519 for 1997.  This category  includes net
                  profit or loss from cash  management and investing in futures,
                  puts, calls, municipals and other securities activities.

                  Total   expenses   increased  to  $7,241,065   for  1998  from
                  $3,172,946 in 1997.

                  Compensation  and related costs  increased to  $1,601,163  for
                  1998 from $1,495,720 for 1997. The increase is due principally
                  to the additional employees hired by the Company in connection
                  with the technology and consulting focused ventures.
<PAGE>
                  Occupancy  costs  increased to $174,706 for 1998 from $164,943
                  for  1997.   This  increase  is  due  to  minor   increase  in
                  maintenance expense.

                  General and administrative  expenses decreased to $268,164 for
                  1998 from  $677,929 for 1997.  This decrease was primarily due
                  to payments  received from  licensing  excess office space and
                  services and the recording of a bad debt expense in 1997.

                  Professional fees increased to $203,253 for 1998 from $174,266
                  for 1997.  This  increase  was due in large part to legal fees
                  incurred in connection with the formation of our  wholly-owned
                  subsidiary,  CareerEngine,  and its  acquisition of Advanced
                  Digital Networks.

                  Interest  expense   increased  to  $4,993,779  for  1998  from
                  $660,088 for 1997.  The principal  reason for this increase is
                  the  interest  expense  and letter of credit  fees  (which are
                  treated as interest)  incurred on the $72,750,000 Bonds issued
                  for the development of Theaters. Also included in this account
                  is the interest cost incurred in the Company's cash management
                  and investing activities.

                  The Company had a loss from continuing  operations of $624,409
                  for 1998  compared  with a profit of  $2,689,230  for 1997. In
                  1998, the Company had a tax benefit of $107,797  compared to a
                  tax  expense  of  $501,735  for  1997.  In 1997,  the  Company
                  incurred Federal  alternative  minimum tax together with state
                  and local  taxes.  For  Federal  income  tax  purposes,  as of
                  December  31,  1998,   the  Company  has  net  operating  loss
                  carryforwards of approximately $12,166,000 available to reduce
                  future taxable income. These carryforwards expire in the years
                  2005 through 2018.

                  The Company's net loss for 1998 was $624,409 compared with net
                  income of $1,702,660 for 1997. For 1998, loss per share (basic
                  and diluted) from continuing  operations was $(.11) per share.
                  For 1997,  net  income  per share  (basic  and  diluted)  from
                  continuing  operations  was $.48 per share  decreased by a net
                  loss  from  discontinued   operations  of  $(.17)  per  share,
                  resulting  in a net  income  of  $.31  per  share  (basic  and
                  diluted).

                  Inflation
                  ---------

                  Inflation  may affect the Company in certain areas of its cash
                  management,  real estate  development  program,  and  merchant
                  banking activities. Changes in interest rates typically follow
                  actual or expected changes in the inflation rate. Accordingly,
                  interest  rates  usually   increase  during  periods  of  high
                  inflation and decrease during periods of low inflation.
<PAGE>
         B.       Liquidity and Capital Resources
                  -------------------------------

                  Management of the Company  believes that funds  generated from
                  operations, supplemented by its available assets, will provide
                  it  with   sufficient   resources  to  meet  all  present  and
                  reasonably  foreseeable  future capital  needs.  Currently the
                  Company's  assets  consist  primarily of cash and  investments
                  which are readily convertible into cash.

                  The  Company  invests  excess  funds  in  liquid,   short-term
                  financial  instruments  in order to maximize  its current cash
                  return with minimum  interest rate risk,  while preserving the
                  ability to move quickly in funding attractive merchant banking
                  ventures.   Such  investments   include  U.S.  Government  and
                  municipal  obligations,  futures  contracts  and money  market
                  funds.

                  The  Company  issued  $72,750,000  of  adjustable  rate tender
                  securities due November 1, 2015 (the "Bonds") during 1997. The
                  Bonds were issued to finance 97% of the cost of the  Company's
                  Real Estate Development  Program. See "Description of Business
                  -  Real   Estate   Development   Program."   The  3%  balance,
                  $2,250,000,  was  provided  as  a  capital  contribution  from
                  Preferred  Members  (shareholders)  of  the  Company's  Lessor
                  subsidiary, Movieplex Realty Leasing, L.L.C.

                  The Bonds pay interest  from the date of delivery on the first
                  Monday  of each  month  for the  preceding  four or five  week
                  period  commencing  January 5, 1998 and principal  annually on
                  the first  Monday of  November  commencing  in the year  2000.
                  Various  commercial  banks  which  provided  letters of credit
                  securing payment on the Bonds are due letter of credit ("LOC")
                  fees which are payable on the same dates as the Bond  interest
                  commenced in 1998. In addition,  a preferred return on capital
                  contributed  is due to the Preferred  Members,  payable on the
                  same due dates as is the interest on the Bonds but  commencing
                  in January of the year 2000.

                  All debt  service on the Bonds,  while bank  letters of credit
                  are effectively in force, is paid directly from draws on those
                  LOCs.  The banks are then  reimbursed by the Lessor.  Fees and
                  the Preferred return are due from the Lessor directly.  During
                  the period from  November  1997  through  November  1999,  all
                  reimbursements  to the  banks  and bank fees will be paid from
                  Bond proceeds.  Thereafter all reimbursements to the banks for
                  debt  service  on the Bonds as well as fees and the  preferred
                  return to Preferred  Members will be paid from the Rents which
                  commence  on  December 1, 1999.  In  addition,  the Rents will
                  cover all other costs of owning and  operating the real estate
                  other than  Federal,  state or local income taxes due on a net
                  income basis.  Prior to the  utilization  of these proceeds to
                  pay for the costs in connection  with the  construction of the
                  Theaters,   they  will  be  invested   in  liquid   short-term
                  instruments.
<PAGE>
                  While the Company believes that currently available funds will
                  provide it with  sufficient  resources to meet all present and
                  reasonably foreseeable future capital needs, as well as future
                  operational   costs  of  the  newly  formed   technology   and
                  consulting  focused  ventures,  the Company  may seek  various
                  forms of credit in order to finance  its  merchant  banking or
                  other activities in the future.  The Company does not have any
                  material  commitments for capital  expenditures as of December
                  31, 1998,  except for the  development  of the  Theaters  with
                  funds provided by the issuance of the Bonds.

                  The Company is a defendant in a lawsuit. An unfavorable result
                  could have a  significant  adverse  effect upon the  Company's
                  liquidity and capital resources.

                  Year 2000 Issue
                  ---------------

                  The Company has reviewed all of its computer systems (hardware
                  and related software) and does not anticipate that the cost of
                  addressing  the "Year  2000"  issue  will be  material  to its
                  future operating results or financial condition.


<PAGE>


Item 7.  Financial Statements.

                  The  Company's  financial  statements  to be  filed  hereunder
                  follow, beginning with page F.



<PAGE>
INDEPENDENT AUDITORS' REPORT

Board of Directors and Stockholders
Helmstar Group, Inc.
New York, New York


We have  audited the  consolidated  balance  sheet of Helmstar  Group,  Inc. and
subsidiaries as of December 31, 1998, and the related consolidated statements of
operations, changes in stockholders' equity and cash flows for each of the years
in  the  two-year  period  then  ended.  These  financial   statements  are  the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial  statements  based on our audits.  The 1997 financial
statements of two joint ventures  described in Note C have been audited by other
auditors  whose reports have been furnished to us; insofar as our opinion on the
1997  consolidated  financial  statements  relates  to data  included  for  such
ventures, it is based solely on their reports.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We  believe  that our audits and the  reports  of the other  auditors  provide a
reasonable basis for our opinion.

In our  opinion,  based on our  audits  and,  for  1997,  the  reports  of other
auditors,  the financial  statements  referred to above present  fairly,  in all
material respects,  the consolidated  financial position of Helmstar Group, Inc.
and subsidiaries as of December 31, 1998, and the consolidated  results of their
operations  and  their  consolidated  cash  flows  for each of the  years in the
two-year  period then ended in conformity  with  generally  accepted  accounting
principles.

As described in Note H to the consolidated financial statements,  the Company is
a defendant in litigation.



/s/Richard A. Eisner & Company, LLP
-----------------------------------
Richard A. Eisner & Company, LLP


New York, New York
February 23, 1999


                                                                             F-1
<PAGE>
<TABLE>
<CAPTION>
HELMSTAR GROUP, INC. AND SUBSIDIARIES
Consolidated Balance Sheet
December 31, 1998                                                                           
 
<S>                                                                                      <C>               <C>         
ASSETS
Cash and cash equivalents ..........................................................                       $  1,040,955
Marketable securities ..............................................................                          7,856,410
Other short-term investments - restricted ..........................................                         52,020,895
Real estate to be leased, under development:
   Land ............................................................................     $ 13,697,418
   Construction in progress ........................................................        6,282,436        19,979,854
Furniture, equipment and leasehold improvements - at cost, less accumulated              ------------
   depreciation and amortization of $302,482 .......................................                            211,634
Deferred financing costs, less accumulated amortization of $109,998 ................                          1,816,177
Other assets .......................................................................                            614,210
                                                                                                           ------------
                                                                                                           $ 83,540,135
                                                                                                           ============

LIABILITIES
Bonds payable ......................................................................                       $ 72,750,000
Accrued expenses and other liabilities .............................................                          3,260,661
                                                                                                           ------------

      Total liabilities ............................................................                         76,010,661
                                                                                                           ------------

Due to preferred member ............................................................                          1,500,000
                                                                                                           ------------

Commitments and contingencies (Notes G and H)

STOCKHOLDERS' EQUITY
Common stock - authorized 10,000,000 shares, par value $.10; issued 6,749,600 shares                            674,960
Paid-in surplus ....................................................................                         14,984,510
Deficit ............................................................................                         (6,605,467)
                                                                                                           ------------

                                                                                                              9,054,003
Less treasury stock, at cost - 1,296,227 shares ....................................                         (3,024,529)
                                                                                                           ------------

                                                                                                              6,029,474
                                                                                                           ------------

                                                                                                           $ 83,540,135
                                                                                                           ============
</TABLE>
See notes to financial statements.                                          F-2
<PAGE>
<TABLE>
<CAPTION>
HELMSTAR GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
                                                                                   Year Ended December 31,
                                                                               ----------------------------
                                                                                    1998            1997
                                                                               -----------      -----------
<S>                                                                            <C>              <C>        
Revenues:
   Profit from joint ventures, including gain on sale of venture assets of
      $5,193,018 in 1997 .................................................     $    22,101      $ 5,656,080
   Financial consulting fees .............................................       1,040,000          255,938
   Income (loss) on securities transactions ..............................       1,526,873         (273,519)
   Interest income .......................................................       3,919,885          725,412
                                                                               -----------      -----------

                                                                                 6,508,859        6,363,911
                                                                               -----------      -----------

Expenses:
   Compensation and related costs ........................................       1,601,163        1,495,720
   Occupancy cost ........................................................         174,706          164,943
   General and administrative ............................................         268,164          677,929
   Professional fees .....................................................         203,253          174,266
   Interest and other financing expense ..................................       4,993,779          660,088
                                                                               -----------      -----------

                                                                                 7,241,065        3,172,946
                                                                               -----------      -----------

(Loss) income from continuing operations before income taxes .............        (732,206)       3,190,965
Income tax (benefit) provision ...........................................        (107,797)         501,735
                                                                               -----------      -----------

(Loss) income from continuing operations .................................        (624,409)       2,689,230

Discontinued operations:
   Loss from operations of discontinued subsidiary .......................                         (755,409)
   Loss on disposal of subsidiary ........................................                         (231,161)
                                                                               -----------      -----------

Net (loss) income ........................................................     $  (624,409)     $ 1,702,660
                                                                               ===========      ===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
HELMSTAR GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(continued)
                                                                                   Year Ended December 31,
                                                                               ----------------------------
                                                                                    1998            1997
                                                                               -----------      -----------
<S>                                                                            <C>              <C>        
Per common share - basic and diluted:
   (Loss) income from continuing operations ..............................     $      (.11)     $       .48
   Loss from discontinued operations .....................................                             (.17)
                                                                               -----------      -----------

   Net (loss) income .....................................................     $      (.11)     $       .31
                                                                               ===========      ===========

Weighted average number of common shares outstanding - basic
   (loss) income per share ...............................................       5,489,376        5,520,958
Effect of dilutive employee stock options ................................                           30,770
                                                                               -----------      -----------

Weighted average number of common shares outstanding -
   diluted (loss) income per share .......................................       5,489,376        5,551,728
                                                                               ===========      ===========
</TABLE>
See notes to financial statements                                           F-3


<PAGE>
<TABLE>
HELMSTAR GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Changes in Stockholders' Equity

                                            Common Stock                                           Treasury Stock
                                      ---------------------      Paid-in                     -------------------------
                                       Shares        Amount      Surplus          Deficit      Shares         Amount         Total
                                       ------        ------      -------          -------      ------         ------         -----
<S>                                  <C>          <C>          <C>            <C>            <C>          <C>            <C>       
Balance - January 1, 1997 .....      6,749,600    $  674,960   $14,984,510    $ (7,683,718)  1,213,227    $ (2,912,824)  $5,062,928
Treasury stock acquired at cost                                                                 20,000         (15,774)     (15,774)
Net income ....................                                                  1,702,660                                1,702,660

Balance - December 31, 1997 ...      6,749,600       674,960    14,984,510      (5,981,058)  1,233,227      (2,928,598)   6,749,814
Treasury stock acquired at cost                                                                 63,000         (95,931)     (95,931)
Net loss ......................                                                   (624,409)                                (624,409)

Balance - December 31, 1998 ...      6,749,600    $  674,960   $14,984,510    $ (6,605,467)  1,296,227    $ (3,024,529)  $6,029,474

</TABLE>

See notes to financial statements.                                          F-4
<PAGE>
<TABLE>
<CAPTION>
HELMSTAR GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
                                                                                                    Year Ended December 31,
                                                                                                 ---------------------------
                                                                                                    1998             1997
                                                                                                 -----------    ------------
<S>                                                                                              <C>            <C>         
Cash flows from operating activities:
   (Loss) income from continuing operations                                                      $  (624,409)   $  2,689,230
   Adjustments to reconcile (loss) income from continuing operations to net
      cash provided by (used in) operating activities:
        Depreciation and amortization                                                                 79,409          27,576
        Share of income from joint ventures                                                          (22,101)       (463,062)
        Realized gain from joint ventures - sale of assets                                                        (5,193,018)
        Provision for bad debts                                                                                       85,000
        Realized loss on sale or disposal of marketable securities                                                   235,585
        Unrealized loss from marketable securities                                                                     2,934
        (Gain) loss on sale of furniture and equipment                                                  (166)          2,653
        Purchase of marketable securities                                                        (26,361,024)    (12,415,814)
        Sales of marketable securities                                                            25,739,476       6,292,874
        Changes in:
           Other assets                                                                               38,767           4,133
           Accrued expenses and other liabilities                                                  1,691,723         822,229
                                                                                                 -----------    ------------

              Net cash provided by (used in) operating activities - continuing operations            541,675      (7,909,680)
              Net cash used in operating activities - discontinued operations                                       (477,951)
                                                                                                 -----------    ------------

              Net cash provided by (used in) operating activities                                    541,675      (8,387,631)
                                                                                                 -----------    ------------
Cash flows from investing activities:
   Purchase of other short-term investments - restricted                                                         (71,174,934)
   Sales of other short-term investments - restricted                                             19,154,039
   Distributions from joint ventures - operations                                                    195,391         473,360
   Distributions from joint ventures - refinancings                                                                1,420,000
   Distributions from joint ventures - sale of assets                                                              4,995,239
   Purchase of land                                                                              (13,697,418)
   Construction in progress                                                                       (6,271,436)
   Purchase of furniture and equipment                                                              (202,242)        (38,546)
   Other                                                                                              17,493         (85,000)
                                                                                                 -----------    ------------

              Net cash used in investing activities - continuing operations                         (804,173)    (64,409,881)
              Net cash provided by investing activities - discontinued operations                                    110,393
                                                                                                 -----------    ------------

              Net cash (used in) investing activities                                               (804,173)    (64,299,488)
                                                                                                 -----------    ------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
HELMSTAR GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(continued)
                                                                                                    Year Ended December 31,
                                                                                                 ---------------------------
                                                                                                    1998             1997
                                                                                                 -----------    ------------
<S>                                                                                              <C>            <C>         
Cash flows from financing activities:
   Deferred financing costs                                                                         (152,968)     (1,674,209)
   Purchase of treasury stock                                                                        (95,931)        (15,774)
   Proceeds from bonds payable                                                                                    72,750,000
   Proceeds from preferred member                                                                    750,000         750,000
                                                                                                 -----------    ------------

              Net cash provided by financing activities                                              501,101      71,810,017
                                                                                                 -----------    ------------

Net increase (decrease) in cash and cash equivalents                                                 238,603        (877,102)
Cash and cash equivalents at beginning of year                                                       802,352       1,679,454
                                                                                                 -----------    ------------

Cash and cash equivalents at end of year                                                         $ 1,040,955    $    802,352
                                                                                                 ===========    =============

Supplemental disclosures of cash flow information from continuing operations:
   Cash paid during the year for:
      Interest (net of amounts capitalized)                                                      $ 4,643,493    $     123,603
      Income taxes                                                                               $    71,763    $         888
</TABLE>
See notes to financial statements.                                           F-5
<PAGE>
HELMSTAR GROUP, INC. AND SUBSIDIARIES

Notes to Financial Statements
December 31, 1998

Note A - The Company and its Significant Accounting Policies

Helmstar Group,  Inc. and subsidiaries  (the "Company") are primarily engaged in
merchant  banking  activities  concentrating  on real estate  projects  and also
provide financial consulting  services.  During 1997, the Company entered into a
real estate  development  and lease  financing  program for the  construction of
multiplex  movie theaters (see Note D). During 1998, the Company formed a wholly
owned  subsidiary to provide  information  technology  placement and  consulting
services  and  in  December  1998,  the  subsidiary  acquired  the  assets  of a
technology  consulting  firm  for a  consideration  that  was not  material.  In
connection therewith, Internet category-specific career sites will be created to
provide resume hosting and job postings for career candidates.  The Company sold
its mortgage banking subsidiary in 1997 (see Note J).

[1]    Principles of consolidation:

      The accompanying consolidated financial statements include the accounts of
      Helmstar Group,  Inc. and its  subsidiaries.  Results of operations of the
      mortgage banking subsidiary have been reflected as discontinued operations
      in the accompanying 1997 financial statements.

      All  significant   intercompany   balances  and  transactions   have  been
      eliminated.

[2] Real estate to be leased:

      Movie theaters to be leased,  which are under development,  are carried at
      cost. During the development  period,  interest cost incurred on the bonds
      issued to finance the acquisition of land and construction  thereon of the
      theaters is being  capitalized  based on the average amount of accumulated
      expenditures  incurred  to  develop  the  theaters.  During the year ended
      December 31, 1998,  approximately  $516,000 of interest,  letter of credit
      fees and amortization of deferred  financing  costs,  were capitalized and
      included in construction in progress.  Upon commencement of rental income,
      under  leases to be accounted  for as  operating  leases (see Note D), the
      theaters  will be  depreciated  using  the  straight-line  method  over an
      estimated useful life of 39 years.

[3] Depreciation and amortization:

      Furniture,  fixtures  and  equipment  are  being  depreciated  using  both
      straight-line  and  accelerated  methods over  estimated  lives of five to
      seven years. Leasehold improvements are amortized on a straight-line basis
      over the shorter of the term of the lease or their useful lives.

      Deferred  financing  costs are being amortized over the eighteen year term
      of the related bonds.

[4] Statements of cash flows:

      For the purpose of the statements of cash flows, the Company considers all
      highly  liquid debt  instruments  purchased  with an original  maturity of
      three months or less to be cash equivalents.


                                                                             F-6
<PAGE>
HELMSTAR GROUP, INC. AND SUBSIDIARIES

Notes to Financial Statements
December 31, 1998

Note A - The Company and its Significant Accounting Policies (CONTINUED)

[5] Income (loss) per share:

      Basic income (loss) per share is computed based upon the weighted  average
      number of common shares  outstanding  during each year.  Dilutive employee
      stock  options  did not  have an  effect  on the  computation  of  diluted
      earnings  per share in 1997 and,  in 1998,  employee  stock  options  were
      anti-dilutive.

[6] Income taxes:

      Deferred income taxes are measured by applying enacted  statutory rates in
      effect at the balance sheet date to net operating loss  carryforwards  and
      to the  differences  between the tax bases of assets and  liabilities  and
      their reported amounts in the financial statements. The resulting deferred
      tax asset as of December 31, 1998 was fully  reserved since the likelihood
      of realization of future tax benefits cannot be established.

[7] Marketable securities and other short-term investments:

      Investments  are  classified  in  one of  three  categories  based  on the
      Company's intent: trading,  available-for-sale and held-to-maturity,  with
      trading  and  available-for-sale  securities  carried  at fair  value  and
      held-to-maturity securities carried at amortized cost. Gains and losses on
      the trading  securities are included in operations.  Unrealized  gains and
      losses  on  available-for-sale  securities  are  reported  in  a  separate
      component of stockholders' equity.

      The Company's  marketable  securities  consist of United  States  Treasury
      Bills which are  classified as trading  securities.  At December 31, 1998,
      cost approximates market value.

      Other short-term investments were acquired with the proceeds of bonds (see
      Note B). The Trust Indenture  governing the issuance of the bonds provides
      that the bond  proceeds  must always be  available-for-sale;  accordingly,
      such  investments,  which consist of taxable municipal debt securities and
      repurchase agreements, are classified as available-for-sale securities.

[8] Derivative financial instruments:

      As part of its  investment  strategies to profit from  anticipated  market
      movements,  the  Company  maintains  trading  positions  in a  variety  of
      derivative  financial  instruments   consisting   principally  of  futures
      contracts in treasuries,  stocks and municipal  securities.  All positions
      are  reported at fair value,  and changes in fair value are  reflected  in
      operations as they occur.  The Company  realized a net gain on derivatives
      sold  during  1998  of   approximately   $1,526,000  and  a  net  loss  of
      approximately  $239,000  on  derivatives  sold in 1997.  Such  amounts are
      included in income (loss) on securities  transactions in the  accompanying
      statements of  operations.  At December 31, 1998, no derivative  financial
      instruments  were held by the Company  and the average  fair value of such
      instruments held during the years was not material.

                                                                             F-7
<PAGE>
HELMSTAR GROUP, INC. AND SUBSIDIARIES

Notes to Financial Statements
December 31, 1998

Note A - The Company and its Significant Accounting Policies (CONTINUED)

[9] Stock-based compensation to employees:

      The Company has elected to follow Accounting  Principals Board Opinion No.
      25,  "Accounting  for Stock  Issued to  Employees"  ("APB 25") and related
      interpretations  in accounting for its employee  stock options.  Under APB
      25,  compensation  cost is measured  as the excess,  if any, of the quoted
      market price of the stock at grant date or other measurement date over the
      amount an employee must pay to acquire the stock.

[10] Use of estimates:

      The  preparation  of financial  statements  in conformity  with  generally
      accepted  accounting  principles requires management to make estimates and
      assumptions that affect the reported amounts of assets and liabilities and
      disclosure  of  contingent  assets  and  liabilities  at the  date  of the
      financial  statements  and the  reported  amounts of revenues and expenses
      during the  reporting  period.  Actual  results  could  differ  from those
      estimates.


Note B - Short-Term Investments

In November  1997,  the Company  issued  $72,750,000  of adjustable  rate tender
securities  in order to  provide  a part of the  funds  needed  for its new real
estate  development  activities  (see Note D).  According to the Trust Indenture
pursuant to which these securities were issued,  the Company is restricted as to
the term and the investment instruments (the "Eligible Investments") in which it
can invest  proceeds of the securities  until spent for the purposes  defined in
the indenture.

From the Eligible  Investments defined in the indenture,  the Company has chosen
to invest the bond proceeds in taxable  Municipal  Auction Rate  Certificates or
ARCs and Adjustable  Rate  Repurchase  Agreements or Repos.  ARCs are high-grade
taxable  instruments  with long-term  maturities  but with 35-day  interest rate
reset and tender dates which  function as  artificial  interim  maturities.  The
Repos  are  primarily  overnight  instruments  or  have  other  extremely  short
maturities.  Because  these  investments  may be  redeemed  at par within  short
periods  of time,  cost  closely  approximates  market  value and there  were no
unrealized  gains and losses at December 31, 1998 and 1997.  In addition,  there
were no gains or losses from the sale of any of these  investments.  The Company
uses  the  specific  identification  method  to  determine  the  cost  of  these
investments upon disposition.

Short-term investments at December 31, 1998 consist of:

            Municipal auction rate certificates                    $  46,503,536
            Adjustable rate repurchase agreements                      5,517,359
                                                                   -------------
                                                                   $  52,020,895
                                                                   =============

                                                                             F-8
<PAGE>
HELMSTAR GROUP, INC. AND SUBSIDIARIES

Notes to Financial Statements
December 31, 1998

Note C - Investment in Joint Ventures

During  1997,  two  partnerships  in which the Company has a majority  financial
interest and a 50% voting  interest  sold their  manufacturers  outlet  shopping
malls.  As of December 31, 1998,  the  partnerships'  assets consist of cash and
receivables  and  they  are in the  process  of being  liquidated.  The  Company
accounts for its investment in the ventures under the equity method.

A  reconciliation  of  the  change  in the  carrying  amount  of  the  Company's
investment in real estate joint  ventures for the years ended  December 31, 1998
and 1997 follows:
<TABLE>
<CAPTION>
                                                1998             1997
                                            -----------      -----------
<S>                                         <C>              <C>        
             Balance, beginning of year     $   185,864      $ 1,418,383
                                            -----------      -----------
             Income:
                From operations .......          22,101          383,151
                From refinancing ......                           79,911
                From sale .............                        5,193,018
                                            -----------      -----------
                                                 22,101        5,656,080

             Cash distributions:
                From operations .......        (195,391)        (473,360)
                From refinancing ......                       (1,420,000)
                From sale .............                       (4,995,239)
                                            -----------      -----------

                                               (195,391)      (6,888,599)
                                            -----------      -----------

             Balance, end of year .....     $    12,574(a)   $    185,864
                                            ===========      ============
</TABLE>
             (a)  Included in other assets


Note D - Real Estate Development and Financing

The Company is in the process of developing  and/or acquiring  state-of-the-art,
multiplex  movie  theaters (the  "Theaters")  in various  states  throughout the
continental  United  States.  The  cost  of  the  Theaters  is  expected  to  be
approximately  $75,000,000.  A major film exhibitor,  Carmike Cinemas, Inc. (the
"Lessee"),  is acting as the development  agent for the Company in this endeavor
over the course of a two-year  "Project  Development  Period" and will lease and
operate each Theater as it is  completed.  All leases will be triple net leases.
Rents will commence on all Theaters at the completion of the Project Development
Period and extend over an ensuing  initial lease term of sixteen  years.  At the
end of the initial lease term,  the Lessee has the option to extend the lease as



                                                                             F-9
<PAGE>
HELMSTAR GROUP, INC. AND SUBSIDIARIES

Notes to Financial Statements
December 31, 1998

Note D - Real Estate Development and Financing  (continued)

to all the Theaters  for a term of ten years and  thereafter  for an  additional
term of five years at rental rates  provided in the lease.  In addition,  at the
end of the  initial  lease term,  the Lessee has an option to  purchase  all the
Theaters at fair market value, as defined in the lease.  Monthly rental payments
under the leases will  fluctuate  with  required  debt  service  payments on the
Bonds.  Rental income from the leases will be accounted  for on a  straight-line
basis,  subject to increases or decreases,  principally  based on changes in the
variable  base rate of the Bonds  described  below.  During  1998,  the  Company
purchased land for the  development of five theaters and commenced  construction
on three of such sites.

In order to finance 97% of the total expected cost of the Theaters,  on November
20, 1997,  the Company's  subsidiary,  Movieplex  Realty  Leasing,  L.L.C.  (the
"Lessor") issued $72,750,000 of adjustable rate tender securities,  due November
1, 2015 (the  "Bonds").  The Bonds were issued in sets of three series,  each of
which is secured by irrevocable,  direct pay letters-of-credit (the "LOCs") from
a commercial  bank and each LOC with an initial term of five years.  The Company
expects to continue  to use LOCs of this  nature to secure the Bonds  throughout
their terms.

The Bonds bear  interest  from their date of  delivery  at a variable  base rate
indexed to the 30-day,  high-grade  commercial  paper  rate.  This rate (5.9% at
December 31, 1998) is reset weekly and interest is payable monthly. Principal on
the Bonds is payable  annually  commencing in December 2000.  Prior to maturity,
$59,775,000  of the original Bond  principal is scheduled to be  amortized.  The
Bonds may be tendered at par by investors on any  interest  rate reset date,  in
which event they may be remarketed by a marketing agent to other investors.  The
fair value of the Bonds  approximates  their  carrying  amount in the  financial
statements.

Scheduled  maturities of bonds payable for the five years subsequent to December
31, 1998 and thereafter are as follows:

               Year Ending
               December 31,                             Amount
               ------------                        -------------

               2000                                $     970,000
               2001                                    1,035,000
               2002                                    1,105,000
               2003                                    1,180,000
               Thereafter                             68,460,000
                                                   -------------
                                                   $  72,750,000
                                                   =============

The remaining 3% of the total  expected  cost of the Theaters is being  financed
from equity invested by the Lessor.  Subsidiaries of the Company own 100% of the
Common Membership (or  shareholdings) of the Lessor which is a Limited Liability
Company. In addition, these same subsidiaries own 1% of the Preferred Membership
of the Lessor in return for a cash  investment of $22,500 and a third party owns
99% of the Preferred  Membership  in return for a cash  investment of $2,227,500
(of which  $1,500,000  has been paid at December 31, 1998,  with the balance due
prior  to the  end of the  Project  Development  Period).  Preferred  Membership
interests are entitled to a preferred rate of return based on three month LIBOR.
                                                                            F-10
<PAGE>
HELMSTAR GROUP, INC. AND SUBSIDIARIES

Notes to Financial Statements
December 31, 1998

Note E - Income Taxes

The income tax  (benefit)  provision,  all of which is current,  consists of the
following:

                                                Year Ended
                                                December 31,
                                     -----------------------------
                                          1998              1997
                                     ------------      -----------

            Federal                  $    (22,143)     $    53,000
            State and local               (85,654)         448,735
                                     ------------      -----------
 
                                     $   (107,797)     $   501,735
                                     ============      ===========
 
At December 31, 1998,  the Company has a net  operating  loss  carryforward  for
federal  income tax purposes of  approximately  $12,166,000,  which expires from
2005 to 2018.

The  Company's  deferred tax asset  consists of the following as of December 31,
1998:

            Net operating loss carryforward                     $ 5,597,000
            AMT tax credit carryforward                              10,000
            Litigation provision                                    207,000
            Accounts receivable and other reserves                  161,000

                                                                  5,975,000
            Valuation allowance                                  (5,975,000)
                                                                -----------
            Net asset                                           $         0
                                                                ===========

The valuation  allowance  increased by  approximately  $650,000  during 1998 and
decreased by $1,225,000 during 1997.

                                                                            F-11
<PAGE>
HELMSTAR GROUP, INC. AND SUBSIDIARIES

Notes to Financial Statements
December 31, 1998

Note E - Income Taxes (CONTINUED)

The effective  tax rate  applicable  to  continuing  operations  varied from the
statutory federal income tax rate as follows:
<TABLE>
<CAPTION>
                                                                                              Year Ended
                                                                                             December 31,
                                                                                          -------------------
                                                                                           1998         1997
                                                                                           ----         ----
<S>                                                                                       <C>            <C>  
            Statutory rate                                                                (34.0)%        34.0%
            State and local taxes, net of federal income tax effect                         4.3           9.3
            Nondeductible expenses                                                          3.9            .7
            Other                                                                                          .6
            Reversal of prior year tax overaccrual                                         (7.2)
            Utilization of carryforward losses                                                          (28.9)
            Valuation allowance                                                            18.2
                                                                                          -----         -----
            Effective rate                                                                (14.8)%        15.7%
                                                                                          =====          ==== 
</TABLE>
The Internal  Revenue Service ("IRS") is examining the Company's  federal income
tax  returns  for the years 1985  through  1989.  The IRS has  proposed  certain
adjustments  to the returns which results in a tax  deficiency of  approximately
$348,000  (exclusive  of  interest).  The Company has  consented to the proposed
adjustments  and awaits the IRS's final  approval.  In a prior year, the Company
had  recorded a  liability  amounting  to $487,000  for income tax and  interest
related to the years under examination and, accordingly,  after giving effect to
$60,000  of  additional  state  and local tax  deficiencies  related  to the IRS
adjustments,  in 1998,  the  Company  accrued  additional  interest  expense  of
$312,000  related to the tax  deficiency,  thereby  increasing  the liability to
$799,000 at December 31, 1998.

Note F - Incentive Compensation Plan

The Company has reserved an aggregate of 750,000  shares of its common stock for
issuance  to  officers  and  other key  employees  in the form of  incentive  or
nonqualified  stock options,  stock  appreciation  rights,  or restricted  stock
awards pursuant to its 1990 Incentive Compensation Plan (the "Plan").  Incentive
stock options  granted under the Plan must be  exercisable  at a price per share
not less than 100% (110% in the case of a 10%  stockholder)  of the fair  market
value of the  Company's  common  stock on the date of grant.  Options  cannot be
exercised after ten years (five years in the case of a 10% stockholder) from the
date of grant.  Nonqualified stock options cannot be exercised prior to one year
or after ten years from the date of grant.  During  1992,  options  to  purchase
150,000 shares were granted at an exercise  price of $.5625 per share.  In 1996,
50,000  options  were  cancelled.  As of December  31,  1998,  there are 100,000
outstanding options to purchase common stock, all of which are exercisable.


                                                                            F-12
<PAGE>
HELMSTAR GROUP, INC. AND SUBSIDIARIES

Notes to Financial Statements
December 31, 1998

Note G - Commitments

[1]   The Company  occupies  office space under a lease expiring on February 28,
      2006.  Rental  expense for such lease was  $164,819  and  $151,200 for the
      years ended December 31, 1998 and 1997, respectively.

      Minimum future annual rental payments at December 31, 1998 are as follows:

                1999                                          $   127,900
                2000                                              127,900
                2001                                              127,900
                2002                                              127,900
                2003                                              127,900
                Thereafter                                        276,900
                                                              -----------

                                                              $   916,400
                                                              ===========

[2]   The Company has a Retirement  Savings Plan for its employees,  pursuant to
      Section  401(k)  of  the  Internal  Revenue  Code.  The  Company,  at  its
      discretion, may match 25% of contributions.  Employee contributions to the
      Plan  and the  Company's  matching  contributions  vest  immediately.  The
      Company's  contribution  to the  Plan  in  1998  and  1997  applicable  to
      continuing operations was approximately $9,800 and $9,000, respectively.


Note H - Litigation

In May 1996,  the Company was served with a summons and  complaint in connection
with a class  action  commenced  in March 1996 against  multiple  parties.  This
action was filed in the Superior Court of California, County of Riverside and is
currently pending in that court. The plaintiffs brought this action on behalf of
themselves and all other purchasers of bonds issued by the Housing  Authority of
the County of Riverside for the  Whitewater  Garden  Apartments  project and the
Ironwood  Apartments  project (the  "Bonds").  The  plaintiffs  maintain that in
connection  with the  issuance and  underwriting  of the Bonds,  the  defendants
negligently and fraudulently misrepresented that the interest on the Bonds would
be exempt from federal income tax. The plaintiffs are seeking damages for taxes,
penalties, and interest they have paid or are obligated to pay, attorneys' fees,
costs,  punitive damages,  and other relief the court deems just. The plaintiffs
maintain that taxes,  interest,  and penalties are in excess of $3 million or an
amount to be proved at the time of trial.

The  Company  plans  to  defend  vigorously   against  all  of  the  plaintiffs'
allegations  involving  it.  The  ultimate  resolution  of  this  action  is not
presently determinable.

                                                                            F-13
<PAGE>
HELMSTAR GROUP, INC. AND SUBSIDIARIES

Notes to Financial Statements
December 31, 1998

Note I - Financial Information Relating to Operating Segments

The  Company's  reportable  segments  are  strategic  business  units that offer
different  services  as  described  in Note A. The  accounting  policies  of the
segments  are  the  same  as  those  described  in the  summary  of  significant
accounting  policies.  The Company  evaluates  performance of a segment based on
income or loss from operations before income taxes.
<TABLE>
<CAPTION>

                                                                          Year Ended December 31, 1998
                                                      --------------------------------------------------------------------
                                                                            Financial
                                                         Merchant          Consulting        Technology
                                                          Banking           Services         Services            Total
                                                      --------------    -------------    -------------     ---------------
<S>                                                   <C>               <C>              <C>               <C>            
         Equity in net income of investees            $       22,101                                       $        22,101
         Interest income                                   3,919,885                                             3,919,885
         Other revenues                                    1,526,873    $   1,040,000                            2,566,873
         Interest expense                                  4,993,779                                             4,993,779
         Depreciation and amortization                        36,779                     $      42,630              79,409
         Income (loss) from operations                      (551,938)         171,077         (351,345)           (732,206)
         Segment assets                                   83,377,206           21,100          141,829          83,540,135
         Capital expenditures                             20,077,022                            94,074          20,171,096
         Investment in equity method investee                 12,574                                                12,574
 
<CAPTION>

                                                                    Year Ended December 31, 1997
                                                      --------------------------------------------------
                                                                              Financial
                                                           Merchant         Consulting
                                                           Banking           Services           Total
                                                      --------------    --------------   ---------------
<S>                                                   <C>               <C>              <C>            
        Equity in net income of investees             $    5,656,080                     $     5,656,080
        Interest income                                      725,412                             725,412
        Other revenues                                      (273,519)   $      255,938           (17,581)
         Interest expense                                    660,088                             660,088
        Depreciation and amortization                         27,576                              27,576
        Income from operations                             3,062,072           128,893         3,190,965
        Segment assets                                    81,627,959           190,793        81,818,752
         Capital expenditures                                 38,546                              38,546
        Investment in equity method investee                 185,864                             185,864
</TABLE>

All of the Company's  revenues are  attributable  to, and all of its  long-lived
assets are located, in the United States.

                                                                            F-14
<PAGE>
HELMSTAR GROUP, INC. AND SUBSIDIARIES

Notes to Financial Statements
December 31, 1998


Note J - Sale of Mortgage Banking Subsidiary

During 1997,  the Company sold its wholly owned  subsidiary,  Citizens  Mortgage
Service Company ("Citizens"), to IMN Financial Corp. for approximately $375,000.
The Company recorded a loss from this transaction of approximately $231,000. The
Company  has  received  approximately  $111,000  from  the  purchaser  and has a
receivable at December 31, 1998 of approximately $264,000 which is past due. The
Company has commenced arbitration  proceedings for breach of contract seeking to
recover the amount due, including accrued interest.

For the year  ended  December  31,  1997,  condensed  results of  operations  of
Citizens,  which are reflected as  discontinued  operations in the  accompanying
financial statements, are presented below:


          Revenues                                             $   1,106,519
          Expenses                                                (1,861,928)
                                                               -------------

          Loss from operations                                 $    (755,409)
                                                               ============= 



                                                                            F-15
<PAGE>
 
Item 8.  Changes in and Disagreements with Accountants on
                  Accounting and Financial Disclosure.       
         None.


<PAGE>
                                    PART III

Item 9.   Directors, Executive Officers, Promoters  and Control Persons; 
                  Compliance with Section 16(a) of the Exchange Act.

                  The information required to be furnished pursuant to this item
                  is  set  forth   under  the   caption   "Management"   in  the
                  registrant's  definitive  proxy statement to be filed with the
                  Securities and Exchange  Commission within 120 days of the end
                  of the fiscal year ended December 31, 1998, the period covered
                  by this Form 10-KSB, and is incorporated herein by reference.


Item 10.  Executive Compensation.

                  The information required to be furnished pursuant to this item
                  is set forth under the caption "Executive Compensation" in the
                  registrant's  definitive  proxy statement to be filed with the
                  Securities and Exchange  Commission within 120 days of the end
                  of the fiscal year ended December 31, 1998, the period covered
                  by this Form 10-KSB, and is incorporated herein by reference.


Item 11.  Security Ownership of Certain Beneficial Owners and Management


                  The information required to be furnished pursuant to this item
                  is set forth under the caption "Security  Ownership of Certain
                  Beneficial   Owners  and   Management"  in  the   registrant's
                  definitive proxy statement to be filed with the Securities and
                  Exchange  Commission  within 120 days of the end of the fiscal
                  year ended  December 31, 1998, the period covered by this Form
                  10-KSB, and is incorporated herein by reference.


Item 12.  Certain Relationships and Related Transactions

                  The information required to be furnished pursuant to this item
                  is set forth  under the  caption  "Certain  Relationships  and
                  Related  Transactions"  in the  registrant's  definitive proxy
                  statement  to  be  filed  with  the  Securities  and  Exchange
                  Commission within 120 days of the end of the fiscal year ended
                  December 31, 1998, the period covered by this Form 10-KSB, and
                  is incorporated herein by reference.

<PAGE>
Item 13.  Exhibits, List and Reports on Form 8-K.

                  (a)      Exhibits

                  Certain   of   the    following    exhibits,    as   indicated
                  parenthetically,  were  previously  filed as exhibits to other
                  reports or  registration  statements  filed by the  Registrant
                  under  the  Securities  Act of 1933 or  under  the  Securities
                  Exchange Act of 1934 and are hereby incorporated by reference.

                  3.1         Restated   Certificate  of  Incorporation  of  the
                              Registrant  filed on July 31, 1987 and  amendments
                              thereto filed on June 8, 1989,  September 14, 1990
                              and  December  2, 1991.  Certificate  of change of
                              location of  registered  office and of  registered
                              agent  filed  on May  7,  1992.  (Incorporated  by
                              reference  to the  Registrant's  Annual  Report on
                              Form 10-KSB for the year ended December 31, 1997.)

                  3.2         Amended and  Restated  By-Laws of the  Registrant.
                              (Incorporated  by  reference  to the  Registrant's
                              Annual  Report on Form  10-KSB  for the year ended
                              December 31, 1995.)

                  10.1        Lease of the Company's  executive  offices,  dated
                              February 29, 1996.  (Incorporated  by reference to
                              the Registrant's  Annual Report on Form 10-KSB for
                              the year ended December 31, 1996.)

                  10.2        Helmstar Group,  Inc. 1990 Incentive  Compensation
                              Plan.    (Incorporated   by   reference   to   the
                              Registrant's  Annual Report on Form 10-KSB for the
                              year ended December 31, 1995.)

                  10.3        Amendment  to  the  Helmstar   Group,   Inc.  1990
                              Incentive  Compensation  Plan.   (Incorporated  by
                              reference  to the  Registrant's  Annual  Report on
                              Form 10-KSB for the year ended December 31, 1996.)

                  10.4        Sale of Citizens  Mortgage  Service Company to IMN
                              Financial   Corp,    dated   September   5,   1997
                              (Incorporated  by  reference  to the  Registrant's
                              Current  Report on Form 8-K,  dated  September 19,
                              1997.)

                  10.5        Indenture  of  Trust  between   Movieplex   Realty
                              Leasing,  L.L.C. and First Union National Bank, as
                              Trustee, dated November 1, 1997.  (Incorporated by
                              reference  to the  Registrant's  Annual  Report on
                              Form  10-KSB/A  for the year  ended  December  31,
                              1997.)

<PAGE>
                  10.6        Form of Bond.  (Incorporated  by  reference to the
                              Registrant's  Annual  Report on Form  10-KSB/A for
                              the year ended December 31, 1997.)

                  10.7        Master Lease  between  Movieplex  Realty  Leasing,
                              L.L.C., as Landlord, and Carmike Cinemas, Inc., as
                              Tenant, dated November 20, 1997.  (Incorporated by
                              reference  to the  Registrant's  Annual  Report on
                              Form  10-KSB/A  for the year  ended  December  31,
                              1997.)(1)

                  10.8        Reimbursement Agreement,  dated as of November 20,
                              1997, among Movieplex  Realty Leasing,  L.L.C, the
                              Lenders,   and  Wachovia  Bank,  N.A.,  as  Agent.
                              (Incorporated  by  reference  to the  Registrant's
                              Annual  Report on Form 10-KSB/A for the year ended
                              December 31, 1997.)(1)

                  10.9        Form  of  Letter  of  Credit.   (Incorporated   by
                              reference  to the  Registrant's  Annual  Report on
                              Form  10-KSB/A  for the year  ended  December  31,
                              1997.)

                  10.10       Form of Bond Purchase  Agreement between Movieplex
                              Realty Leasing, L.L.C. and {the Purchaser],  dated
                              November 20, 1997.  (Incorporated  by reference to
                              the  Registrant's  Annual  Report on Form 10-KSB/A
                              for the year ended December 31, 1997.)

                  10.11       Agency and Development Agreement between Movieplex
                              Realty Leasing,  L.L.C. and Carmike Cinemas, Inc.,
                              dated   November   20,  1997.   (Incorporated   by
                              reference  to the  Registrant's  Annual  Report on
                              Form  10-KSB/A  for the year  ended  December  31,
                              1997.)

                  21.0        Subsidiaries of the Registrant.


                  (b)         No reports on Form 8-K have been filed  during the
                              last quarter covered by this report.

                  ----------
                  (1)         Portions of this exhibit have been deleted per the
                              Registrant's  request for  confidential  treatment
                              and filed seperately with the Commission  pursuant
                              to Rule 24b-2.

<PAGE>


                                   SIGNATURES


Pursuant to the  requirements of Section 13 or 15(d) 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 on the 31st day of March,
1999.


Helmstar Group, Inc.


    /s/ George W. Benoit
    --------------------
    George W. Benoit, Chairman of the Board
                  and Chief Executive Officer


Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below by the  following  persons on behalf of the  Registrant in
the capacities indicated on the 31st day of March, 1999.


         Signature                       Title
         ---------                       -----


/s/George W. Benoit          Chairman of the Board, President,
-------------------          Chief Executive Officer
(George W. Benoit)                                   


/s/Joseph G. Anastasi        Director
---------------------
(Joseph G. Anastasi)


/s/Charles W. Currie         Director
--------------------
(Charles W. Currie)


/s/James J. Murtha           Director
------------------
(James J. Murtha)


/s/David W. Dube             Director
----------------
(David W. Dube)