<PAGE>
 
                    U.S. SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549


                                  FORM 10-QSB



     (Mark One)

      x   Quarterly report pursuant to Section 13 or 15(d) of the Securities
     ---                                                                    
Exchange Act of 1934

     For the quarterly period ended   September 30, 1995
                                     -----------------------

     ___ Transition report under Section 13 or 15(d) of the Exchange Act of 1934

     For the transition period from __________ to __________

     Commission file number l-9224
                            ------


                             HELMSTAR GROUP, INC.
  ---------------------------------------------------------------------------
       (Exact Name of Small Business Issuer as Specified 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)

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

     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  __
      -          

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

           Class                    Outstanding at October 31, 1995
           -----                    -------------------------------

Common stock - par value $.10                5,548,373 shares
-----------------------------                ----------------
<PAGE>
 
                                    PART I
                             FINANCIAL INFORMATION


ITEM L.  FINANCIAL STATEMENTS.

     The following consolidated financial statements of Helmstar Group, Inc. and
subsidiaries (collectively referred to as the "Company," unless the context
requires otherwise) are prepared in accordance with the rules and regulations of
the Securities and Exchange Commission for Form l0-QSB and reflect all
adjustments (consisting of normal recurring accruals) and disclosures which, in
the opinion of management, are necessary for a fair statement of results for the
interim periods presented. It is suggested that these financial statements be
read in conjunction with the financial statements and notes thereto included in
the Company's Form l0-KSB for the fiscal year ended December 31, 1994, which was
filed with the Securities and Exchange Commission.

     The results of operations for the three months and nine months ended
September 30, 1995 are not necessarily indicative of the results to be expected
for the entire fiscal year.
<PAGE>
 
                                       2

                     HELMSTAR GROUP, INC. AND SUBSIDIARIES
                     CONDENSED CONSOLIDATED BALANCE SHEETS
                                  (Unaudited)

<TABLE>
<CAPTION>
                                         Sept 30,    December 31,
                 ASSETS                    1995          1994
                                        -----------  ------------
<S>                                    <C>           <C>

Cash and cash equivalents............  $ 1,196,329    $   739,624
Marketable securities................      890,883        508,907
Joint ventures including advances....    1,465,513      3,675,971
Mortgage servicing rights - net of
  accumulated amortization of
  $1,585,173 in 1995 and $1,289,410
  in 1994............................    1,859,768      2,077,108
Other investments....................      734,979        397,126
Mortgage loans held for sale.........    1,751,203         30,000
Due for mortgage loans sold..........      155,449         54,554
Furniture, equipment and
  leasehold improvements - at cost,
  less accumulated depreciation and
  amortization of $348,576 in
  1995 and $316,507 in 1994..........      217,583        256,526
Other assets.........................      736,935        786,849
                                        ----------     ----------

     TOTAL...........................  $ 9,008,642    $ 8,526,665
                                        ==========     ==========

         LIABILITIES

Notes payable........................                 $   379,479
Accrued expenses and other
  liabilities........................  $ 1,111,715      1,510,946
                                        ----------     ----------

     Total liabilities...............    1,111,715      1,890,425
                                        ----------     ----------

    STOCKHOLDERS' EQUITY

Common stock - authorized
  10,000,000 shares, par value
  $.10; issued 6,749,600 shares......      674,960        674,960
Paid-in surplus......................   14,984,510     14,984,510
Unrealized gain on securities
  available for sale.................      355,635
(Deficit)............................   (5,214,468)    (6,504,307)
                                        ----------     ----------

     Total...........................   10,800,637      9,155,163

Less treasury stock, at cost -
  1,201,227 shares in 1995 and
  783,905 shares in 1994.............   (2,903,710)    (2,518,923)
                                        ----------     ----------

     Total stockholders' equity......    7,896,927      6,636,240
                                        ----------     ----------

     TOTAL...........................  $ 9,008,642    $ 8,526,665
                                        ==========     ==========
</TABLE>

     See Notes to Condensed Consolidated Financial Statements (Unaudited).
<PAGE>
 
                                       3

                     HELMSTAR GROUP, INC. AND SUBSIDIARIES
                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                  (Unaudited)

<TABLE>
<CAPTION>
                                     Three Months Ended             Nine Months Ended
                                            Sept 30,                      Sept 30,
                                   -------------------------      -----------------------
                                         1995         1994             1995           1994
<S>                                 <C>           <C>             <C>            <C>
Revenues:
  Profit from joint ventures...... $   137,288   $  107,104      $ 1,917,160  $     388,004 
  Financial consulting fees.......     170,000      100,000          460,000        455,500 
  Loan servicing fees net of                                                                
     guarantor fees...............     213,793      229,871          641,594        730,973 
  Loan origination fees...........     151,421       63,116          383,144        259,148 
  Interest income.................     118,208       37,040          279,066        124,974 
  Investment income...............      60,547     (127,380)         691,857        238,033 
  Other income....................     226,132      116,287          263,589        172,933 
                                    ----------    ---------       ----------     ---------- 
                                                                                            
     Total Revenues...............   1,077,389      526,038        4,636,410      2,369,565 
                                    ----------    ---------       ----------     ---------- 
                                                                                            
                                                                                            
Expenses:                                                                                   
  Compensation and related costs..     604,401      480,269        1,941,447      1,651,181 
  Occupancy cost..................      96,930       95,569          320,182        284,736 
  Amortization of mortgage                                                                  
     servicing rights.............      97,594      105,488          295,763        364,995 
  General and administrative......     189,474      141,129          584,924        503,926 
  Professional fees and                                                                     
     litigation expenses..........      19,929       57,297          137,127        168,305 
  Interest........................       1,160        6,584            5,106         21,785 
                                    ----------    ---------       ----------     ---------- 
                                                                                            
     Total Expenses...............   1,009,488      886,336        3,284,549      2,994,928 
                                    ----------    ---------       ----------     ---------- 
                                                                                            
Profit (loss) before taxes........      67,901     (360,298)       1,351,861       (625,363)
                                                                                            
Income tax (benefit)..............      1,800       (13,110)          62,022         19,895 
                                    ---------     ---------       ----------     ---------- 
                                                                                            
                                                                                            
NET PROFIT (LOSS)................. $   66,101    $ (347,188)     $ 1,289,839  $    (645,258)
                                    =========     =========       ==========     ========== 
                                                                                            
                                                                                            
                                                                                            
                                                                                            
Net profit (loss)                                                                           
  per common share................     $  .01       $  (.06)          $  .22        $  (.11)
                                       ======        =======          ======        ======= 
                                                                                            
Weighted average number of                                                                  
  common shares outstanding.......  5,808,254     6,005,495        5,906,025      6,005,495 
                                    =========     =========        =========     ========== 
</TABLE> 
                                  
                                 
                                  
     See Notes to Condensed Consolidated Financial Statements (Unaudited).
<PAGE>
 
                                       4
                                 
                    HELMSTAR GROUP, INC. AND SUBSIDIARIES 
               CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS 
                                  (Unaudited)


<TABLE>
<CAPTION>
                                                                 Nine months Ended
                                                                   September 30,
                                                             -------------------------
                                                                   1995         1994
<S>                                                          <C>           <C>
Cash flows from operating activities:
 Net income (loss)........................................  $ 1,289,839   $ (645,258)
 Adjustments to reconcile net income (loss) to net
 cash provided by (used in) operating activities:
  Depreciation and amortization...........................      367,270      435,141
  Unrealized (gain) on joint ventures
 and other investments....................................     (623,111)    (292,515)
  (Gain) on sale or disposal of investments...............   (1,276,267)    (115,898)
  (Gain) on sale of mortgage rights.......................                   (93,873)
  Loss on sale of fixed assets............................        1,912
  Changes in operating assets and liabilities:
 (Increase) decrease in mortgage loans held for sale......   (1,721,203)     533,450
 (Increase) decrease in due for mortgage loans sold.......     (100,895)     249,562
 Decrease (increase) in other assets......................       24,208     (246,409)
 (Decrease) in accrued expenses...........................     (399,231)    (417,005)
                                                             ----------    ---------

Net cash provided by (used in) operating activities.......   (2,437,478)    (592,805)
                                                             ----------    ---------

Cash flows from investing activities:
 (Purchase) sale of investment securities - net:
  U.S. Government obligations.............................     (381,976)     246,237
 Purchase of interest in joint venture....................                      (500)
 Distributions from joint ventures and other investments..    2,445,996      244,519
 Purchase of mortgage servicing rights....................      (78,423)    (133,706)
 Proceeds from the sale of joint ventures.................    1,681,622
 Proceeds from the sale of mortgage servicing rights......                   320,994
 Proceeds from the sale or disposal of fixed assets.......        8,752
 Purchase of fixed assets.................................      (17,522)     (25,408)
                                                             ----------    ---------

Net cash provided by (used in) investing activities.......    3,658,449      652,136
                                                             ----------    ---------

Cash flows from financing activities:
 Repayment of short term borrowings - net:................     (379,479)    (527,853)
 Purchase of treasury stock...............................     (384,787)         (81)
                                                             ----------    ---------

Net cash provided by (used in) financing activities.......     (764,266)    (527,934)
                                                             ----------    ---------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS......      456,705     (468,603)
Cash and cash equivalents at beginning of period..........      739,624      840,367
                                                             ----------    ---------

CASH AND CASH EQUIVALENTS AT END OF PERIOD................  $ 1,196,329   $  371,764
                                                             ==========    =========

Supplemental disclosures of cash flow information:
 Cash paid during the period for:
  Interest................................................  $    59,116   $    6,584
  Taxes...................................................       10,693       19,255
 Non-cash increase in value of securities
    available for sale....................................      355,635
</TABLE>

     See Notes to Condensed Consolidated Financial Statements (Unaudited).
<PAGE>
 
                                       5

                     HELMSTAR GROUP, INC. AND SUBSIDIARIES
             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)

l.   SIGNIFICANT ACCOUNTING POLICIES
     -------------------------------

     The accounting policies followed by the Company are set forth in the notes
to the Company's financial statements included in its Form l0-KSB, for the
fiscal year ended December 3l, 1994, which was filed with the Securities and
Exchange Commission (the "SEC").

     The Company accounts for investment securities in accordance with Statement
of Financial Accounting Standards No. 115. The Company records the change in
market value of investments "available for sale" in an equity account.

2.   JOINT VENTURES
     --------------

     On February 22, 1995, First Highpoint Limited Partnership sold its
principal asset, an apartment project located in Plano, Texas. The partnership
had owned such project throughout 1994. The Company recognized a gain of
$1,260,871 in the three months ended March 31, 1995 and an additional amount of
$3,902 in this period.

     On April 11, 1995, Blowing Rock Outlet Partners refinanced its principal
asset, a manufacturers outlet shopping center, located in Blowing Rock, North
Carolina. The Company's share of the proceeds distributed after the refinancing
was in excess of the carrying amount of the Company's interest in such venture
prior to the distribution.
<PAGE>
 
                                       6

                     HELMSTAR GROUP, INC. AND SUBSIDIARIES
             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)

2.   JOINT VENTURES (continued)
     --------------            

     Summary combined operating results of the joint ventures in which the
Company is a co-venturer are as follows:

<TABLE>
<CAPTION>
                                     Three Months Ended September 30,
                                    ----------------------------------
                                          1995              1994
                                    ----------------  ----------------
<S>                                 <C>               <C>
 
Rental income.....................  $    531,957         $    791,413
Operating expenses................        40,196             (203,414)
                                     -----------          -----------
                                                        
Net operating income..............       491,761              587,999
Other income (expense)............      (399,201)            (465,769)
                                     -----------          -----------
                                                        
Net income.......................   $     92,560         $    122,230
                                     ===========          ===========
                                                        
Company's share of profit                               
 from joint ventures..............  $     81,380         $    107,104
                                                        
Gain from receiving cash                                
 distributions in excess of                             
 the book value of the Company's                        
 interest in a joint venture......        55,908        
                                     -----------          -----------
                                                        
Profit from joint ventures........  $    137,288         $    107,104
                                     ===========          ===========
</TABLE> 
 

<TABLE> 
<CAPTION> 
                                        Nine Months Ended September 30,
                                        -------------------------------
                                            1995              1994
                                         ---------         ---------
<S>                                     <C>               <C>  
Rental income.....................      $ 1,842,590       $ 2,377,754
Operating expenses................         (217,449)         (494,954)
                                         ----------        ----------
 
Net operating income..............        1,625,141         1,882,800
Other income (expense)............       (1,153,879)       (1,419,553)
                                         ----------        ----------
 
Net income........................      $   471,262       $   463,247
                                         ==========        ==========
 
Company's share of profit
 from joint ventures..............      $   343,300       $   388,004
 
Company's share of gain on sale
 of an apartment project..........        1,264,773        
 
Gain from receiving cash
 distributions in excess of
 the book value of the Company's
 interest in a joint venture......          309,087
                                         ----------        ----------
 
Profit from joint ventures........      $ 1,917,160       $   388,004
                                         ==========        ==========
</TABLE>
<PAGE>
 
                                       7

                     HELMSTAR GROUP, INC. AND SUBSIDIARIES
             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)

2.   JOINT VENTURES (continued)
     --------------            


     Pro forma summary combined operating results of the joint ventures in which
the Company is a co-venturer, excluding First Highpoint Limited Partnership, are
as follows:

<TABLE>
<CAPTION>
                                    Three Months Ended September 30,
                                   ----------------------------------
                                         1995              1994
                                      ---------          --------
<S>                                    <C>               <C>
 
Rental income....................      $   531,957       $   508,707
Operating expenses...............          (40,196)          (68,277)
                                        ----------        ----------
 
Net operating income.............          491,761           440,480
Other income (expense)...........         (399,201)         (334,047)
                                        ----------        ----------
 
Net income.......................      $    92,560       $   106,433
                                        ==========        ==========
 
Company's share of profit
 from joint ventures.............      $    81,380       $    91,307
                                        ==========        ==========
</TABLE> 
 

<TABLE> 
<CAPTION>  
                                       Nine Months Ended September 30,
                                       -------------------------------
                                           1995              1994
                                         --------          --------
<S>                                    <C>               <C>   
Rental income....................      $ 1,653,165       $ 1,538,102
Operating expenses...............         (110,980)         (112,205)
                                        ----------        ----------
 
Net operating income.............        1,542,185         1,425,897
Other income (expense)...........       (1,082,416)       (1,014,292)
                                        ----------        ----------
 
Net income.......................      $   459,769       $   411,605
                                        ==========        ==========
 
Company's share of profit
 from joint ventures.............      $   331,807       $   336,362
                                        ==========        ==========
</TABLE>


3.   INCOME (LOSS) PER SHARE
     -----------------------

     Income (loss) per share is based on the weighted average number of common
shares outstanding during each period. The assumed exercise of stock options
relating to the Company's incentive compensation plan have not been included in
the computation, because the effect of their inclusion would not be dilutive.
<PAGE>
 
                                       8

                     HELMSTAR GROUP, INC. AND SUBSIDIARIES
             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)


4.   LITIGATION
     ----------

     The Company is a defendant in various lawsuits. In those instances in which
liability can be estimated, provisions have been reflected in the financial
statements. The ultimate outcome of the remaining lawsuits cannot presently be
determined, and no provision for any liability that may result has been made in
the financial statements, since the amounts, if any, cannot be determined.

     For an update to the litigation described in the notes to the Company's
financial statements included in its Form 10-KSB for the fiscal year ended
December 31, 1994, which was filed with the SEC, see Item 1, "Legal
Proceedings," on page 23 of this Form 10-QSB.

5.   SUBSEQUENT EVENT
     ----------------

     On November 6, 1995, the Company entered into an agreement to sell
substantially all of its mortgage servicing rights for approximately $2.4
million. The closing is expected to occur in December 1995.
<PAGE>
 
                                       9

Item 2.  Management's Discussion and Analysis of Financial Condition and
------   ---------------------------------------------------------------
         Results of Operations
         ---------------------

     A.  Three Months Ended September 30, 1995 Compared
         ----------------------------------------------
         with Three Months Ended September 30, 1994
         ------------------------------------------

         Total revenues increased to $1,077,389 for the three months ended
         September 30, 1995 from $526,038 for the three months ended September
         30, 1994.

         Profit from joint ventures increased to $137,288 for the three months
         ended September 30, 1995 from $107,104 for the three months ended
         September 30, 1994. 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 the three months ended September 30, 1994
         included $15,797 from First Highpoint Limited Partnership ("First
         Highpoint"). Since First Highpoint sold its apartment complex in
         February 1995, the Company did not realize any profit or loss from such
         venture during the three months ended September 30, 1995. The Company's
         share of the gain from such sale was reflected in profit from joint
         ventures for the nine months ended September 30, 1995.

         Profit for the three months ended September 30, 1995 includes a gain of
         approximately $55,000 from receiving cash distributions from Blowing
         Rock Outlet Partners ("Blowing Rock") in excess of the Company's
         carrying amount of its interest in such venture.

         Notwithstanding improved operating results at the venture, the
         Company's share of income from Blowing Rock should be lower in future
         periods, due in part to the substantial increase in interest expense,
         as a result of refinancing the venture's mortgage debt from $3,757,828
         to $6,550,000 in April 1995. Furthermore, the partnership agreement
         provides that the Company's share of income and cash flow would
         decline, once the Company recovered its entire capital contribution
         from certain events including the refinancing of the venture's debt.
         The Company received a distribution in excess of its capital
         contribution from the refinancing proceeds. The venture's cash flow, at
         current interest rates, was not impacted negatively because debt
         service on the new loan is lower than on the old loan. In 
<PAGE>
 
                                      10

         addition to interest, the old loan required principal amortization
         payments of $40,000 per month.

         Although operating results continue to improve as the ventures mature,
         some variation in profit or loss for a specific interim period may
         result due to such factors as receiving annual payments of percentage
         rent; incurring periodic operating expenses which will occur only every
         few years, such as painting the entire project; accounting adjustments
         between interim periods; lost rent due to the turnover of a tenant
         notwithstanding that a new tenant has been secured at a higher rent;
         etc.

         Financial consulting fees increased to $170,000 for the three months
         ended September 30, 1995 from $100,000 for the three months ended
         September 30, 1994. The Company provides financial structuring advice
         to clients 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.

         Loan servicing fees decreased to $213,793 for the three months ended
         September 30, 1995 from $229,871 for the three months ended September
         30, 1994. This decrease largely is attributable to a decline in the
         size of the Company's mortgage servicing portfolio as a result of an
         increase in prepayments spurred by lower interest rates.

         On November 6, 1995, the Company entered into an agreement to sell
         substantially all of its mortgage servicing rights for approximately
         $2.4 million. The closing is expected to occur in December 1995.

         The Company was able to cushion the effect of the decline in servicing
         revenue with loan origination fees reflecting the increased level of
         new originations completed by the Company. Most of the Company's loan
         originations [i.e., fixed rate mortgages underwritten in accordance
         with Federal National Mortgage Association ("FNMA") or Federal Home
         Loan Mortgage Corporation ("FHLMC") standards] have an annual servicing
         fee of .0025% of the unamortized principal balance. Older loans, many
         of which have been refinanced, often have higher servicing fees.

         Loan origination fees increased to $151,421 for the three months ended
         September 30, 1995 from
<PAGE>
 
                                      11

         $63,116 for the three months ended September 30, 1994. The Company has
         taken significant steps to expand its origination business. This
         included opening branches in late 1993 and adding experienced
         originators. During mid-1994 until early 1995, many of the Company's
         competitors were scaling down origination departments, while the
         Company was enhancing its own. Recent declines in interest rates have
         improved the number of mortgage refinancings and housing sales. As a
         result of the steps taken to expand its origination business, the
         Company was poised to capture a larger share of an improving market.

         Interest income increased to $118,208 for the three months ended
         September 30, 1995 from $37,040 for the three months ended September
         30, 1994, due in large part to a change in the way the Company funds
         mortgage loans originated for resale. In the three months ended
         September 30, 1994, the Company relied more heavily on its "warehouse
         facility" to fund such loans. Under the terms of the "warehouse
         facility," the Company foregoes both interest income on mortgage loans
         originated for resale and virtually all interest expense, since the
         provider of such facility earns interest income on the mortgage loans
         prior to completing the sale thereof to investors. In addition to
         utilizing the "warehouse facility," the Company funds mortgage loans
         originated for resale by borrowing from its "credit facility" or using
         its own cash. When either the "credit facility" or its own cash is
         used, the Company earns interest income on the mortgage loans until the
         time of completing the sale thereof to investors. The Company incurs
         interest expense when using the "credit facility." During the three
         months ended September 30, 1995, the Company relied more heavily on its
         own cash to fund mortgage loans originated for resale and earned
         interest on mortgages prior to completing the sale thereof to
         investors.

         Investment income increased to $60,547 for the three months ended
         September 30, 1995 from a negative $127,380 for the three months ended
         September 30, 1994. This category includes: net profit or loss from
         investing in futures, puts, calls, equities and other securities
         activities which included participation in an investment partnership in
         1994.

         Other income increased to $226,132 for the three months ended September
         30, 1995 from $116,287 for
<PAGE>
 
                                      12

         the three months ended September 30, 1994, principally as a result of
         the payment of an item which was previously considered uncollectible.
         This category also consists of sundry fees and revenues earned in
         connection with the Company's mortgage banking business other than loan
         servicing or origination fees.

         Total expenses increased to $1,009,488 for the three months ended
         September 30, 1995 from $886,336 for the three months ended September
         30, 1994.

         Compensation and related costs increased to $604,401 for the three
         months ended September 30, 1995 from $480,269 for the three months
         ended September 30, 1994, due in large part to higher commission
         payments to loan originators and hiring additional processing staff as
         a result of the increase in mortgage loan originations.

         Occupancy costs increased slightly to $96,930 for the three months
         ended September 30, 1995 from $95,569 for the three months ended
         September 30, 1994.

         Amortization of mortgage service rights decreased to $97,594 for the
         three months ended September 30, 1995 from $105,488 for the three
         months ended September 30, 1994. The carrying amount of purchased
         servicing rights must be amortized over the period of the estimated,
         future net servicing income associated therewith. The Company reviews
         the carrying amount of each portfolio for possible impairment. If
         estimated future servicing costs exceed revenues, the Company will
         recognize a loss equal to any excess. Future amortization expense will
         be adjusted accordingly.

         General and administrative expenses increased to $189,474 for the three
         months ended September 30, 1995 from $141,129 for the three months
         ended September 30, 1994, due in part to greater activity in the
         Company's loan origination business.

         Professional fees decreased to $19,929 the three months ended September
         30, 1995 from $57,297 for the three months ended September 30, 1994,
         reflecting a decline in the level of activity in various litigations in
         which the Company is involved.
<PAGE>
 
                                      13

         Interest expense decreased to $1,160 for the three months ended
         September 30, 1995 from $6,584 for the three months ended September 30,
         1994. Interest expense is incurred in connection with the Company's
         mortgage banking activities.

         On a pre-tax basis, the Company had a profit of $67,901 for the three
         months ended September 30, 1995 compared with a loss of $360,2980 for
         the three months ended September 30, 1994. Provision for income taxes
         for the three months ended September 30, 1995 was $1,800 compared with
         a benefit of $13,110 for the three months ended September 30, 1994.
         These provisions consist solely of state and local taxes. For Federal
         income tax purposes, as of December 31, 1994, the Company has net
         operating loss carryforwards aggregating approximately $11,400,000
         available to reduce future taxable income. These carryforwards expire
         in the years 2006 through 2009.

         The Company's net income for the three months ended September 30, 1995
         was $66,101 compared with a net loss of $347,188 for the three months
         ended September 30, 1994. On a per share basis, the profit was $.01 for
         the three months ended September 30, 1995, compared with a net loss of
         $(.06) for the three months ended September 30, 1994. Earnings or loss
         per share are based on the weighted average number of shares
         outstanding (5,808,254 for the three months ended September 30, 1995
         and 6,005,495 for the three months ended September 30, 1994). The
         assumed exercise of stock options relating to the Company's incentive
         compensation plan were not included in the computation, because the
         effect of their inclusion would be not be dilutive.

         Nine months Ended September 30, 1995 Compared
         ---------------------------------------------
         with Nine months Ended September 30, 1994
         -----------------------------------------

         Total revenues increased to $4,636,410 for the nine months ended
         September 30, 1995 from $2,369,565 for the nine months ended September
         30, 1994.

         Profit from joint ventures increased to $1,917,160 for the nine months
         ended September 30, 1995 from $388,004 for the nine months ended
         September 30, 1994. 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.
<PAGE>
 
                                      14

         Profit for the nine months ended September 30, 1995 includes the
         Company's share of gain from the sale of an apartment project by First
         Highpoint in February 1995. Such amount was approximately $1,260,000.
         The Company's share of income from First Highpoint's operations for the
         nine months ended September 30, 1995 were $11,493 compared with $51,642
         for the nine months ended September 30, 1994.

         The Company realized a gain of approximately $310,000 from receiving
         cash distributions from Blowing Rock in excess of the Company's
         carrying amount of its interest in such venture. The venture made a
         substantial cash distribution in April 1995, after refinancing its
         mortgage.

         Notwithstanding improved operating results at the venture, the
         Company's share of income from Blowing Rock should be lower in future
         periods, due in part to the substantial increase in interest expense,
         as a result of refinancing the venture's mortgage debt from $3,757,828
         to $6,550,000 in April 1995. Furthermore, the partnership agreement
         provides that the Company's share of income and cash flow would
         decline, once the Company recovered its entire capital contribution
         from certain events including the refinancing of the venture's debt.
         The Company received a distribution in excess of its capital
         contribution from the refinancing proceeds. The venture's cash flow, at
         current interest rates, was not impacted negatively because debt
         service on the new loan is lower than on the old loan. In addition to
         interest, the old loan required principal amortization payments of
         $40,000 per month.

         Although operating results continue to improve as the ventures mature,
         some variation in profit or loss for a specific interim period may
         result due to such factors as receiving annual payments of percentage
         rent; incurring periodic operating expenses which will occur only every
         few years, such as painting the entire project; accounting adjustments
         between interim periods; lost rent due to the turnover of a tenant
         notwithstanding that a new tenant has been secured at a higher rent;
         etc.

         Financial consulting fees increased to $460,000 for the nine months
         ended September 30, 1995 from $455,500 for the nine months ended
         September 30, 1994. The Company provides financial structuring 
<PAGE>
 
                                      15

         advice to clients 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.

         Loan servicing fees decreased to $641,594 for the nine months ended
         September 30, 1995 from $730,973 for the nine months ended September
         30, 1994. This decrease is largely attributable to a decline in the
         average size of the Company's mortgage servicing portfolio during the
         nine months ended September 30, 1995 versus the nine months ended
         September 30, 1994. The Company's mortgage servicing portfolio was
         impacted negatively by a high level of prepayments. Lower interest
         rates in 1993, early 1994 and mid-1995 spurred a great number of
         mortgage refinancings. Furthermore, the Company's mortgage servicing
         portfolio decreased as a result of the bulk sale of approximately $25
         million in mortgage servicing rights during the third quarter of 1994.

         On November 6, 1995, the Company entered into an agreement to sell
         substantially all of its mortgage servicing rights for approximately
         $2.4 million. The closing is expected to occur in December 1995.

         The Company was able to cushion the effect of the decline in servicing
         revenue with loan origination fees reflecting the increased level of
         new originations completed by the Company. Most of the Company's new
         loan originations [i.e., fixed rate mortgages underwritten in
         accordance with FNMA or FHLMC standards] have an annual servicing fee
         of .0025% of the unamortized principal balance. Older loans, many of
         which have been refinanced, often have higher servicing fees.

         Loan origination fees increased to $383,144 for the nine months ended
         September 30, 1995 from $259,148 for the nine months ended September
         30, 1995. The Company has taken significant steps to expand its
         origination business. This included opening branches in late 1993 and
         adding experienced originators. During mid-1994 until early 1995, many
         of the Company's competitors were scaling down origination departments,
         while the Company was enhancing its own. Recent declines in interest
         rates have improved the number of mortgage refinancings and housing
         sales. As a result of the steps taken to expand its 
<PAGE>
 
                                      16

         origination business, the Company was poised to capture a larger share
         of an improving market.

         Interest income increased to $279,066 for the nine months ended
         September 30, 1995 from $124,974 for the nine months ended September
         30, 1994, due in large part to a change in the way the Company funds
         mortgage loans originated for resale. In the nine months ended
         September 30, 1994, the Company relied more heavily on its "warehouse
         facility" to fund such loans. Under the terms of the "warehouse
         facility," the Company foregoes both interest income on mortgage loans
         originated for resale and virtually all interest expense, since the
         provider of such facility earns interest income on the mortgage loans
         prior to completing the sale thereof to investors. In addition to
         utilizing the "warehouse facility," the Company funds mortgage loans
         originated for resale by borrowing from its "credit facility" or using
         its own cash. When either the "credit facility" or its own cash is
         used, the Company earns interest income on the mortgage loans until the
         time of completing the sale thereof to investors. The Company incurs
         interest expense when using the "credit facility." During the nine
         months ended September 30, 1995, the Company relied more heavily on its
         own cash to fund mortgage loans originated for resale and earned
         interest on mortgages prior to completing the sale thereof to
         investors.

         Investment income increased to $691,857 for the nine months
         ended September 30, 1995 from $238,033 for the nine months
         ended September 30, 1994.  This category includes: (1) net
         profit or loss from investing in futures, puts, calls,
         equities and other securities activities including
         participation in an investment partnership; (2) receipts
         pursuant to a settlement agreement on a receivable which had
         been fully reserved in a prior period; and (3) the value of
         stock in a public company received in payment of certain
         contingent consideration pursuant to the terms of the sale of
         the Company's interest in a joint venture in 1992.
         
         Other income increased to $263,589 for the nine months ended
         September 30, 1995 from $172,933 for the nine months ended
         September 30, 1994, principally as a result of the collection
         of an item which was previously considered uncollectible.
         This category also consists of sundry fees and revenues earned
         in connection with 
<PAGE>
 
                                      17

         the Company's mortgage banking business other than loan servicing or
         origination fees.

         Total expenses increased to $3,284,549 for the nine months ended
         September 30, 1995 from $2,994,928 for the nine months ended September
         30, 1994.
         
         Compensation and related costs increased to $1,941,447 for the nine
         months ended September 30, 1995 from $1,651,181 for the nine months
         ended September 30, 1994. The increase is due principally to the
         accrual of an incentive bonus relating to the profit from the Company's
         joint ventures and to higher commission payments to loan originators
         and hiring additional processing staff as a result of the increase in
         mortgage loan originations.
         
         Occupancy costs increased to $320,182 for the nine months ended
         September 30, 1995 from $284,736 for the nine months ended September
         30, 1994. This increase is due principally to a payment made when the
         Company exercised its right to cancel the lease on its executive
         offices, effective February 29, 1996. Management believes that it can
         procure executive offices on more favorable terms. The Company
         currently is reviewing space alternatives.
         
         Amortization of mortgage service rights decreased to $295,763 for the
         nine months ended September 30, 1995 from $364,995 for the nine months
         ended September 30, 1994. The carrying amount of purchased servicing
         rights must be amortized over the period of the estimated, future net
         servicing income associated therewith. The Company reviews the carrying
         amount of each portfolio for possible impairment. If estimated future
         servicing costs exceed revenues, the Company will recognize a loss
         equal to any excess. Future amortization expense will be adjusted
         accordingly.
         
         General and administrative expenses increased to $584,924 for the nine
         months ended September 30, 1995 from $503,926 for the nine months ended
         September 30, 1994. This increase was due principally to greater
         activity in the Company's loan origination business and an increase in
         insurance coverage.
         
         Professional fees decreased to $137,127 for the nine months ended
         September 30, 1995 from $168,305 for the nine months ended September
         30, 1994, reflecting a decline in the level of activity in
<PAGE>
 
                                      18

         various litigations in which the Company is involved.

         Interest expense decreased to $5,106 for the nine months ended
         September 30, 1995 from $21,785 for the nine months ended September 30,
         1994, principally as a result of greater utilization of its own cash
         and the "warehouse facility" in funding loans originated for resale.

         
         On a pre-tax basis, the Company had a profit of $1,351,861 for the nine
         months ended September 30, 1995 compared with a loss of $625,363 for
         the nine months ended September 30, 1994. Provision for income taxes
         for the nine months ended September 30, 1995 was $62,022 compared with
         $19,895 for the nine months ended September 30, 1994. These provisions
         consist solely of state and local taxes. For Federal income tax
         purposes, as of December 31, 1994, the Company has net operating loss
         carryforwards aggregating approximately $11,400,000 available to reduce
         future taxable income. These carryforwards expire in the years 2006
         through 2008.
         
         The Company's net income for the nine months ended September 30, 1995
         was $1,289,839 compared with a net loss of $645,258 for the nine months
         ended September 30, 1994. On a per share basis, net profit was $.22 for
         the nine months ended September 30, 1995 compared with a net loss of
         $(.11) for the nine months ended September 30, 1994. Earnings or loss
         per share are based on the weighted average number of shares
         outstanding (5,906,025 for the nine months ended September 30, 1995 and
         6,005,495 for the nine months ended September 30, 1994). The assumed
         exercise of stock options relating to the Company's incentive
         compensation plan were not included in the computation, because the
         effect of their inclusion would not be dilutive.

B.       Liquidity and Capital Resources
         -------------------------------

         Management of the Company believes that funds generated from
         operations, its credit and warehouse facilities, working capital line
         and cash distributions from joint ventures, supplemented by its
         available assets, will provide it with sufficient resources to meet all
         present and reasonably foreseeable future capital needs. A significant
         portion of the Company's assets are readily convertible into cash.
<PAGE>
 
                                      19
         
         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 obligations, commodity futures contracts and money
         market funds. Additionally, since commencing the mortgage loan
         origination business, the Company may use its own cash to carry a
         portion of its inventory of mortgage loans originated for resale. Prior
         to funding any loans, the Company procures firm commitments from
         investors to purchase such loans. Fifteen days is the typical time
         between funding a mortgage loan and receiving payment from an investor.
         
         The Company's primary financing needs are in its mortgage banking
         activities. In addition to its own cash resources, the Company meets
         its mortgage funding requirements by borrowing the necessary amounts
         from a $2 million "credit facility" maintained with a savings bank.
         After funding an individual loan, the Company can replenish its cash
         position or available borrowing capacity under the credit facility by
         utilizing a separate, $10 million mortgage "warehouse facility." The
         Company can draw down up to 98% of the face amount of an individual
         mortgage loan from the "warehouse facility." This facility is
         replenished from the purchase price paid by the investor who had
         committed to purchase such loan.
         
         The Company also has a $350,000 revolving credit line with the bank
         which provides the "warehouse facility." This line carries interest at
         prime plus 1%. It can be used only in connection with the Company's
         mortgage banking activities.
         
         Sales of mortgage servicing rights among mortgage servicers is rather
         routine. Prices that servicers are willing to pay for the same package
         may vary, due to various factors including the potential purchaser's
         internal cost of servicing each loan, access to capital, cost of
         capital, prepayment assumptions and opportunities for cross-selling
         other products to mortgagors.
         
         The carrying amount reflected in the consolidated balance sheets for
         mortgage servicing rights acquired from third parties may not be
         representative of the realizable value of the bulk sale of all or a
         portion of such portfolio. The Company treats the acquisition of
         mortgage
<PAGE>
 
                                      20

         servicing rights as part of its investing activities in the
         consolidated statements of cash flows.

         On November 6, 1995, the Company entered into an agreement to sell
         substantially all of its mortgage servicing rights.

         In connection with its interests in real estate, the Company uses
         separate subsidiaries for each venture. The Company utilizes the equity
         method of accounting for its interests in real estate joint ventures.
         Accordingly, the assets and liabilities of such ventures are not
         included in the Company's consolidated balance sheets.
         
         The two operating real estate projects in which the Company is a co-
         venturer, currently have strong occupancies and positive cash flow.
         Cash maintained by each partnership, supplemented with cash flow from
         operations, should be sufficient to cover all operating costs and debt
         service requirements of each venture, so that additional cash
         contributions from the Company or its co-venturers would not be
         necessary. Facts and circumstances, however, are subject to change for
         reasons beyond the Company's control. Based on current estimates, the
         Company expects to continue to receive cash distributions from its real
         estate joint venture activities during 1995.
         
         In April 1993, one of the Company's real estate joint ventures entered
         into a modification agreement with the lender holding the venture's
         mortgage loan. The lender converted the loan from a short-term,
         variable rate loan into a four-year, fixed rate loan. Interest is
         payable at 8.5% per annum. The lender charged an extension fee which
         was paid as follows: (1) $15,000 at the time the extension was
         consummated; (2) $15,000 on April 1, 1994; and $33,818 (an amount equal
         to the product of the outstanding principal balance $4,609,079
         multiplied by .0075) on April 1, 1995. Regular amortization is
         determined on a 20-year schedule for the first year and then on a 15-
         year self-liquidating basis. Additional amortization payments equal to
         25% of "excess cash flow" were paid during the second 12-month period.
         Thereafter, 50% of "excess cash flow" is due as additional
         amortization. The loan matures on April 1, 1997.
         
         In April 1995, the Company's other real estate joint venture refinanced
         the mortgage loan on its 
<PAGE>
 
                                      21

         project. The principal amount of the new, nonrecourse loan is
         $6,550,000; the interest rate equals Citibank's six-month LIBOR rate
         plus 3.10% and the interest rate resets each September and March; the
         maximum interest rate is 13.5375%; principal amortization is based on a
         25-year schedule; and the loan matures on May 1, 2992. The current
         interest rate through February 29, 1996 is 9.0063%. The interest rate
         had been 9.5375% through August 31, 1995. The principal balance of the
         refinanced loan was $3,757,828. The proceeds from refinancing, net of
         expenses including points, fees, title insurance, escrows, etc., was
         approximately $2.5 million. The Company received a distribution from
         the joint venture of approximately $2.2 million.

         Prior to the distribution of the net proceeds from refinancing, the
         Company received a preferred return equal to 10% of its original
         capital contribution. Distributions from sales or refinancing proceeds
         were to be applied, pursuant to the partnership agreement, first to the
         Company to pay any preferred return due and then in an amount equal to
         the Company's original capital contribution. The Company received 55%
         of cash distributions in excess of the preferred return. Since the
         Company recovered its entire original capital contribution, it will no
         longer receive a preferred return. If the project is sold or refinanced
         in the future, the Company will receive 70% of distributable net
         proceeds.
         
         Although the venture's outstanding debt was increased substantially, at
         current interest rates, monthly debt service decreased slightly because
         the old loan required monthly principal payments of $40,000 through its
         maturity in July 1995. In addition to principal and interest payments,
         debt service for the new loan includes contributions to various reserve
         accounts. The funds from such reserve accounts may be used, in
         accordance with the loan agreement, to offset future expenses, if any,
         for structural repairs, tenant improvements, leasing commissions, and
         interest expense.
         
         The carrying amounts reflected on the Company's consolidated balance
         sheets for its various joint venture interests is determined in
         accordance with the equity method of accounting. Such carrying amounts
         may not be representative of the realizable value on a sale of those
         interests. Management reviews the carrying amount of each 
<PAGE>
 
                                      22

         venture to determine if an adjustment for any impairment other than a
         temporary decline is required. If management believes in good faith
         that any impairment is other than temporary, a loss provision equal to
         such amount will be charged against the Company's consolidated results
         of operations.
         
         Cash distributions from joint ventures are reflected in investing
         activities in the Company's consolidated statements of cash flows.
         Equity contributions to joint ventures as well as any advances to joint
         ventures also are reflected in investing activities in the Company's
         consolidated statements of cash flows.
         
         While the Company believes that currently available funds will provide
         it with sufficient resources to meet all present and reasonably
         foreseeable future capital needs, the Company may seek various forms of
         credit in order to finance its merchant banking, mortgage banking or
         other activities in the future. The Company does not have any material
         commitments for capital expenditures as of September 30, 1995.
         
         The Company is a defendant in various lawsuits. Although the Company
         has reached settlements in some instances, an unfavorable result in
         those remaining could have a significant adverse effect upon the
         Company's liquidity and capital resources.
<PAGE>
 
                                      23

                                    PART II

                               OTHER INFORMATION

Item 1.  LEGAL PROCEEDINGS.

         The Multi-District Litigation ("MDL"), MDL No. 739, U.S.
         --------------------------------------------------------
         District Court for the Eastern District of Pennsylvania
         -------------------------------------------------------

         On August 9, 1995, the Court approved a class-wide settlement agreement
         of claims asserted in six separate lawsuits.

         Eddie Jo Hurley and All Others Similarly Situated v. Citizens Mortgage
         ----------------------------------------------------------------------
         Service Company, N.Y. Supreme Court (Monroe County) (Index No. 9862/93)
         ----------------

         On October 20, 1995 the Court approved a class-wide settlement
         agreement.
<PAGE>
 
                                      24

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.

         (a)  Exhibits:  A statement regarding the computation of per share
              earnings is omitted because the computation is described in Note 3
              of the Notes to Condensed Consolidated Financial Statements
              (Unaudited) on page 7 of this Form 10-QSB.

              Exhibit 27 - Financial Data Schedule -- See below.

         (b)  Reports on Form 8-K:

              -- August 11, 1995, Press Release announcing that the U.S.
              District Court for the Eastern District of Pennsylvania had
              approved a class-wide settlement agreement of six separate class
              action lawsuits.
<PAGE>
 
                                      25


                                   SIGNATURES

     In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                                                HELMSTAR GROUP, INC.



                                                     /s/ George W. Benoit
                                                ---------------------------
Date: November 14, 1995                         George W. Benoit, Chairman of 
                                                the Board of Directors, 
                                                President, Chief Executive
                                                Officer



                                                     /s/ Roger J. Burns
                                                ---------------------------
Date: November 14, 1995                         Roger J. Burns, First Vice 
                                                President, Chief Financial 
                                                Officer