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 June 30, 1998

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

      For the transition period from  to

      Commission file number 1-9224


                              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.

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

           Class                    Outstanding at July 31, 1998
           -----                    ----------------------------

Common stock - par value $.10                5,513,373 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  10-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 10-KSB for the fiscal year ended December 31, 1997, which was
filed with the Securities and Exchange Commission.

         The results of  operations  for the three  months and six months  ended
June 30, 1998 are not  necessarily  indicative of the results to be expected for
the entire fiscal year.
<PAGE>
<TABLE>
<CAPTION>
                     HELMSTAR GROUP, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS

                                                   June 30,        December 31,
                                                     1998              1997 
                                                ------------       ------------
                                                 (Unaudited)
         ASSETS

<S>                                             <C>                <C>         
Cash and cash equivalents ................      $    761,788       $    802,352
Short term investments ...................        61,147,618         71,174,934
Marketable securities ....................         7,595,830          7,234,862
Joint ventures ...........................           118,411            185,864
Land .....................................         9,117,495
Construction in progress .................           136,058             11,000
Deferred financing costs, less
    accumulated amortization of
    $47,932 in 1998 and $11,000
    in 1997 ..............................         1,679,419          1,663,209
Furniture, equipment and
    leasehold improvements - at cost,
    less accumulated depreciation and
    amortization of $256,673 in
    1998 and $242,565 in 1997 ............           105,196            106,128
Other assets .............................           493,646            640,403
                                                ------------       ------------

         TOTAL ...........................      $ 81,155,461       $ 81,818,752
                                                ============       ============

         LIABILITIES

Bonds payable ............................      $ 72,750,000       $ 72,750,000
Accrued expenses and other
    liabilities ..........................         1,087,845          1,509,201
Income taxes payable .....................           103,965             59,737
                                                ------------       ------------

         Total liabilities ...............        73,941,810         74,318,938
                                                ------------       ------------

Due to preferred member ..................           750,000            750,000
                                                ------------       ------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                     HELMSTAR GROUP, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS

                                                   June 30,        December 31,
                                                     1998              1997 
                                                ------------       ------------
                                                 (Unaudited)
          


             STOCKHOLDERS' EQUITY
<S>                                             <C>                <C>         
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
(Accumulated deficit) ....................        (6,264,891)        (5,981,058)
                                                ------------       ------------

         Total ...........................         9,394,579          9,678,412

Less treasury stock, at cost -
    1,236,227 shares in 1998 and
    1,233,227 shares in 1997 .............        (2,930,928)        (2,928,598)
                                                ------------       ------------

         Total stockholders' equity ......         6,463,651          6,749,814
                                                ------------       ------------

         TOTAL ...........................      $ 81,155,461       $ 81,818,752
                                                ============       ============
</TABLE>
      See Notes to Condensed Consolidated Financial Statements (Unaudited).
<PAGE>
<TABLE>
<CAPTION>
                                  HELMSTAR GROUP, INC. AND SUBSIDIARIES
                             CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                               (Unaudited)


                                                Three Months Ended               Six Months Ended
                                                    June 30,                          June 30,
                                          ----------------------------      ----------------------------
                                               1998             1997            1998             1997
                                                            (Restated)                        (Restated)
<S>                                       <C>              <C>              <C>              <C>        
Revenues:
    (Loss) profit from
     joint ventures .................     $   (59,155)     $   176,933      $     9,527      $   363,851
    Financial consulting fees .......                                                             90,000
    Interest income .................       1,067,469           76,450        2,129,152          105,010
    Investment income (loss) ........         796,274         (491,164)         913,503           53,400
                                          -----------      -----------      -----------      -----------

         Total revenues .............       1,804,588         (237,781)       3,052,182          612,261
                                          -----------      -----------      -----------      -----------

Expenses:
    Compensation and related costs ..         289,609          299,126          573,878          628,746
    Occupancy cost ..................          47,193           41,850           87,369           83,451
    General and administrative ......          85,353          138,255          182,098          236,073
    Professional fees ...............          90,000           74,177          128,027           89,197
    Interest ........................       1,155,373           69,619        2,340,706           69,619
                                          -----------      -----------      -----------      -----------

         Total Expenses .............       1,667,528          623,027        3,312,078        1,107,086
                                          -----------      -----------      -----------      -----------

Income (loss) from continuing
    operations before taxes .........         137,060         (860,808)        (259,896)        (494,825)

(Benefit) provision for
    income taxes ....................         (22,008)          (6,764)          23,937            3,016
                                          -----------      -----------      -----------      -----------

Income (loss) from
    continuing operations ...........         159,068         (854,044)        (283,833)        (497,841)

Loss from operations of
    discontinued subsidiary .........                         (286,928)               _         (602,857)
                                          -----------      -----------      -----------      -----------

NET INCOME (LOSS) ...................     $   159,068      $(1,140,972)     $  (283,833)     $(1,100,698)
                                          ===========      ===========      ===========      ===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                  HELMSTAR GROUP, INC. AND SUBSIDIARIES
                             CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                               (Unaudited)
                                               (continued)


                                                Three Months Ended               Six Months Ended
                                                    June 30,                          June 30,
                                          ----------------------------      ----------------------------
                                               1998             1997            1998             1997
                                                            (Restated)                        (Restated)
<S>                                       <C>              <C>              <C>              <C>        
Per common share - basic and diluted:

Income (loss) from
    continuing operations ...........     $       .03      $      (.16)     $      (.05)     $      (.09)
(Loss) from discontinued operations .               _             (.05)               _             (.11)
                                          -----------      -----------      -----------      -----------
Net income (loss) ...................     $       .03      $      (.21)     $      (.05)     $      (.20)
                                          ===========      ===========      ===========      ===========

Weighted average number of
    common shares outstanding - basic       5,514,373        5,516,373        5,515,376        5,525,542
Effect of dilutive employee
    stock options ...................          60,000
                                          -----------      -----------      -----------      -----------
Weighted average number of
    common shares - diluted
    income (loss) per share .........       5,554,373        5,516,373        5,515,376        5,525,542
                                          ===========      ===========      ===========      ===========
</TABLE>

    See Notes to Condensed Consolidated Financial Statements (Unaudited).

The three and six month  periods  for 1997 have been  restated  to  reflect  the
results of a Company's subsidiary as a discontinued operation.
<PAGE>
<TABLE>
<CAPTION>
                             HELMSTAR GROUP, INC. AND SUBSIDIARIES
                        CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                          (Unaudited)


                                                                       Six Months Ended
                                                                            June 30, 
                                                                 ----------------------------
                                                                   1998               1997
                                                                                  (Restated)
<S>                                                              <C>             <C>         
Cash flows from operating activities:
  Net income (loss) .....................................        $(283,833)      $(1,100,699)
  Adjustments to reconcile net (loss) to net
     cash (used in) operating activities:
    Depreciation and amortization .......................           14,106            24,065
    Unrealized (gain) from joint ventures
     and other investments ..............................           (9,527)         (363,851)
    Provision for loan reserve ..........................                             50,000
    Changes in operating assets and liabilities:
     Decrease in other assets ...........................          146,757           396,212
     (Purchase) of marketable securities - net ..........         (360,968)       (1,853,318)
     Increase (decrease) in accrued expenses ............         (377,128)          215,803
     Decrease in assets and liabilities of
      disposed subsidiary ...............................                          1,102,857
                                                              ------------      ------------

Net cash (used in) operating activities .................         (870,593)       (1,528,931)
                                                              ------------      ------------
Cash flows from investing activities:
  Sale of investment securities - net ...................       10,027,316
  Distributions from joint ventures and other investments           76,980         1,700,000
  Purchase of other investments .........................                            (35,000)
  Purchase of land ......................................       (9,117,495)
  Increase in construction in progress ..................         (125,058)
  Increase in deferred financing costs ..................          (16,210)
  Purchase of fixed assets ..............................          (13,174)          (41,398)
  Loan to debtor in possession ..........................                            (50,000)
                                                              ------------      ------------

Net cash provided by investing activities ...............          832,359         1,573,602
                                                              ------------      ------------
Cash flows from financing activities:
  Purchase of treasury stock ............................           (2,330)          (15,774)
                                                              ------------      ------------

Net cash (used in) financing activities .................           (2,330)          (15,774)
                                                              ------------      ------------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ....          (40,564)           28,897
Cash and cash equivalents at beginning of period ........          802,352           165,858
                                                              ------------      ------------

CASH AND CASH EQUIVALENTS AT END OF PERIOD ..............     $    761,788      $    194,755
                                                              ============      ============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                             HELMSTAR GROUP, INC. AND SUBSIDIARIES
                        CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                          (Unaudited)
                                                                       Six Months Ended
                                                                            June 30, 
                                                                 ----------------------------
                                                                   1998               1997
                                                                                  (Restated)
<S>                                                              <C>             <C>         
Supplemental  disclosures of cash flow information:
Cash paid during the period for:
    Interest ............................................     $  1,968,698      $     69,619
    Taxes ...............................................           39,718               688
</TABLE>
     See Notes to Condensed Consolidated Financial Statements (Unaudited).

The six month  period for 1997 has been  restated  to reflect  the  results of a
Company's subsidiary as a discontinued operation.
<PAGE>
                      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 10-KSB, for the
fiscal year ended  December 3l, 1997,  which was filed with the  Securities  and
Exchange  Commission (the "SEC").  With respect to interest  incurred during the
construction  period,  the Company  capitalizes  such cost ($77,126) for the six
month period ended June 30, 1998.

2.       INCOME (LOSS) PER SHARE

         Income  (loss)  per share is based on the  weighted  average  number of
common shares  outstanding  and common stock  equivalents  based on the treasury
stock method when dilutive.

3.       LITIGATION

         The Company is a defendant in various lawsuits. The ultimate outcome of
the 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. See Part II, Item 1.
<PAGE>
Item 2.           Management's Discussion and Analysis of Financial Condition 
                  and Results of Operations

                           The Statements of Operations for the prior period has
                  been   restated  to  reflect  the  results  of  the  Company's
                  subsidiary,   Citizens   Mortgage   Service   Company,   as  a
                  discontinued operation.

                           During  the  quarter  ended June 30,  1998,  Helmstar
                  formed a new wholly-owned subsidiary. An internet website will
                  be used to provide placement  services for skilled  technology
                  specialists   and   project/term   consulting   services   for
                  corporations.  The  subsidiary  will also provide  information
                  technology management  consulting,  special project management
                  and corporate tax/outsourcing services.

                  A.       Three Months Ended June 30, 1998 Compared
                           with Three Months Ended June 30, 1997

                           Total revenues  increased to $1,804,588 for the three
                  months  ended June 30, 1998 from a negative  $237,781  for the
                  three months ended June 30, 1997.

                           Profit  from joint  ventures  decreased  to a loss of
                  $59,155 for the three months ended June 30, 1998 from a profit
                  of  $176,933  for  the  three  months  ended  June  30,  1997,
                  primarily as a result of the sale of the outlet shopping malls
                  during the fourth quarter of 1997 by two partnerships in which
                  the Company has a majority  financial  interest.  The loss for
                  the current quarter represents final adjustments per the terms
                  of the sales contract and a provision for local taxes.

                           Financial  consulting  fees were nil for the both the
                  three  months  ended June 30, 1998 and the three  months ended
                  June 30, 1997. Although providing financial structuring advice
                  to clients on a fee basis remains an integral component of the
                  Company's merchant banking business, significant variations in
                  revenues  are likely  because of the  transactional  nature of
                  this  business.  The Company  currently is engaged in advising
                  clients with respect to the structuring of transactions  which
                  are expected to generate fees later in 1998.

                           Interest income increased to $1,067,469 for the three
                  months  ended June 30, 1998 from  $76,450 for the three months
                  ended June 30, 1997,  primarily due to interest  earned on the
                  net  proceeds  from the  $72,750,000  bond  offering,  pending
                  application   of  the   proceeds   for   acquiring   land  and
                  constructing   multiplex   movie  theaters   pursuant  to  its
                  agreement  with Carmike  Cinemas,  Inc., and on the securities
                  held in the cash  management  and investing  activities of the
                  Company.

                           Investment income increased to $796,274 for the three
                  months ended June 30, 1998  compared to a loss of $491,164 for
                  the  three  months  ended  June  30,   1997.   This   category
                  principally   consists   of  net  income  or  loss  from  cash
                  management and investing in futures,  puts,  calls,  equities,
                  municipal securities, and other securities activities.
<PAGE>
                           Total expenses  increased to $1,667,528 for the three
                  months ended June 30, 1998 from  $623,027 for the three months
                  ended June 30, 1997, primarily due to interest paid on the net
                  proceeds  from  the  $72,750,000  bond  offering  made  by the
                  Company.

                           Compensation  and related costs decreased to $289,609
                  for the three months ended June 30, 1998 from $299,126 for the
                  three months ended June 30, 1997.

                           Occupancy  costs  increased  to $47,193 for the three
                  months  ended June 30, 1998 from  $41,850 for the three months
                  ended June 30, 1997.

                           General  and  administrative  expenses  decreased  to
                  $85,353 for the three months ended June 30, 1998 from $138,255
                  for the three months ended June 30, 1997,  primarily  due to a
                  reserve for bad debt  recorded  in the quarter  ended June 30,
                  1997.

                           Professional  fees increased to $90,000 for the three
                  months  ended June 30, 1998 from  $74,177 for the three months
                  ended  June 30,  1997.  The  increase  is due in large part to
                  increased  legal expenses  incurred for the quarter ended June
                  30, 1998.

                           Interest  expense  increased  to  $1,155,373  for the
                  three  months  ended June 30, 1998 from  $69,619 for the three
                  months  ended June 30, 1997,  due to interest  paid on the net
                  proceeds of the $72,750,000 bond offering made by the Company.

                           On a pre-tax basis,  from  continuing  operations the
                  Company had income of $137,060 for the three months ended June
                  30, 1998 compared with a loss of $860,808 for the three months
                  ended June 30, 1997.  Provision for income taxes for the three
                  months  ended June 30, 1998  increased to a benefit of $22,008
                  compared  to a benefit  of $6,764 for the three  months  ended
                  June 30, 1997. The current provision  consists solely of state
                  and local taxes for the current  period and an adjustment  for
                  the prior  period.  For  Federal  income tax  purposes,  as of
                  December  31,  1997,   the  Company  had  net  operating  loss
                  carryforwards of approximately  $7,300,000 available to reduce
                  future taxable income. These carryforwards expire in the years
                  2005  through  2011.  The  Company  has  a  net  capital  loss
                  carryforward of approximately  $3,400,000 which will expire in
                  2002.

                           The  Company's  net income for the three months ended
                  June  30,  1998  was  $159,068  compared  with a net  loss  of
                  $1,140,972  for the three months ended June 30, 1997.  For the
                  three months ended June 30, 1998,  net income from  continuing
                  operations was $.03 per share. For the three months ended June
                  30, 1997,  net loss from  continuing  operations  was $.16 per
                  share increased by a net loss from discontinued  operations of
                  $.05 per share,  resulting  in a loss of $.21 per  share.  The
                  Company adopted Statements of Financial  Accounting  Standards
                  No.  128 in 1997 and has  retroactively  applied  the  effects
                  thereof to the quarter ended June 30, 1997.  Statement No. 128
<PAGE>
                  replaces the calculation of primary and fully diluted earnings
                  per share with basic and diluted  earnings  per share.  Unlike
                  primary earnings per share,  basic earnings per share excludes
                  any  dilutive  effects of options,  warrants  and  convertible
                  securities.  Diluted earnings per share is very similar to the
                  previously  reported  fully  diluted  earnings per share.  The
                  number of shares used in the  computations  were 5,554,373 for
                  the three  months  ended June 30, 1998 and  5,516,373  for the
                  three months ended June 30, 1997.

                           Six Months Ended June 30, 1998 Compared
                           with Six Months Ended June 30, 1997

                           Total  revenues  increased to $3,052,182  for the six
                  months  ended June 30, 1998 from  $612,261  for the six months
                  ended June 30, 1997.

                           Profit from joint  ventures  decreased  to $9,527 for
                  the six months  ended June 30, 1998 from  $363,851 for the six
                  months ended June 30, 1997,  primarily as a result of the sale
                  of the outlet shopping malls during the fourth quarter of 1997
                  by two  partnerships  in  which  the  Company  has a  majority
                  financial interest.  The income for the six month period ended
                  June 30, 1998 represents percentage rents collected during the
                  period,  but  attributable  to a prior period per the terms of
                  the sales contract and a provision for local taxes.

                           Financial consulting fees were nil for the six months
                  ended June 30,  1998 versus  $90,000 for the six months  ended
                  June 30, 1997. Although providing financial structuring advice
                  to clients on a fee basis remains an integral component of the
                  Company's merchant banking business, significant variations in
                  revenues  are likely  because of the  transactional  nature of
                  this  business.  The Company  currently is engaged in advising
                  clients with respect to the structuring of transactions  which
                  are expected to generate fees later in 1998.

                           Interest  income  increased to $2,129,152 for the six
                  months  ended June 30, 1998 from  $105,010  for the six months
                  ended  June 30,  1997.  This  increase  was  primarily  due to
                  interest earned on the net proceeds from the $72,750,000  bond
                  offering,  pending  application  of the proceeds for acquiring
                  land and constructing multiplex movie theaters pursuant to its
                  agreement  with Carmike  Cinemas,  Inc., and on the securities
                  held in the cash  management  and investing  activities of the
                  Company.

                           Investment  income  increased to $913,503 for the six
                  months  ended June 30,  1998 from  $53,400  for the six months
                  ended June 30, 1997. This category principally consists of net
                  profit or loss from cash  management and investing in futures,
                  puts,  calls,   equities,   municipal   securities  and  other
                  securities activities.

                           Total  expenses  increased to $3,312,078  for the six
                  months ended June 30, 1998 from  $1,107,086 for the six months
                  ended June 30,  1997,  primarily  due to interest  paid on the
                  proceeds of the $72,750,000 bond offering made by the Company.
<PAGE>
                           Compensation  and related costs decreased to $573,878
                  for the six months  ended June 30, 1998 from  $628,746 for the
                  six months ended June 30, 1997, primarily due to discretionary
                  bonuses paid in the first six months of 1997.

                           Occupancy  costs  increased  to  $87,369  for the six
                  months  ended June 30, 1998 from  $83,451 for the three months
                  ended June 30, 1997.

                           General  and  administrative  expenses  decreased  to
                  $182,098 for the six months ended June 30, 1998 from  $236,073
                  for the six months  ended June 30,  1997,  primarily  due to a
                  reserve for bad debt  recorded for the quarter  ended June 30,
                  1997.

                           Professional  fees  increased to $128,027 for the six
                  months  ended June 30,  1998 from  $89,197  for the six months
                  ended  June 30,  1997.  The  increase  is due in large part to
                  increased  legal expenses  incurred for the quarter ended June
                  30, 1998.

                           Interest expense  increased to $2,340,706 for the six
                  months  ended June 30,  1998 from  $69,619  for the six months
                  ended June 30, 1997,  due to interest  paid on the proceeds of
                  the $72,750,000 bond offering made by the Company.

                           On a pre-tax basis, from continuing  operations,  the
                  Company had a loss of $259,896  for the six months  ended June
                  30, 1998  compared  with a loss of $494,825 for the six months
                  ended June 30,  1997.  Provision  for income taxes for the six
                  months  ended June 30, 1998 was $23,937  compared  with $3,016
                  for the six  months  ended  June 30,  1997.  These  provisions
                  consist  solely of state and local taxes.  For Federal  income
                  tax  purposes,  as of December 31,  1997,  the Company has net
                  operating   loss   carryforwards   aggregating   approximately
                  $7,300,000  available to reduce future taxable  income.  These
                  carryforwards  expire  in the years  2005  through  2011.  The
                  Company has a net capital loss  carryforward of  approximately
                  $3,400,000.

                           The  Company's net loss for the six months ended June
                  30, 1998 was $283,833  compared  with a net loss of $1,100,698
                  for the six months ended June 30, 1997.  On a per share basis,
                  the net loss from  continuing  operations was $.05 for the six
                  months  ended  June 30,  1998,  compared  with a net loss from
                  continuing  operations  of $.09  increased  by a net loss from
                  discontinued  operations  of $.11  resulting in a loss of $.20
                  per share for the six  months  ended  June 30,  1997.  Average
                  common shares outstanding used for the primary  computation of
                  net loss per common share were 5,515,376 in 1998 and 5,525,542
                  in 1997.  Common share  equivalents  relating to the Company's
                  Incentive   Compensation   Plan  were  not   included  in  the
                  computation  because  the effect of their  inclusion  would be
                  antidilutive for the six months ended June 30, 1998.
<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.

                           On November 20, 1997, the Company issued  $72,750,000
                  of adjustable rate tender securities due November 1, 2015 (the
                  "Bonds").  The Bonds were issued to finance 97% of the cost of
                  developing and/or acquiring  state-of-the-art  multiplex movie
                  theaters in various states  throughout the continental  United
                  States.  The 3% balance,  $2,250,000,  is being  provided as a
                  capital contribution from Preferred Members  (shareholders) of
                  the Company's  Lessor  subsidiary,  Movieplex  Realty Leasing,
                  L.L.C.  $772,500 of this  capital was  contributed  during the
                  fourth quarter of 1997.

                           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
                  and also commence 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  multiplex  movie
                  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, 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 June 30, 1998,  except for the development
                  of the multiplex  movie  theaters  with funds  provided by the
                  issuance of the Bonds.

                           The Company is a defendant  in various  lawsuits.  An
                  unfavorable  result in certain of those  lawsuits could have a
                  significant  adverse  effect upon the Company's  liquidity and
                  capital resources.

                           Year 2000 Issue

                           The  Company  does  not  anticipate  that the cost of
                  addressing  the "Year  2000"  issue  will be  material  to its
                  future operating results or financial condition.
<PAGE>


                                     PART II

                                OTHER INFORMATION



Item 1.  Legal Proceedings.

                           Cross  Creek  Village  v.  Housing  Authority  of the
                  County of Riverside,  et al., Case No. 236813,  Superior Court
                  of the State of California, County of Riverside, July 9, 1993.

                           Pursuant  to an  Order  dated  April  14,  1998,  the
                  Superior  Court  dismissed  this case without  prejudice,  and
                  ordered that the applicable  statute of limitations are tolled
                  for a period of three years from the date of dismissal.


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 2 of the Notes to Condensed Consolidated
                      Financial Statements (Unaudited) of this Form 10-QSB.

                      Exhibit 27 - Financial Data Schedule -- See below.

                  (b) Reports on Form 8-K:

                      --  The Company  did not file any  reports  on Form 8-K 
                           during the three months ended June 30, 1998.