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, 1997

[   ] 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.

           Class                             Outstanding at October 30, 1997
           -----                             -------------------------------
                                                                         
Common stock - par value $.10                       5,516,373 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 year ended December 31, 1996,  which was filed
with the Securities and Exchange Commission.

         The results of  operations  for the three  months and nine months ended
September 30, 1997 are not necessarily  indicative of the results to be expected
for the current year.


<PAGE>
<TABLE>
<CAPTION>
                     HELMSTAR GROUP, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS

                                                                   (Restated) 
                                                 September 30,      December 31,
                                                     1997              1996 
                                                 (Unaudited)
ASSETS
<S>                                             <C>                <C>
Cash and cash equivalents ................      $    609,639       $    165,858
Due from buyer of 
    assets of joint ventures .............         4,533,240
Due from buyer of subsidiary..............           264,607    
Marketable securities ....................         2,358,237          1,350,441
Joint ventures ...........................           311,109          1,418,383
Other investments ........................            35,000
Furniture, equipment and
    leasehold improvements - at cost,
    less accumulated depreciation and
    amortization of $235,815 in
    1997 and $218,503 in 1996 ............           112,879             97,811
Other assets .............................           366,974            644,536
Assets of disposed subsidiary ............                            4,611,869
Due from disposed subsidiary .............                            1,100,000
                                                ------------       ------------

         TOTAL ...........................      $  8,591,685       $  9,388,898
                                                ============       ============

LIABILITIES

Accrued expenses and other
    liabilities ..........................      $    912,962       $    746,709
Liabilities of disposed
    subsidiary ...........................                            3,579,261
                                                ------------       ------------

         Total liabilities ...............           912,962          4,325,970
                                                ------------       ------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                     HELMSTAR GROUP, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS

                                                                   (Restated) 
                                                   Sept 30,        December 31,
                                                     1997              1996 
                                                 (Unaudited)
          
<S>                                             <C>                <C>
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
(Accumulated deficit) ....................        (5,052,149)        (7,683,718)
                                                ------------       ------------

         Total ...........................        10,607,321          7,975,752

Less treasury stock, at cost -
    1,233,227 shares in 1997 and
    1,213,227 shares in 1996 .............        (2,928,598)        (2,912,824)
                                                ------------       ------------

         Total stockholders' equity ......         7,678,723          5,062,928
                                                ------------       ------------

         TOTAL ...........................      $  8,591,685       $  9,388,898
                                                ============       ============

</TABLE>

      See Notes to Condensed Consolidated Financial Statements (Unaudited).
 
December  31, 1996 has been  restated to account for the sale of a  discontinued
operation.
<PAGE>
<TABLE>
<CAPTION>
                                  HELMSTAR GROUP, INC. AND SUBSIDIARIES
                             CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                               (Unaudited)


                                                 Three Months Ended              Nine Months Ended
                                                     Sept 30,                         Sept 30,
                                          --------------------------------------------------------------
                                              1997             1996             1997            1996
                                          -----------      -----------      -----------      -----------
                                                              Restated                         Restated
<S>                                       <C>              <C>              <C>              <C>
Revenues:
    Profit from joint ventures ......     $ 5,377,474      $   109,465      $ 5,741,325      $   530,210
    Financial consulting fees .......          60,000                           150,000
    Interest income .................          65,341           34,367          170,351          165,810
    Investment (loss) income ........        (489,044)         (64,049)        (435,644)         127,545
    Other income ....................                                                              3,000
                                          -----------      -----------      -----------      -----------

         Total Revenues .............       5,013,771           79,783        5,626,032          826,565
                                          -----------      -----------      -----------      -----------


Expenses:
    Compensation and related costs ..         314,345          320,217          943,091        1,102,075
    Occupancy cost ..................          39,920           44,122          123,371          145,152
    General and administrative ......          66,299           41,432          302,372          316,426
    Professional fees and
         litigation expenses ........          42,785           33,020          131,982           88,193
    Interest ........................          12,641              990           82,260           46,557
                                          -----------      -----------      -----------      -----------

         Total Expenses .............         475,990          439,781        1,583,076        1,698,403
                                          -----------      -----------      -----------      -----------


Profit (loss) before taxes ..........       4,537,781         (359,998)       4,042,956         (871,838)

Income tax (benefit) ................         422,000          (24,623)         425,016           (6,904)
                                          -----------      -----------      -----------      -----------

Net profit (loss) from
    continuing operations ...........       4,115,781         (335,375)       3,617,940         (864,934)
Loss from discontinued operations ...        (152,352)        (392,456)        (755,209)      (1,079,300)
Loss on the sale of a subsidiary ....        (231,161)                         (231,161)
                                          -----------      -----------      -----------      -----------

NET INCOME (LOSS) ...................     $ 3,732,268      $  (727,831)     $ 2,631,570      $(1,944,234)
                                          ===========      ===========      ===========      ===========

</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                  HELMSTAR GROUP, INC. AND SUBSIDIARIES
                             CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                               (Unaudited)
                                               (continued)


                                                 Three Months Ended              Nine Months Ended
                                                     Sept 30,                         Sept 30,
                                          --------------------------------------------------------------
                                              1997             1996             1997            1996
                                          -----------      -----------      -----------      -----------
                                                              Restated                         Restated
<S>                                       <C>              <C>              <C>              <C>
Net earnings (loss) per common share:

    From Continuing Operations ......     $       .74      $      (.06)     $       .65      $      (.16)
    From Discontinued Operations ....            (.07)            (.07)            (.18)            (.19)
                                          -----------      -----------      -----------      -----------
    Net Income (Loss) ...............     $       .67      $      (.13)     $       .47      $      (.35)
                                          ===========      ===========      ===========      ===========

Weighted average number of
    common shares outstanding .......       5,535,123        5,544,174        5,541,233        5,544,174
                                          ===========      ===========      ===========      ===========



</TABLE>

      See Notes to Condensed Consolidated Financial Statements (Unaudited).

The Three Month Period and the Nine Month Period for 1996 have been  Restated to
Reflect the Effect of the Discontinued Operation.
<PAGE>
<TABLE>
<CAPTION>
                                 HELMSTAR GROUP, INC. AND SUBSIDIARIES
                             CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                               (Unaudited)


                                                                               Nine Months Ended
                                                                                  September 30   
                                                                         ------------------------------
                                                                             1997               1996
                                                                         -----------        -----------
                                                                                              Restated
<S>                                                                      <C>               <C>  
                            
Cash flows from operating activities:
  Net income (loss) ..............................................       $ 2,631,570       $ (1,944,234)
  Adjustments to reconcile net income (loss) to net
     cash provided by (used in) operating activities:
    Depreciation and amortization ................................            20,827             13,580
    Unrealized (gain) on joint ventures
     and other investments .......................................          (463,062)          (530,210)
    (Gain) on settlement, sale or disposal of
     joint ventures and investments ..............................        (5,278,263)
    Loss on abandonment of fixed assets ..........................             2,653
    Provision for loan reserve ...................................            50,000
  Changes in operating assets and liabilities:
    (Increase) in receivable due to sale of business segment .....          (264,607)
    Decrease in other assets .....................................           277,561            440,122
    (Purchase) of marketable securities ..........................        (1,007,796)        (2,111,787)
    Increase (decrease) in accrued expenses ......................           166,253           (495,553)
    Decrease in assets & liabilities of disposed subsidiary ......         2,132,608          1,114,379
                                                                         -----------        -----------

Net cash (used in) operating activities ..........................        (1,732,256)        (3,513,703)
                                                                         -----------        -----------

Cash flows from investing activities:
  (Purchase) of investment securities ............................                           (1,686,692)
  Distributions from joint ventures and other investments ........         2,315,359            363,677
  Purchase of other investments ..................................           (35,000)
  Purchase of fixed assets .......................................           (38,548)           (19,405)
  Loan to debtor in possession ...................................           (50,000)
                                                                         -----------        -----------

Net cash provided by (used in) investing activities ..............         2,191,811         (1,342,420)
                                                                         -----------        -----------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                 HELMSTAR GROUP, INC. AND SUBSIDIARIES
                             CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                               (Unaudited)


                                                                               Nine Months Ended
                                                                                  September 30,   
                                                                         ------------------------------
                                                                             1997               1996
                                                                         -----------        -----------
<S>                                                                      <C>               <C>            
Cash flows from financing activities:
  Proceeds from short term borrowings - net ......................                            4,721,298
  Purchase of treasury stock .....................................           (15,774)            (1,729)
                                                                         -----------        -----------

Net cash (used in) provided by financing activities ..............           (15,774)         4,719,569
                                                                         -----------        -----------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS .............           443,781           (136,554)
Cash and cash equivalents at beginning of period .................           165,858            321,337
                                                                         -----------        -----------

CASH AND CASH EQUIVALENTS AT END OF PERIOD .......................       $   609,639        $   184,783
                                                                         ===========        ===========
Supplemental schedule of noncash investing and
financing activities:
 During the period ended September 30, 1997, the  
 Company recorded a receivable from the sale of the  
 joint ventures assets............................................       $ 4,533,240  
 
Supplemental  disclosures of cash flow information:
 Cash paid during the period for:
    Interest .....................................................       $    82,260        $    46,557
    Taxes ........................................................               688             16,415
</TABLE>


       See Notes to Condensed Consolidated Financial Statements (Unaudited).

The Nine Month  Period for 1996 has been  Restated  to Reflect the Effect of the
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
year ended  December 3l, 1996,  which was filed with the Securities and Exchange
Commission (the "SEC").

2.       SALE OF CITIZENS

         During  the third  quarter  1997,  the  Company  sold its  wholly-owned
subsidiary,  Citizens  Mortgage Service Company  ("Citizens"),  to IMN Financial
Corp. for approximately  $375,000.  The purchase price may be increased based on
the outcome of certain  transactions still in progress.  The Company recorded an
operational loss of approximately  $152,000 during the third quarter of 1997 and
a year-to-date loss of approximately  $755,000. A loss of approximately $231,000
was also recorded on the sale.

         The  Statements  of  Operations  for the current and prior periods have
been restated to remove Citizens discontinued operations from continuing revenue
and expense accounts and to record Citizens' results as discontinued operations.

         The December 31, 1996 Balance  Sheet has been  restated to transfer all
assets and  liabilities of Citizens out of individual  accounts and into "Assets
of Disposed Subsidiary" and "Liabilities of Disposed Subsidiary."

         Helmstar Group,  Inc.  ("Helmstar")  had guaranteed  certain  warehouse
lines of credit  utilized by  Citizens  in  connection  with its  mortgage  loan
activities.  A warehouse lender could finance up to 98% of the face amount of an
individual  mortgage  loan held for sale.  The advance  would be repaid from the
purchase price paid by the investor who had committed to purchase the applicable
mortgage loan.

         Pursuant  to the  sales  agreement,  Helmstar  agreed  to  continue  to
maintain  its  guarantees  of any such lines until (1) a line was  cancelled  by
Citizens or (2) a release of Helmstar as guarantor of a line was  delivered.  At
any time after 60 days  following  the closing date  (September  5, 1997) of the
sale, Helmstar could terminate any remaining guarantees. As of November 7, 1997,
Helmstar has  guaranteed  $2.9 million to a single  lender  relating to advances
made prior to the  termination  of  Helmstar's  guarantee.  Helmstar will not be
responsible for future advances, if any, made pursuant to the warehouse lines of
credit.
<PAGE>
                      HELMSTAR GROUP, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

3.  JOINT VENTURES

         During the quarter ended September 30, 1997, two  partnerships in which
the Company has a majority  financial  interest and a 50% voting  interest  sold
their manufacturers  outlet shopping malls. The Company has recorded a profit of
approximately $5.3 million before tax on this sale.

         Summary combined  operating  results of the joint ventures in which the
Company is a co-venturer are as follows:
<TABLE>
<CAPTION>
Company's Share of Profit
  from Joint Ventures:
                                                   Three Months Ended September 30
                                                  ----------------------------------
                                                      1997                   1996 
                                                      ----                   ---- 
<S>                                               <C>                      <C>
         Income from operations                    $   99,211              $ 109,465 

         Profit on sale of
           Outlet Malls                             5,278,263                        
                                                   ----------              ---------
                                                   $5,377,474              $ 109,465 
                                                    ==========             =========
<CAPTION>
                                                    Nine Months Ended September 30
                                                  ----------------------------------
                                                      1997                    1996  
                                                      ----                    ----  
<S>                                               <C>                      <C>
         Income from operations                   $   383,651              $ 330,210 

         Gain from receiving cash
         distribution in excess of the
         book value of the Company's
         interest in a joint venture                   79,911                        

         Profit on sale of
           Outlet Malls                             5,278,263 

         Fully reserve an investment
         which was contingent on a
         project being built                             (500)

         Receipt from the guarantors
         of a co-venturer's obligations
         in connection with the
         development of a project
         which had been sold at a
         foreclosure sale in 1992                                           200,000 
                                                    ----------             ----------
                                                   $5,741,325              $ 530,210 
                                                    ==========              =========
</TABLE>
<PAGE>
                      HELMSTAR GROUP, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)



4.       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.

5.       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. There were no significant changes in the status of litigation during
the three months ended September 30, 1997.
<PAGE>
Item 2.  Management's Discussion and Analysis of Financial Condition and
         Results of Operations

                  The Statements of Operations for the current and prior periods
                  have been restated to record Citizens  results as discontinued
                  operations.

         A.       Three Months Ended September 30, 1997 Compared
                  with Three Months Ended September 30, 1996

                  Total  revenues  increased to $5,013,771  for the three months
                  ended  September  30, 1997 from  $79,783 for the three  months
                  ended September 30, 1996.

                  Profit from joint  ventures  increased to  $5,377,474  for the
                  three months ended  September  30, 1997 from  $109,465 for the
                  three months ended  September 30, 1996,  primarily as a result
                  of the sale of the outlet  shopping malls by two  partnerships
                  in which the Company has a majority financial interest.

                  Financial  consulting  fees were  $60,000 for the three months
                  ended  September 30, 1997 compared to nil for the three months
                  ended  September  30,  1996.   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
                  1997.

                  Interest income increased to $65,341 for the three
                  months  ended  September  30, 1997 from  $34,367 for the three
                  months ended September 30, 1996, due in part to an increase in
                  interest  earning assets and earnings  generated  through cash
                  management and investing activities.

                  Investment  income  decreased  to a negative  $489,044 for the
                  three months ended  September  30, 1997 compared to a negative
                  $64,049 for the three months ended  September  30, 1996.  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.  Large
                  swings can occur due to volatility in the financial markets.

                  Total  expenses  increased  to $475,990  for the three  months
                  ended  September  30, 1997 from  $439,781 for the three months
                  ended September 30, 1996.

                  Compensation  and related costs  decreased to $314,345 for the
                  three months ended  September  30, 1997 from  $320,217 for the
                  three months ended September 30, 1996.
<PAGE>
                  Occupancy  costs  decreased  to $39,920  for the three  months
                  ended  September  30, 1997 from  $44,122 for the three  months
                  ended  September 30, 1996.  This  reduction  resulted from the
                  termination  of the lease for a small  office for the viatical
                  settlements  activity  which  closed in the fourth  quarter of
                  1996.

                  General and  administrative  expenses increased to $66,299 for
                  the three months ended September 30, 1997 from $41,432 for the
                  three  months  ended   September   30,  1996.   Expenses  were
                  approximately  the  same for both  periods  except  for a 1996
                  accounting adjustment which reduced this category.

                  Professional  fees  increased  to $42,785 for the three months
                  ended  September  30, 1997 from  $33,020 for the three  months
                  ended September 30, 1996. The increase is due in large part to
                  increased accounting and income tax consulting and preparation
                  fees.

                  Interest  expense  increased  to $12,641 for the three  months
                  ended  September 30, 1997 from $990 for the three months ended
                  September  30, 1996.  This increase was incurred in connection
                  with the  cash  management  and  investing  activities  of the
                  Company.

                  On a pre-tax basis, from continuing operations the Company had
                  a profit of  $4,537,781  for the three months ended  September
                  30, 1997 compared with a loss of $359,998 for the three months
                  ended  September 30, 1996.  Provision for income taxes for the
                  three months ended  September  30, 1997 was $422,000  compared
                  with a benefit of $24,623 for the three months ended September
                  30, 1996. The current  provision  consists solely of state and
                  local taxes incurred in connection with the sale of the outlet
                  shopping malls.  During prior periods,  the partnerships  paid
                  local taxes on behalf of the partners and the Company recorded
                  profit from joint  ventures net of tax with no tax  provision.
                  Such  tax  provisions  were  immaterial  in prior  years.  For
                  Federal  income tax  purposes,  as of December 31,  1996,  the
                  Company had net operating loss  carryforwards of approximately
                  $13,750,000  available to reduce future taxable income.  These
                  carryforwards expire in the years 2005 through 2011.

                  The  third  quarter  1997  operating  loss  for  Citizens  was
                  $152,352   and  is   recorded   as  "Loss  from   Discontinued
                  Operations." Loss on the sale was recorded as $231,161 but may
                  decrease  based on the  outcome  of  certain  transactions  in
                  process as of the end of the quarter.

                  The Company's net income for the three months ended  September
                  30, 1997 was $3,732,268 compared with net loss of $727,831 for
                  the three  months  ended  September  30,  1996.  For the three
                  months ended  September 30, 1997,  net income from  continuing
                  operations  was  $.74 per  share  reduced  by a net loss  from
                  discontinued  operations  of $(.07) per share,  resulting in a
                  net income of $.67 per share. For the three months ended
<PAGE>
                  September 30, 1996, net income from continuing  operations was
                  $(.06)  per share  increased  by a net loss from  discontinued
                  operations  of $(.07)  per share,  resulting  in a net loss of
                  $(.13) per share.  Income per share for the three months ended
                  September 30, 1997 is computed  based on the weighted  average
                  number of shares  actually  outstanding  plus the shares  that
                  would be  outstanding  assuming the exercise of stock  options
                  relating to the Company's  incentive  compensation  plan which
                  are  considered  to be common stock  equivalents.  The assumed
                  exercise of stock options relating to the Company's  incentive
                  compensation  plan were not  included in the  computation  for
                  September  30,  1996,  because  the effect of their  inclusion
                  would  be  antidilutive.  The  number  of  shares  used in the
                  computations   were  5,535,123  for  the  three  months  ended
                  September  30, 1997 and  5,544,174  for the three months ended
                  September 30, 1996.

                  Nine Months Ended September 30, 1997 Compared
                  with Nine Months Ended September 30, 1996

                  Total  revenues  increased to  $5,626,032  for the nine months
                  ended  September  30, 1997 from  $826,565  for the nine months
                  ended September 30, 1996.

                  Profit from joint  ventures  increased to  $5,741,325  for the
                  nine months  ended  September  30, 1997 from  $530,210 for the
                  nine months ended September 30, 1996,  pimarily as a result of
                  the sale of the outlet  shopping malls by two  partnerships in
                  which  the  Company  has a  majority  financial  interest.  In
                  addition,  in June 1997,  the Company  refinanced the mortgage
                  debt on its Nags Head venture and received cash  distributions
                  in excess of book value which caused a profit of approximately
                  $80,000 which is included in this category.  Also,  during the
                  nine months ended September 30, 1996,  this category  included
                  $200,000 received from certain  individuals who had guaranteed
                  the  obligations of the co-venturer in Stoneledge with respect
                  to a  project  which had been  sold at a  foreclosure  sale in
                  1992.

                  Financial  consulting  fees were  $150,000 for the nine months
                  ended  September 30, 1997 versus nil for the nine months ended
                  September 30, 1996. 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
                  1997.

                  Interest  income  increased  to  $170,351  for the nine months
                  ended  September  30, 1997 from  $165,810  for the nine months
                  ended  September 30, 1996.  The Company earns  interest on its
                  assets and through its cash management program.
<PAGE>
                  Investment  income  decreased  to a negative  $435,644 for the
                  nine months ended  September  30, 1997 from income of $127,545
                  for the nine months ended  September  30, 1996.  This category
                  primarily consists of: net income or loss from cash management
                  and investing in futures,  puts,  calls,  equities,  municipal
                  securities and other securities activities.

                  Total  expenses  decreased to  $1,583,076  for the nine months
                  ended  September 30, 1997 from  $1,698,403 for the nine months
                  ended September 30, 1996.

                  Compensation  and related costs  decreased to $943,091 for the
                  nine months ended  September 30, 1997 from  $1,102,075 for the
                  nine months  ended  September  30,  1996.  The decrease is due
                  principally  to the  elimination  of the salaries  incurred in
                  connection with the Company's  viatical  settlements  business
                  which had terminated in the fourth quarter of 1996.

                  Occupancy  costs  decreased  to  $123,371  for the nine months
                  ended  September  30, 1997 from  $145,152  for the nine months
                  ended  September 30, 1996.  This  reduction  resulted from the
                  termination  of the lease for a small  office for the viatical
                  settlement  activity  which  closed in the  fourth  quarter of
                  1996.

                  General and administrative  expenses decreased to $302,372 for
                  the nine months ended September 30, 1997 from $316,426 for the
                  nine months ended September 30, 1996. This decrease was caused
                  primarily  by savings  realized  with the  curtailment  of the
                  viatical  settlement  business in the fourth  quarter of 1996.
                  This  decrease  was  somewhat  mitigated  by the creation of a
                  reserve for advances made to a debtor in possession during the
                  second quarter of 1997.

                  Professional  fees  increased  to $131,982 for the nine months
                  ended  September  30,  1997 from  $88,193  for the nine months
                  ended September 30, 1996. The increase is due in large part to
                  legal  fees   incurred   in   connection   with  a   potential
                  acquisition,  together with higher  accounting  and income tax
                  consulting and preparation fees.

                  Interest  expense  increased  to $82,260  for the nine  months
                  ended  September  30,  1997 from  $46,557  for the nine months
                  ended  September 30, 1996. The increase was in connection with
                  the cash management and investing activities of the Company.

                  On a pre-tax basis from continuing operations, the Company had
                  income of $4,042,956  for the nine months ended  September 30,
                  1997  compared  with a loss of  $871,838  for the nine  months
                  ended  September 30, 1996.  Provision for income taxes for the
                  nine months ended  September  30, 1997 was  $423,016  compared
                  with a benefit of $6,904 for the nine months  ended  September
                  30, 1996. The current  provisions  consist mostly of state and
                  local taxes incurred in connection with the sale of the outlet
                  shopping malls.  During prior periods,  the partnerships  paid
                  local taxes on behalf of the partner and the Company  recorded
<PAGE>
                  profit from joint  ventures net of tax with no tax  provision.
                  Such  tax  provisions  were  immaterial  in prior  years.  For
                  Federal  income tax  purposes,  as of December 31,  1996,  the
                  Company  has  net  operating  loss  carryforwards  aggregating
                  approximately  $13,750,000  available to reduce future taxable
                  income.  These carryforwards  expire in the years 2005 through
                  2011.

                  For the nine months ended  September  30, 1997,  the operating
                  loss for  Citizens  was $755,209 and is recorded as "Loss from
                  Discontinued  Operations."  Loss on the sale was  recorded  as
                  $231,161  but may  decrease  based on the  outcome  of certain
                  transactions in process as of the end of the period.

                  The Company's  net income for the nine months ended  September
                  30, 1997 was $2,631,570 compared with a net loss of $1,944,234
                  for the nine months ended  September  30,  1996.  For the nine
                  months ended  September 30, 1997,  net income from  continuing
                  operations  was  $.65 per  share  reduced  by a net loss  from
                  discontinued  operations  of $(.18) per share,  resulting in a
                  net  income  of $.47  per  share.  For the nine  months  ended
                  September 30, 1996,  net loss from  continuing  operations was
                  $(.16)  per share  increased  by a net loss from  discontinued
                  operations  of $(.19)  per share,  resulting  in a net loss of
                  $(.35) per share.  Income per share for the nine months  ended
                  September 30, 1997 is computed  based on the weighted  average
                  number of shares  actually  outstanding  plus the shares  that
                  would be  outstanding  assuming the exercise of stock  options
                  relating to the Company's  incentive  compensation  plan which
                  are  considered  to be common stock  equivalents.  The assumed
                  exercise of stock options relating to the Company's  incentive
                  compensation plan were not included in the computation for the
                  nine months ended  September  30, 1996,  because the effect of
                  their  inclusion would be  antidilutive.  The number of shares
                  used in the  computations  were  5,541,233 for the nine months
                  ended  September  30, 1997 and  5,544,174  for the nine months
                  ended September 30, 1997.

         B.       Liquidity and Capital Resources

                  Management of the Company  believes that funds  generated from
                  operations  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.  Currently,  the Company's
                  assets   consist   primarily   of  cash  and  assets   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  primarily include U.S. Government
                  obligations,    municipal   securities,    commodity   futures
                  contracts, and money market funds.
<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 September 30, 1997.

                  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>


                                     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.

                  A  status  conference  has  been  scheduled  in this  case for
                  January 8, 1998.

                  Fred W. Wasserman et al v. Jeffrey P. Christopher et al., Case
                  No. 278699, Superior Court of the State of California,  County
                  of Riverside, March 19, 1996.

                  On  September   9,  1997,   the  Federal   Deposit   Insurance
                  Corporation,  as receiver for First RepublicBank Houston, N.A.
                  (formerly  known as InterFirst  Bank Houston,  N.A.),  filed a
                  removal  petition  removing  this  case to the  United  States
                  District  Court of the  Central  District  of  California.  On
                  October 8, 1997,  the FDIC moved to transfer venue of the case
                  to the United States District Court for the Southern  District
                  of Texas. That motion is currently pending with the court.
 


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) of this Form 10-QSB.

                  Exhibit 27 - Financial Data Schedule -- See below.

                  (b) Reports on Form 8-K:

                      -- September 19, 1997,  announced sale of all the stock of
                      wholly-owned subsidiary, Citizens Mortgage Service Company
                      to IMN Financial Corp.

                      -- October 10, 1997,  press release  announced the sale of
                      Blowing Rock Outlet Partners and Nags Head Outlet Partners
                      by partnerships in which the Company has an interest.



<PAGE>



                                   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.



Date: November  14, 1997                             /s/ George W. Benoit  
                                                     --------------------
                                                     George W. Benoit
                                                     Chairman of the Board of
                                                     Directors, President,
                                                     Chief Executive Officer




Date: November  14, 1997                             /s/ Roger J. Burns  
                                                     ------------------
                                                     Roger J. Burns 
                                                     First Vice President, 
                                                     Chief Financial Officer