HIREL HOLDINGS INC, S-3, 1997-07-31

HIREL HOLDINGS INC
S-3, 1997-07-31
COMPUTERS & PERIPHERAL EQUIPMENT & SOFTWARE

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As Filed with the Securities and Exchange Commission on July 30, 1997

Registration No. ___________

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933

HIREL HOLDINGS, INC.
(Exact name of registrant as specified in its charter)

Delaware 65-0666239
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

6505 S.W. 16th Terrace
Pompano Beach, Florida 33069
(954) 942-5390
---------------------------------------------
(Address, including zip code, and telephone
number, including area code, of
registrant's principal executive offices)

Vincent Montelione
650 S.W. 16th Terrace
Pompano Beach, Florida 33069
(954) 942-5390
---------------------------------------------
(Name, address, including zip code, and telephone number, including
area code, of agent for service)

Copies to:
Roxanne K. Beilly, Esq.
Atlas, Pearlman, Trop & Borkson, P.A.
200 East Las Olas Boulevard, Suite 1900
Fort Lauderdale, Florida 33301
(954) 763-1200
---------------------------------------------
(Name, address, including zip code, and telephone number, including
area code, of agent for service)

Approximate date of commencement of proposed sale to the public: From time to
time after the effective date of this Registration Statement.

<PAGE>

If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended, other than securities offered only in connection with dividend
or interest reinvestment plans, check the following box. [X]

If this Form is filed to register to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration number of the earlier
effective registration statement for the offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.
[ ] ----------.

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ] ----------.

The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until this Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.

<PAGE>

CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
Proposed Proposed
Maximum Maximum
Title of Amount Offering Aggregate Amount of
Shares to be to be Price Per Offering Registration
Registered Registered Share (1)(2) Price (1)(2) Fee
========================================================================================================
<S> <C> <C> <C> <C>
Common Stock,
$.001 par value
per share 1,041,666 $2.91 $3,031,248 $918.56
========================================================================================================
</TABLE>

(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(b).

(2) The maximum offering price is estimated based on the average of the low
and high sales prices for the Common Stock as reported on the NASDAQ
SmallCap Market System on July 25, 1997.

iii

<PAGE>

Subject to Completion, dated July 30, 1997

PROSPECTUS
1,041,666 Shares

HIREL HOLDINGS, INC.

The 1,041,666 shares (the "Shares") of Common Stock, par value $.001
per share ("Common Stock") offered hereby are being sold by the selling
stockholders (the "Selling Stockholders") of Hirel Holdings, Inc. (the
"Company"), if at all, on a delayed basis. The 1,041,666 Shares are issuable
upon conversion of 5% convertible debentures dated June 5, 1997 ("Debentures")
held by the Selling Stockholders.

The Common Stock is quoted on the National Association of Securities
Dealers Automated Quotation System ("NASDAQ") under the symbols "HIRL". On July
25, 1997 the closing price on NASDAQ for the Common Stock was $3.00.

------------------------------------

THESE SECURITIES ARE SPECULATIVE AND
INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" AT PAGES 5 THROUGH 19.

------------------------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

------------------------------------

The date of this Prospectus is July 30, 1997

[Front Cover Page Continues]

<PAGE>

The securities registered hereby may be sold from time to time in one
or more transactions that may take place on the over-the-counter market,
including ordinary brokerage transactions, privately negotiated transactions or
through sales to one or more dealers for resale of such securities as
principals, at market prices prevailing at the time of sale, at prices related
to such prevailing market prices or at negotiated prices. Usual and customary or
specifically negotiated brokerage fees or commissions may be paid by the selling
stockholders. The Company will not receive any of the proceeds from the sale of
the Shares offered hereby. Expenses of this offering, other than fees and
expenses of counsel to the selling securityholders and selling commissions, will
be paid by the Company. The Company will pay all offering expenses for the
offering, estimated at approximately $12,500 including (i) filing fee ($946.97);
(ii) legal fees and expenses ($5,000.00); (iii) accounting fees and expenses
($2,500.00); (iv) printing expenses ($3,000.00); and (v) miscellaneous expenses
($1,053.03), but will not pay any discounts or commissions incurred by selling
stockholders in connection with the sale of their shares of Common Stock.

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Reports, proxy
statements and other information filed with the Commission can be inspected and
copied at the public reference facilities of the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549. Copies of this material can also be obtained at
prescribed rates from the Public Reference Section of the Commission at its
principal office at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates. The Commission also maintains a Web site that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission at http//www.sec.gov.

The Company has filed with the Commission a Registration Statement (the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the resale of the securities described
herein. This Prospectus, which is Part I of the Registration Statement, omits
certain information contained in the Registration Statement. For further
information with respect to the Company and the securities offered by this
Prospectus, reference is made to the Registration Statement, including the
exhibits thereto. Statements in this Prospectus as to any document are not
necessarily complete, and where any such document is an exhibit to the
Registration Statement or is incorporated by reference herein, each such
statement is qualified in all respects by the provisions of such exhibit or
other document, to which reference is hereby made, for a full statement of the
provisions thereof. A copy of the Registration Statement, with exhibits, may be
obtained from the Commission's office in Washington, D.C. (at the above address)
upon payment of the fees prescribed by the rules and regulations of the
Commission, or examined there without charge.

<PAGE>

TABLE OF CONTENTS
<TABLE>
<CAPTION>

Page
----
<S> <C>
AVAILABLE INFORMATION............................................................ 2

INCORPORATION OF CERTAIN INFORMATION BY REFERENCE................................ 4

RISK FACTORS..................................................................... 5

USE OF PROCEEDS.................................................................. 19

THE COMPANY...................................................................... 19

SELLING STOCKHOLDERS ............................................................ 37

PLAN OF DISTRIBUTION............................................................. 38

DESCRIPTION OF SECURITIES........................................................ 39

LEGAL MATTERS.................................................................... 42

EXPERTS.......................................................................... 42

INDEMNIFICATION.................................................................. 42
</TABLE>

The Common Stock is traded on the NASDAQ SmallCap Market ("NASDAQ")
under the symbols "HIRL". The low and high prices of the Common Stock as
reported on the NASDAQ on July 25, 1997 were $2.75 and $3.06, per share,
respectively.

No person has been authorized to give any information or to make any
representations not contained in this Prospectus in connection with the offer
contained in this Prospectus, and if given or made, such information or
representations must not be relied upon as having been authorized by the Company
or the selling stockholders.

------------------------------------

THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF ANY SECURITIES OTHER
THAN THOSE TO WHICH IT RELATES OR AN OFFER TO SELL, OR A SOLICITATION OF AN
OFFER TO BUY, IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE
SUCH AN OFFER IN SUCH JURISDICTION. THE DELIVERY OF THIS PROSPECTUS AT ANY TIME
DOES NOT IMPLY THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT
TO ITS DATE.

------------------------------------

<PAGE>

The Company is subject to the informational requirements of the
Exchange Act and, in accordance therewith, files reports and other information
with the Securities and Exchange Commission.

The Company has previously and intends to furnish its stockholders with
annual reports containing audited financial statements and distributes quarterly
reports containing unaudited summary financial information for each of the first
three quarters of each fiscal year.

INCORPORATION OF CERTAIN INFORMATION BY REFERENCE

The following documents filed with the Commission are incorporated
herein by reference:

(a) Annual Report of the Company on Form 10-KSB for the fiscal year
ended December 31, 1996.

(b) Quarterly Report of the Company on Form 10-QSB for the quarter
ended March 31, 1997.

(d) All reports and documents filed by the Company pursuant to
Section 13, 14 or 15(d) of the Exchange Act, prior to the filing
of a post-effective amendment which indicates that all securities
offered hereby have been sold or which deregisters all securities
then remaining unsold, shall be deemed to be incorporated by
reference herein and to be a part hereof from the respective date
of filing of such documents. Any statement incorporated by
reference herein shall be deemed to be modified or superseded for
purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document,
which also is or is deemed to be incorporated by reference
herein, modifies or supersedes such statement. Any statement
modified or superseded shall not be deemed, except as so modified
or superseded, to constitute part of this Prospectus.

The Company hereby undertakes to provide without charge to each person,
including any beneficial owner, to whom a copy of the Prospectus has been
delivered, on the written or oral request of any such person, a copy of any or
all of the documents referred to above which have been or may be incorporated by
reference in this Prospectus, other than exhibits to such documents. Written
requests for such copies should be directed to Corporate Secretary, Hirel
Holdings, Inc. at the Company's

<PAGE>

principal executive office, 650 S.W. 16th Terrace, Pompano Beach, Florida 33069,
Telephone (954) 942-5390.

RISK FACTORS

THE SHARES OFFERED HEREBY ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF
RISK. ONLY THOSE PERSONS ABLE TO LOSE THEIR ENTIRE INVESTMENT SHOULD PURCHASE
THESE SHARES. PROSPECTIVE INVESTORS, PRIOR TO MAKING AN INVESTMENT DECISION,
SHOULD CAREFULLY READ THIS PROSPECTUS AND CONSIDER, ALONG WITH OTHER MATTERS
REFERRED TO HEREIN, THE FOLLOWING RISK FACTORS:

Limited Operating History; Newly Acquired Businesses

The Company was organized in May 1996 and has a limited operating
history upon which an evaluation of the Company's performance and prospects can
be made. The Company's prospects must be considered in light of the numerous
risks, expenses, delays, problems and difficulties frequently encountered in the
establishment of a new business in industries characterized by emerging markets
and intense competition. Accordingly, there can be no assurance that the Company
will be able to successfully manage its operations or that failure to do so will
not exacerbate the risks inherent in the establishment of a new business.

Absence of Earnings; Accumulated Deficit; Prior Period Losses; Future Operating
Results

Although the Company achieved increased levels of revenues for the year
ended December 31, 1996, the Company also had an increased operating loss of
($1,281,256) from operations and incurred a net loss of ($1,337,386). For the
three month period ended March 31, 1997, the Company had a loss from operations
of ($553,729) on total net sales of $6,115,740, as compared to operating income
of $141,606 on total net sales of $6,987,066 for the three month period ended
March 31, 1996. Sales of computer equipment for the three month period ended
March 31, 1997 was only $2,786,430, as compared to $6,662,628 for the three
month period ended March 31, 1996. This is primarily attributable to problems
associated with Apple Computer, Inc. and the decreased demand for such products.
See "Potential Loss of Sources of Supply." The Company's operating expenses have
increased and can be expected to increase significantly in connection with the
Company's proposed expansion and, accordingly, the Company's future
profitability may depend on corresponding increases in revenues from operations.
Future events, including unanticipated expenses or increased competition,
resulting in decreased demand for the Company's products and services, could
have an adverse affect on the Company's operating margins and results of
operations. There

<PAGE>

can be no assurance that the Company's rate of revenue growth will continue in
the future or that the Company's future operations will be profitable.

Proposed Expansion; Ability to Manage Growth

Although the Company intends to pursue a strategy of growth and will
seek to expand the range of its products and services and penetrate new
geographic markets, the Company has achieved limited growth to date and has
limited experience in effectuating rapid expansion or in managing operations
which are geographically dispersed. The Company's proposed expansion will be
dependent on, among other things, the Company's ability to obtain additional
contracts, hire and retain skilled management, financial, marketing, technical
and other personnel and successfully manage growth (including monitoring
operations and controlling costs). The Company's growth prospects will be
largely dependent upon the Company's ability to achieve greater penetration in
existing markets as well as to achieve significant penetration in new geographic
markets. The Company's prospects could be adversely affected by unfavorable
general economic conditions, including any future downturns in the economy, or a
decline in the economic prospects of particular customers or segments of
targeted markets, which could result in reduction or deferral of expenditures by
prospective customers. The Company's future growth will also be dependent upon
the Company's ability to adapt its operations to satisfy evolving industry,
customer requirements, standards and trends. The Company is also seeking to
expand its operations through the possible acquisition of existing companies in
businesses which the Company believes are compatible with its business. The
Company is presently engaged in identifying candidates for acquisition. The
Company has contracted to acquire all of the assets of Jerry's Marine Service of
Fort Lauderdale, Inc. and Jerry's Marine Services, Inc., which contract is
subject to certain contingencies. See "Business - Recent Developments." The
Company has not established any minimum criteria for any acquisition and
management will have complete discretion in determining the terms of any such
acquisition. There can be no assurance that the Company will be able to
successfully expand its operations or ultimately effect any acquisition, or that
the Company will be able to successfully integrate into its operations any
business which it may acquire. Any inability to integrate into its operations an
acquired business, particularly in instances in which the Company has made
significant capital investments, would have a material adverse effect on the
Company. In addition, in the event the Company expands its operations and/or
effectuates additional acquisitions, there can be no assurance that the Company
will be able to successfully manage its expanded operations or that failure to
do so will not exacerbate the risks inherent in the establishment of a new
business.

Potential Loss of Sources of Supply

Historically, a substantial amount of the merchandise purchased by
Hirel Marketing, Inc. ("HMI") has included trademarked products manufactured in
the United

<PAGE>

States and Pacific Rim countries, which products are sold through authorized
distributors. Agreements between the manufacturer and the authorized distributor
generally provide that the products may only be distributed to authorized
dealers or value-added resellers ("VARs") for all of the products it sells, who
in turn may only resell such products to end users. In addition, the
manufacturers may also require their authorized distributors, and in turn these
authorized distributors will require their VARS and dealers to purchase and sell
a specified quantity of product. HMI, which is not an authorized dealer,
authorized distributor or VAR for Apple Computer, Inc., purchases its products
for resale directly from manufacturers, authorized distributors and authorized
dealers. The Company believes purchasing its products directly from authorized
distributors, dealers and VARs could cause such authorized distributor, dealer
or VAR to breach their respective restrictive agreement. Approximately 85% of
HMI's purchases of Apple Computer, Inc. products are from authorized
distributors, dealers and VARs that are not authorized to sell to HMI. Legal
causes of actions which may be brought against HMI and/or the Company in
connection with the enforcement of restrictive agreements may include breach of
contract, contractual and/or tortious interference, violation of trademarks and
violation of copyrights. Although the Company does not believe any legal cause
of action will be brought against it or HMI, and is unaware of any claims that
have ever been brought in its industry for violating restrictive agreements, in
the event a complaint is filed against HMI and/or the Company and the plaintiff
therein is successful, HMI and/or the Company may be subject to compensatory
and/or punitive damages, and/or equitable relief including injunctive relief. If
such legal actions were commenced against the Company and/or HMI, the business
of HMI and the Company would be materially affected. Additionally, if such legal
actions were commenced and HMI was unable to obtain alternative sources of
supply, the business of HMI would be materially adversely affected, the result
of which being that the HMI business would likely be closed or discontinued.
While manufacturers, distributors or dealers have not sought enforcement of the
restrictive provision in the agreements, there can be no assurances that HMI's
business will not become the subject of legal actions involving manufacturers,
distributors or others.

The Marine Power Division ("MPD") of HTI manufacturers engines for use
in a marine environment. All of the engines currently produced by MPD are based
on base engines manufactured by General Motors. General Motors is the dominant
manufacturer of base engines for use in a marine environment. Although the
Company believes that General Motors intends to continue to supply base engines
for MPD and other marine engine producers, there can be no assurance that
General Motors will continue to sell engines for use in the marine market, or
that they will continue to transact business with MPD. In such event, MPD would
be forced to find alternative supplies of base engines. See "Business--Hirel
Technologies, Inc.--Vendor Relations and Sources of Supply".

<PAGE>

Dependence Upon Major Customers

No single customer of HMI accounted for more than 8% of the revenues of
HMI for the first quarter ended March 31, 1996. In 1994 and 1995 certain
customers accounted for more than 10% of sales of HMI. See "Certain
Transactions--Related Party Transactions." Because of the nature of the business
of HMI, sales to any one customer or groups of customers may be significantly
different from year to year and the loss of any one customer has not been
material to HMI in any year. Such customers who have accounted for more than 10%
of sales for HMI in 1994 and 1995 have not accounted for sales in 1996 and the
loss of such customers would not and did not have a material adverse affect on
HMI.

All sales arrangements with Hirel Technologies, Inc. ("HTI") customers
are terminable at any time and no customer is obligated to continue to purchase
products from HTI. MPD sells marine engines to both distributors and to OEM
customers. For the fiscal year ended December 31, 1996, a single distributor,
Jerry's Marine Service, accounted for approximately 18% of the sales of MPD. The
Company recently executed an agreement to acquire the assets of Jerry's Marine
Service of Fort Lauderdale, Inc. and Jerry's Marine Services, Inc. See "Business
- -- Recent Developments." A single OEM boat manufacturer, Luhr/Mainship,
accounted for approximately 20% of total sales. One other distributor, Mack
Boring & Parts Company, accounted for approximately 11% of total sales of MPD in
1996, but has recently advised the Company that it will no longer engage in the
distribution of gasoline powered engines. Accordingly, MPD must find alternative
distribution of its products in order to compensate for the loss of this
distributor. Mack Boring & Parts Company recently initiated a lawsuit against
the Company. See "Business -- Legal Proceedings." At the present time, a
division of HMI has been established known as Hirel Marine and Industrial
Supply. The Hirel Marine & Industrial Supply division of HMI is presently
engaged in the distribution of engines manufactured by MPD. See "Business--
Hirel Marine and Industrial Supply." The termination by any of the significant
customers of MPD or a substantial decrease in purchases made by such customers
or other customers would have a material adverse affect upon the business,
financial condition and results of operations of the Company and HTI.

The dependence on major customers subjects the Company to significant
financial risks in the operation of its business should a major customer
terminate, for any reason, its business relationship with HTI. In such an event,
the financial condition of the Company may be adversely affected and the Company
may be required to obtain additional financing of which there is not assurance.

Possible Need for Additional Financing

The Company has funded its operations and other capital needs since its
incorporation from operations, the proceeds of its initial public offering and
private

<PAGE>

financing. The Company anticipates it will require additional funds for its
future expansion, operating costs and working capital. In the event that the
Company needs additional financing to fund its operations and capital needs,
there can be no assurance that such financing will be available, or that it will
be available on acceptable terms.

Fluctuations of Customer Purchases

At the current time, most of the customers of HMI and HTI order
products for immediate delivery. Therefore, a significant amount of net sales
for each of HMI or HTI in each quarter results from orders received in that
quarter. MPD receives forecasts from its OEM customers as to the number of
engines that they anticipate they will require during the ensuing three to six
month period. MPD will acquire inventory in sufficient volume so as to be able
to fulfill the anticipated needs of its customers. However, such forecasts do
not constitute firm purchase orders, and there may be fluctuations both as to
the number of engines ordered and the timing of such orders. Accordingly, the
quarterly net sales and operating results at the present time for HMI and HTI
may vary significantly as a result of, among other things, the volume and timing
of purchases received during a quarter, variation in sales mix of products,
increased competition, announcement or introductions of new products, changes in
costs of products, availability in products, and changes in economic or other
conditions effecting customers and/or users of the products. The computer and
electronics distribution industries has been effected historically by general
economic down turns, which have had an adverse economic effect upon
manufacturers and distributors of computer products. In addition, the life cycle
of existing computer products and the timing of new product development and
introduction can effect demand for such products. Accordingly, the historical
financial performance of HMI and HTI is not necessarily a meaningful indicator
of future results and, in general, management expects that the financial results
of HMI and HTI may vary from period to period.

Uncertainty of Future Operating Results

The Company sustained operating losses on a consolidated basis for the
fiscal year ended December 31, 1996 of ($1,337,386), and the three month period
ended March 31, 1997 of ($595,863).

The Company's operating expenses are expected to increase significantly
in connection with the Company's expansion activities. Accordingly, the
Company's future profitability will depend upon increasing revenues from
operations in order to offset such anticipated increases in expenses. Future
events, including unanticipated expenses, increased price competition,
unfavorable general economic conditions, product returns and uncollectible
accounts, could have an adverse effect on the Company's operating results. There
can be no assurance that the Company's rate of revenue growth will continue in
the future or that the Company's future operations will be profitable.

<PAGE>

Risks Associated with Technological Changes and Development of Products

Product sales by HTI since inception have been limited. The market for
the products developed by HTI is characterized by continued and rapid
technological advances requiring ongoing expenditures for research and
development and the timely introduction of new products. In order to remain
competitive, HTI must respond effectively to technological changes by continuing
to enhance and improve its existing products and by successfully developing and
introducing new products, including the development of its products for
non-marine (primarily automotive) markets. The cost of research and development
as well as marketing could be significant particularly as it relates to
non-marine (primarily automotive) products. There can be no assurance that HTI
will be able to fund, successfully develop, market or support its existing
marine products or new products being developed for non-marine (primarily
automotive) markets (including the ECM which can control spark), the Fuel
Chiller, as defined herein, or the single point metering fuel injector or that
HTI will respond effectively to technological changes or new product
announcements or introductions by others. In the event that HTI does not enhance
and improve its products, the sales of HTI and financial results could be
materially adversely effected. General Motors, from time to time, changes the
design of the base engines used by MPD. Such changes require MPD to redesign
certain bracketry and component parts necessary in order to manufacture engines
for end use. Further, it creates problems with respect to the use of base
engines already in inventory. This results in increased expenditures for MPD,
and there is no assurance that there can be increased prices charged for the
engines to adequately compensate for such additional expenditures. See
"Business--Hirel Technologies, Inc.--Research and Development".

In addition, the market for information technology are characterized by
rapidly changing technological and evolving industry standards, often resulting
in product obsolescence or short product life cycles. Accordingly, the Company's
success is dependent upon its ability to anticipate technological changes in the
industry and to continually identify, obtain and market new products that
satisfy evolving industry and customer requirements. There can be no assurance
that competitors will not market products which have perceived advantages over
the products that HMI distributes or which render the products currently sold by
HMI obsolete or less marketable. Sudden technological changes, upon wide spread
commercial introduction, could materially change the types of products sold by
HMI and its vendors and result in significant price competition. There can be no
assurance that the Company's existing customers or new customers will be
willing, for financial or other reasons, to purchase new equipment (which HMI
might include in its inventory) or that product obsolescence will not result in
significantly increasing inventories of unsold products. Moreover, complex
hardware could contain defects which become apparent subsequent to wide spread
commercial use resulting in product recalls and returns. See "Business--Hirel
Marketing, Inc."

<PAGE>

Risks Associated with Extended Repayment Arrangements

The Company provides extended repayment arrangements to its customers
and, particularly in the case of MPI, may extend credit terms to OEM's and
manufacturers. Furthermore, to the extent that certain of the Company's
customers who received the Company's extended repayment arrangements experience
financial difficulties, collection of the accounts receivable could be adversely
affected, which may have an adverse effect on the Company. There can be no
assurances that the Company's customers who received, or will receive, extended
repayment arrangements will be able to fulfill their obligations timely, if at
all, or that the Company will not need the funds for its operations, which could
have an adverse effect on the Company's financial condition and business
operations.

Distribution Risks

Both HMI and MPD are dependent upon the continued viability and
financial stability of their customers. In addition, there is an increasing
number of vendors competing for access to distributors which could adversely
effect HMI's ability to maintain its existing relationships with its customers
or which could negatively impact sales to such customers. There can be no
assurance that HMI or MPD will be successful in maintaining or increasing an
effective distribution and customer support system. See "Business--Sales and
Marketing."

Risks that Relationships with Vendors will not be Maintained

All of HMI's inventory has and will be purchased from manufacturers,
VARs and dealers with whom HMI has not entered into distribution agreements.
There can be no assurance that HMI will be able to continue purchasing from any
manufacturer, VAR or dealer. While the Company does not believe that the loss of
any one vendor would have a material adverse impact upon HMI since most products
sold by HMI are available from multiple sources, HMI's future success will
depend in large part on maintaining relationships with existing vendors and
developing new relationships. Similarly, all of MPD's inventory has and will be
purchased from manufacturers with whom MPD has not entered into long-term supply
agreements. Although the loss of any one vendor for many of the component parts
of engines sold by MPD would not have a material adverse impact upon MPD,
because of the dominance of General Motors in the manufacturing of base engines
for use in a marine environment, the loss of General Motors as a supplier would
have a material adverse impact upon MPD. MPD's future success will depend in
large part on maintaining its relationship with General Motors. The loss or
significant disruptions in relationships with vendors could have a material
adverse effect on the Company's business. See "Business--Vendor Relationships."

<PAGE>

Related Party Transactions and Potential Conflicts of Interest

Since inception Vincent Montelione and the various related companies,
including HMI, HTL, SCV and Cutler have engaged in related party transactions.
While it is generally believed that these transactions were on terms that were
fair and reasonable, such transactions were not at arms length. Other than
disclosed herein, the Company presently does not intend to engage in future
purchases, sales or loans with related parties.

The Company periodically advances funds to its principal stockholder on
a very short term basis. These loans are non-interest bearing with no formal
repayment terms. As of December 31, 1996 and 1995, the balance due on these
loans was $21,025 and $0, respectively. Subsequent to year end, $17,950 of the
balance due at December 31, 1996 was repaid. The Company also makes advances to
enterprises controlled by its principal stockholder. As of December 31, 1996 and
1995, the balance due from related parties including interest was $524,817 and
$223,104, respectively. The related party loans are due on December 31, 1997,
and bear interest at prime. Interest receivable of $34,063 and $3,264 and
interest income of $30,942 and $3,264 on those loans as of December 31, 1996 and
1995, respectively, is reflected in the financial statements of the Company.
Included in the balance due from related parties as of December 31, 1996 are
receivables acquired from related parties in the amount of $162,044 in
conjunction with the MPI acquisition.

During the year ended December 31, 1995, HMI had sales of approximately
$2,500,000 to a company in which Vincent Montelione was the sole stockholder.
During the six months ended June 30, 1996 and the year ended December 31, 1995,
Vincent Montelione received Subchapter S distributions from HMI of approximately
$260,857 and $543,123, respectively. During the six months ended June 30, 1996,
HTL made distributions of $123,460 to its general partner, SCV, Ltd., which in
turn made a distribution to Vincent Montelione, a limited partner of SCV, Ltd.,
in the amount of $80,000.

HMI and HTI sublease from CIS approximately 5,000 square feet of office
space and 11,000 square feet of warehouse space in two adjacent buildings in
North Miami Beach, Florida. While it is believed that the sublease is fair and
reasonable, such lease was not entered into at arms length. CIS leases the
office and warehouse space from an unaffiliated landlord which lease was
determined by arms length negotiations. HMI pays approximately $3,100 per month
for the office and warehouse space it occupies. HTI pays approximately $6,000
per month on the space it occupies. The lease expired in April, 1997.

During the year ended December 31, 1996, HTI paid Fenco Tool & Die,
Ltd., a Florida limited partnership controlled by Vincent Montelione and Gregory
S. Fenech through their ownership of the stock in the corporate general partner,
approximately

<PAGE>

$160,000 for the machining of certain components of its products. During the
year ended December 31, 1996, HTI paid its president $60,000 in consulting fees.

During the year ended December 31, 1996, the Company paid royalties of
$14,935 under a royalty agreement on certain patents covering six components of
its products to a company controlled by the Company's principal stockholder.
Under the agreement, royalties are calculated as a percentage, ranging between
5% and 10%, of net selling price as defined in the agreement. Royalty payments
are due quarterly under the agreement which runs for 50 years.

MPD conducts its operations at a facility in Ponchatola, Louisiana that
is leased from AA Land Development, Inc., a corporation owned by W.E. Allbright,
Jr. who is the Chief Executive Officer of MPD. The rental payment is $4,000 per
month, and the lease extends through January 4, 2008 (inclusive of all renewal
options). The lease contains a provision for adjustment based on increases in
the consumer price index. As of June 30, 1997, AA Land Development, Inc. was
indebted to the Company in the amount of $18,000.

MPD sells engines to Commercial Marine Sales & Service, Inc. ("CMSS"),
a distributor based in Louisiana in which W.E. Allbright, Jr. is a 70%
shareholder. As of June 30, 1997, CMSS was indebted to MPD for $323,267.30 in
trade receivables, and an additional $123,866 which is evidenced by a Promissory
Note bearing interest at ten (10%) percent. Sales to CMSS for 1996 totaled
approximately $605,000.

With respect to the HMI and HTI acquisitions, no specific principle was
followed in ascribing value to the stock issued and except for valuation of the
Company for pricing of the investment by the bridge investors which was
determined in part by negotiation between the Company's underwriter and Vincent
Montelione, and the participation by Herbert D. Katz, as Trustee, which was
determined in negotiations between Herbert D. Katz, as Trustee, and the Company,
the terms of the acquisitions were determined without arm's length negotiations.
As to the acquisition of the assets from Cutler, which likewise was determined
without arms length negotiations, consideration was given to consultation with
an independent appraiser, as well as attributing some value to the intellectual
property rights (the value of which was discounted by the appraiser because of
the lack of an income stream attributable to such intellectual property rights,
and because the appraisal was made on a liquidation basis). In each of these
transactions Vincent Montelione or his affiliates represented, in whole or in
part, the interests of both the Company and HMI or HTI and accordingly there was
a conflict of interest between Vincent Montelione and other parties in the
transactions who were not affiliates of Vincent Montelione.

On or about July 21, 1996, substantially all the operating assets of
Hirel Technologies Ltd. ("HTL"), a Florida limited partnership, the partners of
which are SCV, Ltd. (90%) and Herbert D. Katz, as Trustee (10%), were
contributed to HTI, and following

<PAGE>

distribution of such shares in HTI to the partners of HTL, the outstanding
shares of HTI were exchanged for shares of the Company. SCV Holdings, Inc.,
Vincent Montelione and Gregory Fenech own 1%, 89.1% and 9.9%, respectively, of
SCV, Ltd. Vincent Montelione and Gregory Fenech, director and Vice President of
the Company, own 90% and 10%, respectively, of SCV Holdings, Inc. As part of the
acquisition of the assets of HTI, the Company has agreed to issue to the former
partners of the predecessor of HTI performance options (the "HTI Options"),
exercisable at $6.00 per share, in the aggregate amount of 3,000,000 options, as
follows: (i) 1,000,000 options if HTI has pre-tax earnings of $1,000,000 in any
fiscal year, (ii) an additional 1,000,000 options if HTI has pre-tax earnings of
$2,000,000 in any fiscal year, and (iii) an additional 1,000,000 options if HTI
has pre-tax earnings of $3,000,000 in any fiscal year. In addition, as part of
the acquisition of the assets of HTI, the former partners of HTL entered into a
Technology Assignment and Royalty Agreement ("Royalty Agreement") and pursuant
thereto will receive an aggregate amount of the following royalties on the gross
revenues of four (4) devices sold by the Company or HTI (i) Manifold/Throttle
Body (5%), (ii) Electronic Control Unit (10%), (iii) Single Point Metering (7
1/2%), and (iv) Fuel Chiller (condenser) (7 1/2%). In the event the aggregate
amount of the 3,000,000 HTI Options are issued, Vincent Montelione, as Trustee,
will receive 60% thereof, Herbert D. Katz, as Trustee, will receive 10%, and
SCV, Ltd. will receive 30% thereof. In the event any of the royalties are paid
pursuant to the Royalty Agreement, SCV, Ltd. will receive 90% and Herbert D.
Katz, as Trustee, will receive 10%.

Nasdaq Requirements; Penny Stock; Additional Requirements on Broker-Dealer
Sales of Securities

The Company's Common Stock is included on the NASDAQ SmallCap Market
system. The continued listing criteria include (a) that a company has net
tangible assets of at least: (i) $1,000,000; or (ii) $2,000,000 if the issuer
has sustained losses from continuing operations and/or net losses in two of its
three most recent fiscal years; or (iii) $4,000,000 if the company sustained
losses from continuing operations and/or net losses in three of its four most
recent fiscal years; (b) a market value of the publicly held shares of
$1,000,000, and (c) a minimum bid price of $1.00 per share of Common Stock. If
an issuer does not meet the $1.00 minimum bid price standard, it may, however,
remain in the NASDAQ system if the market value of its public float is at least
$3,000,000 and the issuer has $4,000,000 of total assets. If the Company became
unable to meet the continued listing criteria of the NASDAQ system and became
delisted therefrom, trading, if any, in the Common Stock would thereafter be
conducted in the Over the Counter Market in the so-called "pink sheets" or, if
the available, the electronic bulletin board administered by the National
Association of Securities Dealers, Inc. (the "NASD"). As a result, an investor
would likely find it more difficult to dispose of, or to obtain accurate
quotations as to the value of, the Company's securities. If the Company's
securities were delisted from the NASDAQ system, they may become subject to Rule
15c2-6 under the Securities Exchange Act of 1934, as amended (the "1934 Act"),
which imposes additional sales practice requirements on broker/dealers which
sell such securities to

<PAGE>

persons other than established customers and "accredited investors" (generally,
individuals with net worth in excess of $1,000,000 or annual income exceeding
$200,000, or $300,000 together with their spouse). For transactions covered by
this Rule, a broker/dealer must make a special suitability determination for the
purchaser and have received the purchaser's written consent to the transaction
prior to the sale. Consequently, the Rule may effect the ability of
broker/dealers to sell the Company's securities and may effect the ability of
purchasers in this offering to sell any of the securities acquired hereby in the
secondary market.

The Securities and Exchange Commission (the "Commission") has also
adopted regulations which define a "penny stock" to be any equity security that
has a market price (as therein defined) of less than $5.00 per share or with an
exercise price of less than $5.00 per share, subject to certain exceptions. For
any transaction involving a penny stock, unless exempt, the regulations require
the delivery, prior to any transaction in a penny stock, of a disclosure
schedule mandated by the Commission relating to the penny stock market.
Disclosure is also required to be made about compensation payable to both the
broker/dealer and the registered representative in current quotations for the
securities. Finally, monthly statements are required to be sent disclosing
recent price information for the penny stock held in the account and information
on the limited market in penny stocks.

The foregoing penny stock restrictions will not apply to the Company's
securities if such securities are listed on the NASDAQ system and have certain
price and volume information provided on a current and continuing basis, or meet
certain minimum net tangible assets for average revenue criteria. There can be
no assurance that the Company's securities will qualify for exemption from these
restrictions. In any event, even if the Company's securities were exempt from
such restrictions, it would remain subject to Section 15(b)(6) of the 1934 Act,
which gives the Commission the authority to prohibit any person that is engaged
in unlawful conduct while participating in a distribution of a penny stock from
associating with a broker/dealer or participating in a distribution of penny
stock if the Commission finds that such a restriction would be in the public
interest.

Substantial Competition

The Company encounters substantial competition from domestic
businesses. Nearly all of such entities have substantially greater financial
resources, technical expertise and managerial capabilities than the Company and,
consequently, the Company may be at a substantial competitive disadvantage in
the conduct of its business. See "Business."

<PAGE>

Absence of Outside Directors

Presently each of the directors of the Company are also officers of the
Company and, accordingly, there are no outside directors. Accordingly, the views
of persons other than members of management may not be fully represented at
meetings of the Board of Directors.

Liability for Product Warranties

Customers of HMI are not given nor is it purported that they are given
a warranty from Apple Computer, Inc. on the products they purchase from HMI. The
Warranty from Apple Computer, Inc. does not extend to customers of HMI since HMI
is not an authorized distributor, dealer or VAR. HMI, however, offers the
identical warranty to its customers as that warranty which would be given by
Apple Computer, Inc. or any other manufacturer (if HMI is not an authorized
dealer). Although HMI has no significant warranty claims to date, no assurance
can be given that it will not be requested to honor the warranties in the future
which in certain circumstances would have a materially adverse affect on HMI.

Customers of MPD are given a warranty on the engines purchased from
MPD. Although MPD reserves on its balance sheet for expenses associated with
providing warranty service, no assurance can be given that the amount reserved
for on the balance sheet will be sufficient in order to honor all warranty
claims.

No Assurance of Future Profitability or Payment of Dividends

The Company has not paid any cash dividends on its Common Stock to its
stockholders. No assurance can be given that the future operations of the
Company or its subsidiaries will be profitable. Should the operations of the
Company or its subsidiaries become profitable, it is likely that the Company or
its subsidiaries would retain much or all of the earnings in order to finance
future growth and expansion. Therefore, the Company does not presently intend to
pay dividends, but may consider the payment of dividends at some time in the
future. See "Description of Securities Dividend Policy."

Dependence Upon Major Manufacturers

Substantially all of the products distributed by HMI are manufactured
by Apple Computer, Inc. or are peripherals manufactured by others for products
manufactured by Apple Computer, Inc. See "Business." Substantial dependence on
one manufacturer subjects HMI to significant financial risk in the operation of
its business should such manufacturer terminate, for any reason. In such an
event, the financial condition of the Company may be adversely affected and the
Company may be required to obtain additional financing, of which there is no
assurance. Apple Computer, Inc. has reported

<PAGE>

losses from operations during its recent fiscal reporting periods, and the media
has reported extensively on both the problems faced by Apple Computer, Inc. and
the responses to those problems suggested by the management of Apple Computer,
Inc. The Company believes that the large installed base of products manufactured
by Apple Computer, Inc. will continue to generate demand for additional products
and upgrades. Further, Apple Computer, Inc. has announced its intentions to
license, on some basis, the operating system developed by Apple Computer, Inc.
The Company believes that the actions proposed to be taken by Apple Computer,
Inc. will have a positive effect on the business of the Company. No assurances
can be given, however, that Apple Computer, Inc. will continue to generate
demand for its products and upgrades in the future, nor if it does that the
Company will be positively affected.

Substantially all of the products manufactured by MPD are based upon
base engines manufactured by General Motors. Substantial dependence on one
manufacturer subjects MPD to significant financial risk in the operation of its
business should General Motors terminate its relationship with MPD. In such an
event, the financial condition of the Company may be adversely affected, and
there can be no assurance that MPD can obtain an alternate source of base
engines.

Potential Compensation Expenses

The share exchange agreement with HTI provides for the issuance of
options to purchase shares of the Company's Common Stock at $6.00 per share
which options shall be earned as follows: (i) 1,000,000 options if HTI has
pre-tax earnings which equals or exceeds $1,000,000 in any fiscal year, (ii) an
additional 1,000,000 options if pre-tax earnings equals or exceeds $2,000,000 in
any fiscal year, and (iii) an additional 1,000,000 options if pre-tax earnings
equals or exceeds $3,000,000 in any fiscal year. In addition, the employment
agreement for Vincent Montelione provides for the issuance of options to
purchase shares of the Company's Common Stock at $6.00 per share which options
shall be earned as follows: (i) 500,000 options if HMI has pre-tax net earnings
in excess of $1,000,000 in any fiscal year, (ii) an additional 250,000 options
if HMI has pre-tax net earnings in excess of $1,500,000 in any fiscal year,
(iii) an additional 250,000 options if the HMI has pre-tax net earnings in
excess of $2,000,000 in any fiscal year, (iv) an additional 250,000 options if
HMI has pre-tax net earnings in excess of $2,500,000 in any fiscal year, (v) an
additional 500,000 options if HMI has pre-tax net earnings in excess of
$3,000,000 in any fiscal year, and (vi) an additional 300,000 options if HMI has
pre-tax net earnings in excess of $4,000,000 in any fiscal year. If the
aforementioned earnings are achieved, the Company will recognize compensation
expense equal to the difference between the fair market value of the options
when earned and the exercise price of the options of $6.00 per share. The
issuance of the options is likely to result in substantial compensation expense
to the Company in future years.

<PAGE>

Dependence on Management

The Company's business is principally dependent on certain key
management personnel for the operation of its businesses. In particular, Vincent
Montelione has played the primary role in the promotion, development and
management of the Company. The Company has entered into an employment agreement
with Vincent Montelione. Under this agreement, Vincent Montelione is to be paid
an annual salary of $150,000 per year with annual increases of 10% per year for
the length of the agreement and is to be paid an annual bonus each year of the
agreement equal to 5% of the Company's consolidated earnings before income
taxes, depreciation and amortization in excess of $1,000,000. The Company does
not intend to obtain key man life insurance on Vincent Montelione, but will
obtain key man life insurance on certain key engineers of HTI. If the employment
by the Company of Vincent Montelione terminates, or he is unable to perform his
duties, the Company may be substantially affected.

HTI has entered into an Employment Agreement with W. E. Allbright, Jr.,
the Chief Executive Officer of MPD, and HMI has entered into an Employment
Agreement with Michael Duggan, as President of HMI.

Voting Control; Potential Anti-Takeover Effect

Vincent Montelione, the Company's President, Chief Executive Officer
and Chairman of the Board, beneficially owns, individually and as Trustee, and
through SCV, Ltd. approximately 30% of the Company's Common Stock. Likewise,
members of management (inclusive of Montelione) will be able to exercise
control. Accordingly, such persons may be able to approve major corporate
transactions including amending the Certificate of Incorporation of the Company
or the sale of substantially all of the Company's assets, to elect all of the
directors of the Company and to control the Company's affairs. This voting
control may have the effect of delaying or preventing a change in control of the
Company and may adversely affect the rights of the holders of the shares of
Common Stock of the Company. In addition, the Company is subject to a State of
Delaware statute regulating business combinations which may also hinder or delay
a change of control.

Limitation on Director Liability

As permitted by the Delaware General Corporation Law, the Company's
Certificate of Incorporation limits the liability of directors to the Company or
its stockholders for monetary damages for breach of a director's fiduciary duty,
except for liability in four specific instances. These are for (i) any breach of
the director's duty of loyalty to the Company or its stockholders, (ii) acts or
omissions not in good faith or which involve intentional misconduct or knowing
violation of law, (iii) unlawful payments of dividends or unlawful stock
purchases or redemptions as provided in Section 174 of the Delaware

<PAGE>

General Corporation Law, or (iv) any transaction from which the director derived
an improper personal benefit. As a result of the Company's charter provision and
Delaware law, stockholders may have more limited rights to recover against
directors for breach of fiduciary duty than as existing prior to the enactment
of the laws.

Additional Authorized Shares Available for Issuance May Adversely Affect the
Market

Sales of substantial numbers of additional shares of Common Stock of
the Company, or the perception that such sales could occur, could adversely
affect prevailing market prices for the Common Stock. As of the date hereof,
5,208,750 shares of Common Stock are outstanding. As of the date hereof, of the
outstanding shares, 2,068,750 shares are tradeable in the public market without
restriction under the Securities Act of 1933, as amended (the "Securities Act"),
except for any shares of Common Stock purchased by an "affiliate" of the Company
(as that term is defined under the rules and regulations of the Securities Act),
which will be subject to the resale limitations of Rule 144 under the Securities
Act.

USE OF PROCEEDS

No proceeds will be obtained by the Company from the conversion of the
5% convertible debentures or the sale of the underlying shares of Common Stock.

THE COMPANY

Overview

Hirel Holdings, Inc. (the "Company") was incorporated in the State of
Delaware on May 1, 1996 for the purpose of acquiring the business of Hirel
Marketing, Inc., a Florida corporation ("HMI") and Hirel Technologies, Inc., a
Florida corporation which is a successor to Hirel Technologies, Ltd., a limited
partnership (collectively "HTI"). Hirel Technologies, Ltd. was organized in
October 1995 to acquire from its sole general partner substantially all of the
operating assets and intellectual property rights of Cutler Induction Systems,
Inc., which through October 23, 1995 was engaged in the development and sale of
fuel injection systems for marine engines. In describing HTI herein and
financial results of the operations of HTI, the term "HTI" shall include Cutler
Induction Systems, Inc.

On July 22, 1996 the Company successfully completed its initial public
offering of 1,063,750 shares of its common stock at $6.00 per share and
completed Share Exchange Agreements and the related acquisitions of HMI and HTI
which became wholly-owned subsidiaries of the Company on that date.

<PAGE>

HMI is a distributor of microcomputer hardware, peripherals and related
communication products to VARs and dealers in the United States, Europe, and the
Pacific Rim countries. HTI develops and sells products designed to enhance the
performance of fuel injection systems.

On January 24, 1997, the Company completed its acquisition of
substantially all of the assets of Marine Power, Inc. ("MPD") effective December
31, 1996. MPD, which is operated as a division of HTI, is engaged in
manufacturing and marketing engines for the marine after market and original
equipment manufacturers. On January 10, 1997, HTI acquired all of the assets of
Fenco Tool & Die, Ltd., and a division of HTI known as Hirel Tool & Die ("HTD")
is presently engaged in the tool and die business. As used herein, the
description of the business of HTI shall refer to the development and sale of
fuel injection system only, and the businesses of MPD and HTD are separately
discussed.

On July 8, 1997, the Company entered into an agreement ("Agreement") to
acquire all of the assets, liabilities and contracts of Jerry's Marine Service
of Fort Lauderdale, Inc., a Florida corporation, and Jerry's Marine Services,
Inc., a South Carolina corporation (collectively "JMS"). JMS is a distributor of
marine engines and parts. In consideration for the assets of JMS, the Company
will pay $8,000,000, payable $5,000,000 in cash at closing, and the remaining
purchase price represented by a promissory note payable in $1,000,000 increments
at 12, 24 and 36 months following closing, together with interest thereon at the
prime rate plus one percent. Various liabilities of JMS will be assumed by the
Company, including loans payable to the shareholders of JMS totaling
approximately $750,000. The Promissory note will be secured by a security
interest in the purchased assets. If the audited net asset amount exceeds
$4,500,000 the purchase price will be increased by an amount of such excess, not
to exceed two million ($2,000,000) dollars, which will be paid in cash. The
closing date and time will be mutually agreed upon by both parties, but in all
events not later than 60 days following the completion of the audit. The Company
anticipates the closing to occur in the beginning of the fourth quarter. It is
contemplated that the Agreement will be assigned to a wholly-owned subsidiary of
the Company prior to closing. If the audited net asset amount is less than
$4,500,000, the Company is under no obligation to close on the acquisition of
JMS.

As a result of the recent acquisitions, the focus of the Company and
efforts of management will be to further develop the business of HTI and a
substantial amount of Company resources will be devoted to the HTI business. The
Company believes that its growth and profitability will be enhanced by an
emphasis of the HTI business.

On June 5, 1997, the Company entered into 5% Convertible Debenture
Purchase Agreements pursuant to which the Company issued 5.0% Convertible
Debentures

<PAGE>

("Debentures") and an aggregate of 35,710 Warrants to purchase shares of the
Company's Common Stock to three investors for an aggregate purchase price of
$2,500,000. The Company will use the proceeds of the sale of the Debentures for
working capital purposes. The holders of the Debentures are entitled, at their
option, at any time commencing (a) on the earlier of ninety (90) calendar days
after the closing date, or upon the effective date of a registration statement
registering the underlying shares of Common Stock to convert one-half (1/2) of
the original principal amount of the Debentures into shares of the Company's
Common Stock at a conversion price of seventy nine (79%) percent of the average
closing bid price of the Common Stock as reported by NASDAQ or on other
securities, exchanges or markets on which the Common Stock is listed for the
previous five (5) trading days ending on the day before the conversion or $4.50,
whichever is the lesser, and (b) on the earlier of one hundred twenty (120)
calendar days after the closing date, or thirty (30) days from the effective
date of a registration statement registering the shares of Common Stock
underlying the Debentures to convert the remaining portion of the original
purchase amount of the Debentures and shares of the Company's Common Stock at a
conversion price of seventy nine (79%) percent discount from the average closing
bid price of the Common Stock as reported by NASDAQ or on other securities,
exchanges or markets on which the Common Stock is listed for the previous five
(5) trading days ending on the day before the conversion or $5.00 per share
whichever is lesser. The maximum amount of shares of Common Stock that the
holders of the Debentures are entitled shall not exceed 1,041,666 shares.
After such amount of shares is reached, the Company must then repay the
remaining balance of Convertible Debentures by issuing a four (4) month term
note at one hundred twenty (120%) percent of the face amount of the Debentures.

As a result of the conversion feature of the Debentures and the imputed
interest costs of the Warrants, the Company will have a charge against earnings
of approximately $753,000 in accordance with generally accepted accounting
standards.

The Company's executive offices are located at 650 SW 16th Terrace,
Pompano Beach, FL 33069, and its telephone number is (954)942-5390.

HIREL MARKETING, INC.

General

HMI is a distributor of microcomputer hardware, peripherals and related
communication products to (i) resellers, commonly known in the industry as
value-added resellers ("VARS"), who are able to offer additional value to the
products by offering to the reseller's purchasers complimentary products and
services to the products sold by HMI, and (ii) dealers in the United states,
Europe and the Pacific Rim countries. HMI purchases its products directly from
manufacturers, distributors and dealers in large quantities and sells to an
active base of over 2,000 established customers. HMI emphasizes immediate
turnover of products thereby creating available funds for constant purchasing
and reducing warehouse, labor and other expenses. The Company offers
manufacturers, distributors, VARS and dealers the ability to reach consumers on
a cost

<PAGE>

efficient basis. HMI has historically concentrated on purchasing large
quantities of low-end to middle-range type products which generally sell at
low-margin returns.

HMI provides its customers with microcomputers, disk drives, printers,
monitors, terminals, plug-in-boards and related products. HMI also distributes
certain software packages which support and are included in selected computer
sales. To compliment its distribution activities, HMI provides technical
assistance to its customers by telephone at no charge.

Industry

HMI believes that the microcomputer products industry is well-suited
for wholesale distribution. The large number and diversity of resellers make it
cost-efficient for manufacturers to rely on wholesale distributors for at least
some portion of their distribution. Similarly, due to the large number of
manufacturers, resellers often cannot efficiently establish direct purchasing
relationships and instead rely on wholesale distributors, such as HMI, to
satisfy a portion of their product needs.

As a result of the use of open systems and the off-the-shelf
components, computer hardware and software products are increasingly viewed as
commodities. The resulting price competition has prompted manufacturers and
vendors to rely on more cost-efficient methods of distribution. This, coupled
with shorter life cycles, has benefited distributors like HMI which offer
vendors an efficient mechanism for distributing their products.

Vendor Relations and Sources of Supply

Generally, a manufacturer will require their authorized distributors,
and in turn, these authorized distributors will require their VARS and dealers,
contractually to purchase and sell a specified quantity of product. HMI does not
maintain exclusive supplier agreements with its suppliers requiring it to
purchase or sell a specified quantity of product or restricting it from selling
similar products manufactured or distributed by competitors and therefore, is
not an authorized distributor or dealer. As a result, HMI has the flexibility to
terminate or curtail purchases of one product or product line in favor of
another product or product line due to over production of products by
manufacturers, rapid technological changes in the industry, pricing
considerations and customer demand. HMI's market presence enables it to purchase
from manufacturers, VARS and dealers large quantities of products at competitive
prices that it can resell to other VARS and dealers at competitive prices.

Historically, a substantial amount of the merchandise purchased by HMI
has included trademarked products manufactured in the United States and Pacific
Rim countries, which products are sold through authorized distributors.
Agreements between the manufacturer and the authorized distributor generally
provide that the products may

<PAGE>

only be distributed to authorized dealers or VAR for all of the products it
sells, who in turn may only resell such products to end users. In addition, the
manufacturers may also require their authorized distributors, and in turn these
authorized distributors will require their VARs and dealers to purchase and sell
a specified quantity of product. HMI, which is not an authorized dealer,
authorized distributor or VAR, purchases its products for resale directly from
manufacturers, authorized distributors and authorized dealers. While the Company
does not believe that purchasing directly from the manufacturers would violate
any restrictive agreement, the Company believes purchasing from or selling to
authorized distributors, dealers and VARs' could cause such authorized
distributor, dealer or VAR to breach their respective restrictive agreement. For
the year ended December 31, 1996, approximately 85% of HMI's purchases of Apple
Computer, Inc. products were from authorized distributors, dealers and VARs that
are not authorized to sell to HMI. Legal causes of actions which may be brought
against HMI and/or the Company in connection with the enforcement of restrictive
agreements may include breach of contract, contractual and/or tortuous
interference, violation of trademarks and violation of copyrights.

Although the Company does not believe any legal cause of action will be
brought against it, in the event a claim is filed against HMI and/or the Company
and the plaintiff therein is successful, HMI and/or the Company may be subject
to compensatory and/or punitive damages, and/or equitable relief including
injunctive relief. While manufacturers, distributors or dealers have not sought
enforcement of the restrictive provision in the agreements, there can be no
assurances that HMI's business will not become the subject of legal actions
involving manufacturers, distributors or others.

HMI believes that authorized distributors, dealers and VARs choose to
purchase from and sell to HMI in violation of their respective authorization
agreements primarily as a result of their inability to dispose of all of their
excess inventory or obtain enough desirable products cost effectively through
authorized distribution channels. Authorization agreements require the
distributors, dealers and VARs to purchase and/or sell, as the case may be, a
specific quantity of product at specified prices. HMI provides authorized
distributors, dealers and VARs with the ability to dispose of excess products or
obtain desired products cost effectively.

Subsequent to the effective date of the Initial Public Offering, HMI
has become an authorized dealer for IBM, Motorola and Adobe software.

HMI finances its inventory from its working capital or from a line of
credit which secures letters of credit to acquire inventory. HMI has the option
to pay the letters of credit upon presentation or to finance them for up to
ninety (90) days.

<PAGE>

Products

Substantially all of the products distributed by HMI were manufactured
by Apple Computer, Inc. or are peripherals for Apple Computer, Inc. As noted
above, however, HMI has recently become an authorized dealer for IBM, Motorola
and Adobe software products. No determination has been made as to how much of
such products will be distributed.

HMI distributes its products on a non-exclusive basis without
geographic restriction and without entering into the industry
manufacturer-distributor agreements for authorization to purchase and sell the
products. The following products are distributed by HMI:

Microcomputers: HMI distributes desk top and lap top personal
computers.

Local Area Networks and other Communication Products: Local area
networks ("LANS") allow communications among microcomputers.

Disk Drives: As computer users seek to store and manage increasing
volumes of data, their demand for such data storage devices rise
accordingly. HMI markets hard disk drives and optical disk storage
sub-systems.

Printers: HMI markets non-impact technologies such as laser printers
and ink jet printers, and, to a lesser extent, dot matrix and daisy
wheel printers.

Monitors and Terminals: HMI distributes monitors, including high
resolution colored monitors, and terminals.

Plug-in Boards: Many manufacturers build their computers with an
architecture featuring open slots that accept the plug-in boards or add
on modules of their manufacturers. Among other functions, these
enhancement products may provide additional memory and monochrome or
color graphics to the personal computer, as well as communications with
mini-computers, main frame computers, or other micro-computers.

HMI distributes certain software which support and are included in
selected computer sales.

HMI intends to seek sources other than Apple Computer, Inc. for its
products. No assurances are made, however, that alternate sources for
its products will be available.

<PAGE>

Product Warranties

Purchasers of HMI products that are not purchased directly from
manufacturers, authorized distributors or VARs do not receive the manufacturer's
warranty on the products they purchase from HMI. The manufacturer's warranty
does not extend to HMI purchasers since HMI is not an authorized distributor,
dealer or VAR. HMI provides, however, the identical warranty to its purchasers
as that warranty which would be given by the manufacturer. HMI provides a one
year warranty to its purchasers on parts and labor on all the products it sells.
Although HMI has had no substantial warranty claims to date, no assurance can be
given that it will not be requested to honor the warranties in the future in
certain circumstances could have materially adverse affect on HMI.

Customers

HMI sells micro-computer hardware, peripherals and related
communication products purchased directly from manufacturers, distributors and
dealers in large quantities for sale to an active customer base of more than
2,000 VARS and dealers. HMI pursues a strategy of expanding its product line and
quantity of purchases to broaden its customer base and offer its customers a
broader assortment. Revenues from HMI customers by geographic areas was as
follows:

1996 1995
---- ----
United States $16,241,227 $12,934,688
Europe 3,737,649 7,514,527
Other 1,527,004 1,189,374
----------- -----------
$21,505,880 $21,638,589
=========== ===========

The decline in sales to customers in Europe is in the opinion of
Management attributable to the weakness of European currency as compared to the
US dollar (See Management's Discussion and Analysis of Financial Condition and
Results of Operation).

HMI's VARs and dealer customers typically do not have the resources to
establish a large number of direct purchasing relationships or stock significant
product inventory. Larger resellers, on the other hand, often establish direct
relationships with manufacturers for their more popular products, but utilize
distributors for slower moving products and for fill-in orders of fast moving
products. HMI's backlog of orders is not considered material to understanding of
its business. No single customer accounted for more than 5% of HMI's net sales
during fiscal 1996 or 12% in 1995.

Management believes that, although alternative sources of products are
available, VARs and dealers prefer to work with only a limited number of
suppliers who can provide products on a timely and competitive basis.
Accordingly, management believes that well managed inventory, rapid delivery,
efficient order pricing, competitive pricing and

<PAGE>

expeditious replacement or repair of defective merchandise contribute greatly to
HMI's competitive position. Most of HMI's sales are done on a C.O.D. basis.

Sales and Marketing

HMI conducts business under the name "Mac-in-Stock". Product is sold by
sales representatives who rely generally on telephone and advertising
communications by facsimile. Customers rely upon the Company's weekly facsimile
mailings of product specials as a source for product information, including
prices.

Customers typically call their sales representative to place orders for
same day or next day shipment. Assuming availability of product, an order
received by 5:00 p.m. local time will generally be shipped the same day or next
day from HMI's warehouse in Pompano Beach, Florida. HMI's domestic customer
receives the goods by next day overnight shipment.

HMI provides comprehensive training to its sales representative regarding
technical characteristics of products and its policies and procedures. In this
regard, to compliment its distribution activities, HMI provides technical
assistance to its customers. HMI has used limited advertising as part of its
marketing program. Marketing for the most part is handled directly by HMI sales
representatives.

Competition

HMI operates in a market characterized by intense competition.
Competition within the industry is based on product availability, price,
delivery and various types of support provided by the distributor to the
reseller. Competitors of HMI include authorized distributors, VARS, dealers and
other wholesale distributors like HMI such as Tech Data Corporation, Merisel,
Inc. and Inacom. Some of HMI's competitors are larger and have greater resources
than HMI.

HMI believes that it is capable of competing with other distributors
because of its ability to obtain products at the best available prices and to
immediately resell such products to its established customers. By having a large
and established customer base, HMI is often able to pre-sell products purchased
from its various sources.

Hirel Marine and Industrial Supply

In February 1997, a division of HMI was created for the distribution of
marine engines and related products, known as Hirel Marine and Industrial Supply
("HMIS"). HMIS is based in Lakewood, New Jersey, in a warehouse/office facility
of approximately 3,500 square feet. HMIS currently employs four people. Product
sold by MPD was previously distributed in the Northeast United States by Mack
Boring & Parts Company. Mack Boring & Parts Company announced to MPD that it no
longer intended to engage

<PAGE>

in business of distributing of gasoline powered marine engines. HMIS was formed
for the purpose of engaging in the distribution of engines manufactured by MPD
and other components or products related thereto. Several of the employees of
HMIS were previously employed by Mack Boring & Parts Company. Mack Boring &
Parts Company recently initiated a lawsuit against the Company. See "Business -
Legal Proceedings."

<PAGE>

HIREL TECHNOLOGIES, INC.

General

HTI designs, manufactures and markets fuel injection systems designed to
enhance the performance of gasoline powered engines. The initial products
designed and developed by HTI focus on two areas of technical innovation and
market advantage. The first are fuel intake systems, which through patented
devices improve efficiency, thus developing more torque and horsepower than most
other OEM or aftermarket products presently available in the market.

The second are control systems which, through patent pending advances in
computerized engine management, should serve to eliminate the barriers to
providing complex computerized fuel management. Through December 31, 1996,
component parts of the HTI products were manufactured by third parties
(including Fenco Tool & Die, Ltd., in which Vincent Montelione and Gregory S.
Fenech, directors of the Company, owned an interest) on a contract basis and the
products are assembled at the HTI facilities. On January 10, 1997, HTI acquired
all of the assets of Fenco Tool & Die, Ltd., and a division of HTI known as
Hirel Tool & Die ("HTD") was established to engage in the tool and die business.
The business of HTD is described below. HTI's products are currently designed
and implemented for marine use only. Marine customers use the HTI products to
improve engine performance and reduce gas consumption and emissions. It is
believed that ultimately automotive and other customers will use the products
for the same reason.

Although MPD and HTD are divisions of HTI, as used herein, the reference
to HTI shall relate solely to the business of designing, manufacturing and
marketing fuel injection systems, while the businesses of MPD and HTD shall be
separately discussed.

Management, which is seeking additional acquisitions for HTI, believes
that the market for its products will initially be for engines used in the
marine market. According to the National Marine Association, there are 16.5
million (11.1 million registered) recreational boats in the U.S., accounting for
over $13 billion in retail spending for craft, engines and accessories. Of the
total registered boats, about 3 million are stern drive boats powered by
automotive-type gasoline engines, which type are able to use HTI's existing
products.

<PAGE>

Product Description and Overview

The fuel injection system for a gasoline powered engine is that part of
the engine where air and spark are combined with fuel to create the combustion
that drives the pistons in the engine. The "throttle body" is the mechanical
device that regulates the introduction of air to the fuel injection system. The
air passes through the throttle body into the manifold. It is within the
manifold that the air is mixed with fuel, which is introduced through the fuel
rails. The contour of the manifold will affect the volume and velocity with
which the air is mixed with the fuel. The volume and timing of fuel being
introduced into the system is governed by fuel injectors and the electronic
control module.

In order for an engine to run on an optimum basis, the fuel injection
system must properly mix the fuel and air, and the spark plugs must ignite at
the proper time. Too much air relative to the volume of fuel, or too much fuel
relative to the volume of air, may cause the engine to run lean or rich, as the
case may be. Either situation is inefficient, both in terms of the performance
of the engine and consumption of fuel. HTI's fuel intake systems have been
designed with its proprietary manifold that provides with patented airflow
design innovations to HTI's self-tuning computerized engine management systems.
Multiport fuel injection is also known as multipoint fuel injection.

An electronic control module, or "ECM", is the electronic device used in
the fuel injection system that coordinates the proper mixture of fuel and air.
An ECM can also control the introduction of spark into the fuel and air. If an
ECM does not control spark, then spark must be controlled by a separate ignition
system. As the driver moves the throttle forward, in a marine setting, or
presses down on the gas pedal, in an automotive setting, the mixture of fuel and
air and the introduction of spark must be carefully coordinated to achieve
optimal performance and fuel economy. Electronic control modules currently on
the market control this coordination of fuel, air and spark pursuant to factory
program specifications, which are known in the industry as a "fuel map".

HTI's patented ECM is believed to be the industry's first self-tuning
fuel injection control module. With the ECM, an engine builder or an aftermarket
engine service provider, can configure the engine to suit its application and
let the ECM automatically provide the right fuel mixtures, at the right
injection times, for the unique demands of the engine and applications. Using
advanced microprocessor components and control software techniques (which
techniques are the subject of a pending patent application) the ECM continuously
adjusts fueling to the optimum power point for all engine speeds and loads.

The throttle body, manifold and ECM developed by HTI are intended to
improve the performance of gasoline powered engines by achieving the optimal
mixture of fuel and air. Users of this system should also achieve enhanced fuel
conservation. HTI's electronic control module should be particularly useful to
two main groups. First, are

<PAGE>

those owners of gasoline powered engines that have either carbureted or
electronic throttle engines. The use of carburetors and electronic throttle body
fuel injection to mix fuel and air within the engine is less exacting than is a
true multi-point fuel injection system. HTI's products are designed, at the
present time, for only certain specific marine engines, to allow the customer to
convert their carburetor or throttle body injected engine to a true multi-point
fuel injection system.

In addition, in the event that HTI is successful in developing its
products for use in automobiles, recreational vehicles and industrial vehicles,
HTI intends to market its products to users of those vehicles. HTI's products
would be appropriate for users that are no longer achieving optimal engine
performance and fuel efficiency because the fuel map contained within the
electronic control module is no longer viable as a result of changes in the
mixture of fuel and air within the fuel injection system. This would occur, for
example, as a result of normal wear and tear in the engine, the introduction of
alternate fuels into the engine, or extreme changes in the air pressure at which
the vehicle is being operated. Because of the self programming feature of HTI's
electronic control module, these changes from the assumptions made in the
factory installed fuel map can be detected and appropriate compensating changes
can be made (whether in the mixture of fuel and air, or the introduction of
spark).

At the present time, HTI's ECM does not control the introduction of
spark, and spark is controlled by a separate ignition system, but HTI intends to
seek to modify its electronic control module to regulate the timing of spark
within the engine. The need to use a separate ECM control spark ignition system
is not anticipated to adversely affect the sales of HTI's ECM and other related
products.

Presently complete EFI systems, which includes the manifold, throttle
body and HTI's ECM together with related components produced by unrelated third
parties, are being marketed in the marine aftermarket through a nationwide
network of dealers. HTI also supplies manifolds, throttle bodies and fuel rails
to several OEM marine customers. It is anticipated that the manifolds, throttle
bodies and fuel rails will be included on the MPD engines. It should be noted
that the current version of the ECM is for marine application only. Revised
versions will address a variety of automotive and specialty engine markets.

EFI Products

HTI's EFI products presently are available for marine application only
and include those described below. Because HTI branded systems are designed to
replace carburetor systems on new engines as well as older models, HTI throttle
bodies utilize "carb-standard" dimensions which are designed to accept standard
air cleaners, marine flame arrestors and forced induction (turbo or super
charged) systems. In addition these systems are designed with integration
capabilities with other standard aftermarket

<PAGE>

accessory components, and as such provide a highly flexible product line that
meets numerous consumer requirements, as well as all industry and regulatory
specifications.

Manifold for Big-Block GM V8's. This manifold is designed to be used with
large-displacement (i.e."big-block") General Motors high performance engines
having from 454 to 600 cubic inches. The manifold or the complete intake system
is available in the following configurations: standard deck height with 1000
cubic feet per minute ("CFM") throttle body, standard deck height with 2000 cfm
throttle body, tall deck racing engine block with 1000 cfm throttle body. The
manifold can have brass water passages for salt water applications.

The fuel intake system incorporates many design features that are the
subject of several patents pending and awarded. Design techniques, such as
raised radius polonium floor, contoured airfoil shapes inside the manifold, and
specially positioned injectors give the manifold the capability of producing
superior low-RPM power while retaining high-RPM power.

Manifold for Small-Block GM V8's. This intake manifold known as the
"GenOne" is designed for smaller-displacement (i.e. "small-block") General
Motors engines having from 305 to 409 cubic inches. The design has the same
patented features which apply to the big-block model and is available in two
versions. One model is for "early" cylinder heads that fit engines which,
although new, use a configuration which is standard prior to 1987. The second
version is a model for "late" cylinder head engines (meaning those produced in
1987 and thereafter). Like the big-block manifolds, these manifolds are capable
of producing high power levels at low engine speeds without losing efficiency at
high engine speeds.

Enhanced Manifold for Small-Block GM V8's. This intake manifold is known
as the "GenOne Plus Enhanced." Beginning in mid 1995, GM began to supply its
marine, industrial and other specialty OEM customers with a newly designed small
block V8 (meaning that it has 8 cylinders), capable of producing greater power
than their current models in a cost package that meets market needs.

Throttle Bodies. EFI throttle bodies are used to control air intake. HTI
offers two throttle body models: (i) a 1000 cfm model for applications from 250
to 650 horsepower; and (ii) a 2000 cfm model for engines producing 650 to 1000
horsepower. Like HTI's intake manifolds, HTI's brand throttle bodies are
designed to provide superior volumetric efficiency through advanced laminar air
flow techniques.

Research and Development

Management has historically devoted significant resources to research and
development. The patented intake elements of HTI's products have been developed
utilizing a combination of several advanced design prototyping systems and
engine test

<PAGE>

systems that are advantageous to the engineers. Designs developed at HTI are
brought to life using a Computer Aid Device ("CAD") environment application
known as ProEngineer ("ProE"), an advanced visual design tool in mechanical
engineering. Using the ProE software, the designers can render, prove and
experiment in three dimensions with full capability to apply engineering
calculations to the functional limits of the design at engineering workstations
or computers rather that doing manual drafting.

When the design is ready for real time testing, it can be turned into
output as a conventional blueprint, color image, an instruction file for the
computerized machining and manufacturing systems, or an instruction file for the
state of the art "rapid prototyping" system. HTI has the in-house capability to
employ the most advanced rapid prototyping system available, a three dimensional
laser rendering system known as stereolithography ("SL"). Simply stated, SL
technology allows the Company to down load the output from the ProE software and
quickly develop a working prototype which can be bolted to the engine and
tested.

SL engineers take a three dimensional drawing from the design engineer's
computer file and convert the drawing to a computer data base within the SL
system. This conversion causes the file to be "sliced" into thousands of very
thin cross sections. Once converted the file is then passed to the SL equipment
which primarily consists of a laser aimed at the surface of a tank of resin. The
file then instructs the laser to travel along the pool resin in the pattern set
forth by the first cross section or slice of the three dimensional drawing, and
the laser literally "draws" the pattern on the surface of the resin. The effect
of the laser on the resin is that where the laser touches the resin, the resin
turns into solid and where it does not touch the resin, it remains in a liquid
form. When the first cross section has been drawn, the thin section of recently
hardened resin is lowered just a few thousandths of an inch below the surface,
after which this process is repeated layer after layer until the system "builds"
the entire object in three dimensions replicating to exact detail the original
design. The resulting rapidly built prototype is extremely accurate to the
design, even in the smallest detail, and because of the nature of the resin is a
functional part that can be tested in real applications and to endure high
levels of resistance and tolerance.

Management takes full advantage of this technology in a variety of ways.
First, SL prototypes are rendered of individual elements of a product for quick
real world testing of form, fit and function. The SL prototype can show, for
example, how a manifold runner will fit into a given space or how the air
actually flows when a runner shape is put on a conventional flow bench. These
items can be ascertained within hours after rendering a new design. The SL
prototypes or models are also used in actual engine testing. The partial SL or
complete SL element that has been rendered into a model can be assembled on an
engine and tested.

In the case of HTI, management has chosen to perform such test on a
dynamometer ("dyno"). The dyno is a laboratory piece of equipment that allows
the

<PAGE>

engineers to hook up an engine to it and retrieve critical data such as
horsepower, torque, fuel consumption, exhaust gas temperatures and air fuel
ratios.

When a design is complete and fully tested, the engineers can return to
the ProE environment and let the system help render a new foundry pattern for
casting a manifold. Since the file has the net "positive" shape of the new
intake system, a simple instruction can render the "negative" shapes, those
spaces around or inside the system. Because the objective is a foundry pattern,
HTI engineers have "taught" or built in a method within the ProE environment
that calculates that shrink factor for aluminum casting to exact measure.

The resulting molds are believed to be far more accurate than tooling
built by the most skilled pattern-maker. More important, such tooling is ready
in a few weeks versus the nine to twelve months which conventional pattern
making processes generally require. Each of the ProE and SL technologies as well
as the dynamometer have been (as described above) important tools in the
development and testing of the HTI technologies.

Customers

HTI's sales to date have been made to the marine industry consisting of
manufacturers as well as aftermarket users such as marinas and boat repair
facilities for OEM resale to other customers made on open account to credit
worthy customers and on a COD cash basis. In addition, MPD also sells its
products to distributors for subsequent resale to dealers.

Sales and Marketing

HTI's initial sales have been made based in large part on limited
advertising and by word of mouth. HTI has in the past, and will in the future,
continue attending trade shows and other marine industry expos and conventions.
With the acquisition of MPD, the Company has increased its advertising in trade
journals.

Competition

HTI operates in a market characterized by intense competition.
Competition within the industry is based on acceptance of and changes in
technology as well as cost and availability of product. It is believed that many
of HTI's competitors are larger and have greater resources than HTI. HTI
believes, however, that it can effectively compete with such competitors because
of its technology and continuing improvements to such technology.

<PAGE>

Marine Power Division

The Marine Power Division ("MPD") of HTI manufactures engines for use in
a marine environment. This is generally known as "marinizing" a base engine
manufactured by another, which for MPD is base engines manufactured by General
Motors. MPD designs, manufactures and markets four-cycle marine engines and jet
pumps. The primary sales of MPD are six cylinder and eight cylinder gasoline
powered, inboard engines for the OEM and after markets. OEM customers are boat
manufacturers that include engines manufactured by MPD in the sale of new boats.
Aftermarket sales are primarily to regional distributors who, in turn, resell
such engines to marine dealers for use as replacement engines for existing
boats. Engines manufactured by MPD are distributed in the Northeast United
States through Hirel Marine & Industry Supply, a division of HMI. Engines
manufactured by MPD are distributed in the Southeast United States through
Jerry's Marine Service of Fort Lauderdale, Inc. and Jerry's Marine Services,
Inc. (collectively "JMS"). The Company entered into an agreement on July 8, 1997
to acquire all of the assets, liabilities and contracts of JMS. In addition to
the manufacture and sale of inboard engines, MPD also manufactures stern drive
replacement engines, which are sold under the name "ENPAC." MPD also sells
engines designed to be attached to various jet drives, which engines are sold
under the tradename "JETPAC." MPD also marinizes a diesel engine manufactured by
General Motors; however, at the present time, such sales are limited. MPD also
sells spare parts for marine engines. Such parts are primarily sold through
regional distributors.

Hirel Tool & Die Division

The Hirel Tool & Die Division ("HTD") of HTI operates a tool and die
facility. HTD was formed for the purpose of providing manufacturing capability
to HTI for its fuel injection products as well as design and build capability
for non-related customers. HTD focuses on computer numeric control ("CNC")
machining, CNC programming and stereolithography rapid prototyping.

Government Regulations

HMI and HTI are presently not subject to federal, state and local laws,
regulations or recommendations relating to its businesses. The extent of
government regulations which may result from any legislation or administrative
action in the future and cannot be accurately predicted.

Patents, Trademarks, Copyrights and Proprietary Rights

HTI seeks to protect its proprietary technology by means of patents and
contractual arrangements. The Company's policy is to file patent applications to
protect technology, inventions and improvements that are important to the
development of its business. HTI

<PAGE>

also relies upon trade secrets, know how, continuing technological innovation
and licensing opportunities to develop and maintain its competitive position.

Immediately prior to its initial public offering, the Company acquired by
means of an assignment from the former partners of the predecessor of HTI, all
United States patent rights relating to the following technology: (1) single
point fuel injection systems (patent issued on November 7, 1995), (2) air intake
manifolds for fuel injected, internal combustion engines (patent issued on April
19, 1996), (3) air valves for the intake manifolds of internal combustion
engines (patent issued on March 26, 1996), (4) an electronic control unit for
controlling an electronic injector fuel delivery system and a method of
controlling an electronic injector delivery system (application pending). There
can be no assurance that the patents that are pending with the United States
Patent and Trademark Officer will be issued, or that issued patents will not be
challenged successfully or will commercially benefit or adequately protect the
Company.

The former partners of the predecessor of HTI, in the aggregate, will
receive the following royalties on the gross revenues of four (4) devices that
may be sold by HTI (i) Manifold/Throttle Body (5%), (ii) Electronic Control
Module (ECM) (10%), (iii) Single Point Metering (71/2%) and (iv) Fuel Chiller
(condenser) (71/2%). HTI is currently selling manifolds, throttle bodies and
ECM's. Single Point Metering and the Fuel Chiller are under development and not
available for sale.

HTI relies heavily on patent rights, trade secrets, unpatented know how
and nondisclosure agreements to establish and protect its proprietary rights.
HTI's policy is to require all employees and consultants to sign confidentiality
agreements under which they agree not to use or disclose HTI's proprietary or
other confidential information. HTI's policy is also to require technical
employees to enter into a non-competition agreements with HTI and agreements
specifying that inventions and improvements made by an employee during the term
of employment related to HTI's business become the sole property of HTI.

Despite these precautions, it may be possible for others to independently
develop the same or similar technologies, or for unauthorized third parties to
obtain and use information that HTI regards as proprietary. No assurance can be
given that any patents under pending patent applications or any future patent
applications will be issued, or when and if issued, that such patents or issued
patents currently assigned to HTI will afford patent protection of a scope which
will exclude competitors or that any of HTI's patents will be held valid if
challenged.

Employees

As of July 25, 1997, the Company and its subsidiaries, HMI (including
HMIS) and HTI (including MPD and HTD), employ an aggregate of seventy (70)
persons, including Vincent Montelione, all of whom are full time employees and
none of whom are subject

<PAGE>

to collective bargaining agreements. Of these full time employees, four (4) are
engaged in administration and finance, of the Company, ten (10) are employed by
HMI (including HMIS), fifteen (15) are employed by HTI (including HTD), and
forty-five (45) are employed by MPD.

The Company believes that its combined future success will depend in
large measure upon its continued ability to recruit and retain personnel. HMI
and HTI have never experienced a work stoppage. The Company believes that its
relationship with employees is good.

Recent Developments

On July 8, 1997, the Company entered into an agreement to acquire all of
the assets, liabilities and contracts of Jerry's Marine Service of Fort
Lauderdale, Inc., a Florida corporation, and Jerry's Marine Services, Inc., a
South Carolina corporation (collectively "JMS"). JMS is a distributor of marine
engines and parts. In consideration for the assets of JMS, the Company will pay
$8,000,000, payable $5,000,000 in cash at closing, and the remaining purchase
price represented by a promissory note payable in $1,000,000 increments at 12,
24 and 36 months following closing, together with interest thereon at the prime
rate plus one percent. Various liabilities of JMS will be assumed by the
Company, including loans payable to the shareholders of JMS totaling
approximately $750,000. The Promissory note will be secured by a security
interest in the purchased assets. If the audited net asset amount exceeds
$4,500,000 the purchase price will be increased by an amount of such excess, not
to exceed two million ($2,000,000) dollars, which will be paid in cash. The
closing date and time will be mutually agreed upon by both parties, but in all
events not later than 60 days following the completion of the audit. The Company
anticipates the closing to occur in the beginning of the fourth quarter of 1997.
It is contemplated that the agreement will be assigned to Hirel Technologies,
Inc., a wholly-owned subsidiary of the Company, prior to closing. The agreement
with JMS also provides that the Company will enter into employment agreements
(anticipated to be short term) with Helen Lewis, Joe Lewis, and Bobby LaBorde.
The agreements are anticipated to be entered into and effective upon closing of
the agreement.

On January 24, 1997, the Company completed its acquisition of
substantially all the assets of Marine Power, Inc. ("MPD") effective December
31, 1996. The Company acquired assets of $4,674,526 and assumed liabilities of
$5,323,278 in exchange for 390,000 shares of the Company's Common Stock valued
at $1,950,000. The acquisition will be accounted for utilizing the purchase
method and the operations of MPD will be included with the Company's from
December 31, 1996 onward. Goodwill of $2,638,752 (including $40,000 of legal and
accounting fees charged to the acquisition) arose from the transaction which
will be amortized utilizing the straight-line method over 15 years. In addition,
the Company entered into agreements whereby, based on the attainment of certain
earning levels, the sellers can earn registration rights on specified portions
of

<PAGE>

their shares as well as up to an additional 50,000 shares of the Company's
Common Stock.

On January 10, 1997, the Company acquired the assets and assumed the
liabilities of Fenco Tool and Die, Ltd., a company owned by certain stockholders
of the Company. The company acquired assets of approximately $90,000 and assumed
liabilities of approximately $30,000 for a $60,000 cash payment. The acquisition
will be accounted for as a purchase and no goodwill will be recorded.

Description of Properties

On September 4, 1996, the Company entered into a Sublease Agreement with
Parlux Fragrances, Inc. for a 38,458 square foot office and warehouse building
located at 650 S.W. 16th Terrace in Pompano Beach, Florida. Rent under the
Sublease commenced on October 1, 1996 and will terminate October 31, 2000 unless
earlier terminated as provided in the Sublease. The Sublease provides for
payment of base rent ranging from $13,300 per month commencing November 1, 1996
to $15,063 commencing November 1, 1999. In addition to the base rent, the
Company must pay operating costs of which are presently $5,512 per month.

Legal Proceedings

The Company is currently a defendant in litigation brought by Mack Boring
& Parts Company ("Mack Boring"), a party previously engaged in the distribution
of engines manufactured by MPD. Mack Boring has several counts to its Complaint,
filed in the Superior Court of Union County, New Jersey, including tortious
interference with contractual relations with the customers of Mack Boring,
tortious interference with prospective economic advantages, libel, slander,
breach of contract, and breach of duty of good faith and fair dealing. The
Company intends to vigorously defend this litigation. Further, Mack Boring is
currently indebted to MPD for approximately $150,000 for engines previously
shipped by MPD to Mack Boring. The Company intends to seek collection of this
receivable in connection with the pending litigation.

SELLING STOCKHOLDERS

The following table sets forth the name of each Selling Stockholder, the
amount of shares of Common Stock directly or indirectly owned by the Selling
Stockholders on the date hereof, the amount of Shares to be offered by the
Selling Stockholders, and the amount and percentage of shares of Common Stock to
be owned by the Selling Stockholders following sale of the Shares. As of the
date hereof, there were outstanding 5,208,750 shares of Common Stock of the
Company.

<PAGE>

Percentage of
Shares
Shares Number of Shares Shares Beneficially Beneficially
Beneficially Being Offered Owned After Owned After
Name Owned For Sale This Offering(1) This Offering(1)
- ---- ------------ ---------------- ------------------- ----------------
<S> <C> <C> <C> <C>
Liberty View Fund, L.L.C. 83,333 83,333 -0- 0%
Liberty View Plus Fund 250,000 250,000 -0- 0%
Paresco, Inc................. 708,333 708,333 -0- 0%
---------
TOTAL........................ 1,041,666

</TABLE>

- ------------------------
(1) Assumes all of the shares being registered will be sold.

PLAN OF DISTRIBUTION

The Company will not receive any of the proceeds from the sale of any
of the Shares by the Selling Stockholders. The sale of the securities registered
hereby may be effected by the Selling Stockholders from time to time in
transactions in the over-the-counter market, on the NASDAQ SmallCap Market, in
negotiated transactions, or a combination of such methods of sale, at fixed
prices which may be changed, at market prices prevailing at the time of sale, at
prices related to prevailing market prices or at negotiated prices. The
securities registered hereby may be sold by one or more of the following
methods: (i) a block trade in which the broker or dealer so engaged will attempt
to sell the Shares as agent for the selling stockholders; (ii) ordinary
brokerage transactions; (iii) transactions in which the broker solicits
purchasers and (iv) privately negotiated transactions. In effecting sales,
brokers or dealers engaged by the selling stockholders may arrange for other
brokers or dealers to participate. Brokers or dealers may receive commissions
from the selling stockholders in amounts to be negotiated immediately prior to
the sale. Such brokers or dealers and any other participating brokers or dealers
may be deemed to be "underwriters" within the meaning of the Securities Act in
connection with such sales.

In order to comply with the securities laws of certain states, if
applicable, the Shares will be sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain states the
Shares may not be sold unless they have been registered or qualified for sale in
the applicable state or an exemption from the registration or qualification
requirement is available and is complied with by the Company and the selling
stockholders.

The selling stockholders and any broker-dealers, agents or underwriters
that participate with the selling stockholders in the distribution of the
securities registered hereby may be deemed to be "underwriters" within the
meaning of Section 2(11) of the Securities Act, and any securities registered
hereby purchased by them may be deemed to be underwriting commissions or
discounts under the Securities Act.

<PAGE>

Under applicable rules and regulations under the Exchange Act, any
person engaged in the distribution of the securities registered hereby may not
simultaneously engage in market-making activities with respect to the Common
Stock for a period of two business days prior to the commencement of such
distribution. In addition and without limiting the foregoing, each Selling
Stockholder will be subject to applicable provisions of the Exchange Act and the
rules and regulations thereunder, including without limitation, Rules 10b-6,
10b-6A and 10b-7, which provisions may limit the timing of the purchases and
sales of shares by the selling stockholders.

The Company has agreed to pay all fees and expenses incident to the
registration of the securities registered hereby except selling commissions and
fees and expenses of counsel or any other professionals or other advisors, if
any, to the selling stockholders.

DESCRIPTION OF SECURITIES

Common Stock

The authorized capital stock of the Company consists of 24,000,000
shares of Common Stock, $.001 par value per share of which 5,208,750 shares are
presently issued and outstanding as of the date hereof. There are approximately
28 holders of record as determined by an examination of the Company's stock
transfer records. Holders of the Common Stock do not have preemptive rights to
purchase additional shares of Common Stock or other subscription rights. The
Common Stock carries no conversion rights and is not subject to redemption or to
any sinking fund provisions. All shares of Common Stock are entitled to share
equally in dividends from sources legally available therefor when, as and if
declared by the Board of Directors and, upon liquidation or dissolution of the
Company, whether voluntary or involuntary, to share equally in the assets of the
Company available for distribution to stockholders. All outstanding shares of
Common Stock are validly authorized and issued, fully paid and nonassessable.
The Board of Directors is authorized to issue additional shares of Common Stock,
not to exceed the amount authorized by the Company's Certificate of
Incorporation, and to issue options and warrants for the purchase of such
shares, on such terms and conditions and for such consideration as the Board may
deem appropriate without further stockholder action. The above description
concerning the Common Stock of the Company does not purport to be complete.
Reference is made to the Company's Certificate of Incorporation and bylaws which
are available for inspection upon proper notice at the Company's offices, as
well as to the applicable statutes of the State of Delaware for a more complete
description concerning the rights and liabilities of stockholders.

Each holder of Common Stock is entitled to one vote per share on all
matters on which such stockholders are entitled to vote. Since the shares of
Common Stock do not have cumulative voting rights, the holders of more than
fifty percent (50%) of the shares voting for the election of directors can elect
all the directors if they choose to do so and, in such event, the holders of the
remaining shares will not be able to elect any person to the Board of Directors.

<PAGE>

Common Stock
------------
High Low
---- ---
1996
Third Quarter $10.00 $5.50
Fourth Quarter $7.63 $4.25

1997
First Quarter $6.00 $4.38
Second Quarter $5.25 $3.00
Third Quarter (through July 23, 1997) $3.50 $2.25

Preferred Stock

The Board of Directors has the ability to issue up to 1,000,000 shares
of Preferred Stock in one or more series and to fix the rights, preferences,
privileges, qualifications, limitations and restrictions thereof, including
dividend rights, voting rights, terms of redemption, redemption prices,
liquidation preferences, and the number of shares constituting any series or the
designation of any such series, without further vote or action by the
shareholders. The issuance of Preferred Stock may have the effect of delaying or
preventing a change in control of the Company without further action by the
shareholders. The issuance of Preferred Stock with voting and conversion rights
may adversely affect the voting power of the holders of Common Stock, including
the loss of voting control to others. The Company presently has no shares of
Preferred Stock outstanding and has no present intention to issue any Preferred
Stock.

Dividend Policy

Holders of Common Stock are entitled to receive such dividends as may
be declared and paid from time to time by the Board of Directors out of funds
legally available therefor. The Company intends to retain any earnings for the
operation and expansion of its business and does not anticipate paying cash
dividends in the foreseeable future. Any future determination as to the payment
of cash dividends will depend upon future earnings, results of operations,
capital requirements, the Company's financial condition and such other factors
as the Board of Directors may consider.

Certain Provisions of the Company's Certificate of Incorporation

Section 102 of the Delaware General Corporation Law ("DGCL") authorizes
a Delaware corporation to include a provision in its Certificate of
Incorporation limiting or eliminating the personal liability of its directors to
the corporation and its stockholders for monetary damages for breach of
directors' fiduciary duty of care. The duty of care requires that, when acting
on behalf of the corporation, directors exercise an informed business judgment
based on all material information reasonably available to them.

<PAGE>

Absent the limitations authorized by such provision, directors are accountable
to corporations and their stockholders for monetary damages for conduct
constituting gross negligence in the exercise of their duty of care. Although
Section 102 of the DGCL does not change a director's duty of care, it enables
corporations to limit available relief to equitable remedies such as injunction
or rescission. Pursuant to such provision, the Company Certificate of
Incorporation limits the personal liability of the Company directors (in their
capacity as directors but not in their capacity as officers) to the Company or
its stockholders to the fullest extent permitted by the DGCL. Specifically, a
director of the Company will not be personally liable to the Company or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for (i) any breach of the director's duty of loyalty to the Company or
its stockholders, (ii) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) unlawful payments of
dividends or unlawful stock repurchases, redemptions or other distributions, and
(iv) any transaction from which the director derived an improper personal
benefit.

The inclusion of this provision may have the effect of reducing the
likelihood of derivative litigation against directors and may discourage or
deter stockholders or management from bringing a lawsuit against directors for
breach of their duty of care, even though such an action, if successful, might
otherwise have benefitted the Company and its stockholders. However, the
inclusion of this provision together with a provision which requires the Company
to indemnify its officers and directors against certain liabilities, is intended
to enable the Company to attract qualified persons to serve as directors who
might otherwise be reluctant to do so.

Delaware Anti-Takeover Law

The Company is governed by the provisions of Section 203 of the DGCL.
In general, the law prohibits a public Delaware corporation from engaging in a
"business combination" with an "interested stockholder" for a period of three
years after the date of the transaction in which the person became an interested
stockholder, unless the business combination is approved in a prescribed manner.
"Business combination" includes mergers, asset sales and other transactions
resulting in a financial benefit to the stockholder. An "interested stockholder"
is a person who, together with affiliates and associates, own (or within three
years, did own) 15% or more of the corporation's voting stock.

Over-The-Counter Market

The Company's Common Stock is traded on the NASDAQ National Market
System under the symbols "HIRL," respectively.

<PAGE>

Transfer Agent

The Transfer Agent for the Company's shares of Common Stock is American
Stock Transfer & Trust Company, 40 Wall Street, New York, New York 10005.

LEGAL MATTERS

Certain legal matters in connection with the securities being offered
hereby will be passed upon for the Company by Atlas, Pearlman, Trop & Borkson,
P.A., Counsel for the Company, Fort Lauderdale, Florida.

EXPERTS

Certain of the financial statements of the Company included in this
Prospectus and elsewhere in the Registration Statement, to the extent and for
the periods indicated in their reports have been audited by Moore Stephens,
P.C., independent certified public accountants, whose reports thereon appear
elsewhere herein and in the Registration Statement.

INDEMNIFICATION

Section 145 of the General Corporation Law of Delaware, under which
jurisdiction the Company is incorporated, empowers a corporation to indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative by reason of the fact that he or she
is or was a director, officer, employee or agent of the corporation or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation or enterprise. A corporation may indemnify against
expenses (including attorneys' fees) and, other than in respect of an action by
or in the right of the corporation, against judgments, fines and amounts paid in
settlement actually and reasonably incurred in connection with such action, suit
or proceeding if the person indemnified acted in good faith and in a manner he
or she reasonably believed to be in or not opposed to the best interests of the
corporation, and with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful. In the case of an
action by or in the right of the corporation, no indemnification of expenses may
be made in respect to any claim, issue or matter as to which such person shall
have been adjudged to be liable to the corporation unless and only to the extent
that the Court of Chancery or the court in which such action was brought shall
determine that, despite the adjudication of liability, such person is fairly and
reasonably entitled to indemnity for such expenses which the court shall deem
proper. Section 145 of the General Corporation Law of Delaware further provides
that to the extent a director, officer, employee or agent of the corporation has
been successful in the defense of any action, suit or proceeding referred to
above or in the defense of any claim, issue or matter therein, he or she shall
be indemnified against

<PAGE>

expenses (including attorneys' fees) actually and reasonably incurred by him or
her in connection therewith.

The Restated Certificate of Incorporation and By-Laws of the Company
require the Company to indemnify its Directors and officers to the fullest
extent permitted by the General Corporation Law of the State of Delaware.

The Company maintains directors and officers liability insurance, which
covers the Company's subsidiaries and the respective directors and officers.

<PAGE>

No dealer, salesperson or any other person has been authorized to give any
information or to make any representations not contained in this Prospectus in
connection with this offer made hereby. If given or made, such information or
representations must not be relied upon as having been authorized by the Company
or any Underwriter. This Prospectus does not constitute an offer to sell or a
solicitation of any offer to buy any of the securities offered hereby in any
circumstance in which such offer or solicitation would be unlawful. Neither the
delivery of this Prospectus nor any sale made hereunder shall under any
circumstances create an implication that information herein is correct at any
time subsequent to the date of this Prospectus.

--------------

TABLE OF CONTENTS
-----------------

Page
----
AVAILABLE INFORMATION.................................................... 2

INCORPORATION OF CERTAIN
INFORMATION BY REFERENCE............................................... 4

RISK FACTORS............................................................. 5

USE OF PROCEEDS.......................................................... 19

THE COMPANY.............................................................. 19

SELLING STOCKHOLDERS..................................................... 37

PLAN OF DISTRIBUTION..................................................... 38

DESCRIPTION OF SECURITIES................................................ 39

LEGAL MATTERS............................................................ 42

EXPERTS.................................................................. 42

INDEMNIFICATION.......................................................... 42

1,041,666 SHARES

HIREL HOLDINGS, INC.

----------
PROSPECTUS
----------

July 30, 1997

<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 14 Other Expenses of Issuance and Distribution.

The following table sets forth the estimated expenses, all of which are being
paid by the Company, in connection with this offering.

Registration Fee............................... $ 946.97
Legal fees and expenses........................ $ 5,000.00*
Accounting fees and expenses................... 2,500.00*
Printing expenses.............................. 3,000.00*
Miscellaneous.................................. 1,053.03
----------
Total $12,500.00
==========
- ----------------
*Estimated

Item 15. Indemnification of Directors and Officers.

II-1

<PAGE>

the defense of any claim, issue or matter therein, he or she shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him or her in connection therewith.

The Company's Bylaws provide that the Company has the power to
indemnify its directors and executive officers and may indemnify its other
officers, employees and other agents to the fullest extent permitted by Delaware
law.

Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended maybe permitted to directors, officers and controlling
persons of the Company pursuant to the foregoing provisions or otherwise, the
Company has been advised that in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the Company
of expenses incurred or paid by a director, officer or controlling person of the
Company in the successful defense of any action, suit or proceeding) is asserted
by such director, officer or controlling person in connection with the
securities being registered, the Company will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.

Item 16. Exhibits.

Exhibit Description
- ------- -----------
1.1 Form of Underwriting Agreement (1)

1.1(a) Revised Form of Underwriting Agreement (1)

1.3 Form of Selected Dealers Agreement (1)

1.3(a) Revised Form of Selected Dealers Agreement (1)

3.1 Articles of Incorporation dated May 1, 1996 (1)

3.2 By-laws of Hirel Holdings, Inc. (1)

3.2(a) Revised By-laws of Hirel Holdings, Inc. (1)

4.1 Specimen Common Stock Certificate (1)

4.2 Specimen Class A Common Stock Purchase Warrant (1)

II-2

<PAGE>

4.2(a) Revised Specimen Class A Common Stock Purchase Warrant (1)

4.3 Specimen Class B Common Stock Purchase Warrant (1)

4.3(a) Revised Specimen Class B Common Stock Purchase Warrant (1)

4.4 Warrant Agreement (1)

4.4(a) Revised Warrant Agreement (1)

4.5 Underwriter's Unit Purchase Option (1)

4.5(a) Revised Underwriter's Unit Purchase Option (1)

5.1 Opinion of Atlas, Pearlman, Trop & Borkson, P.A. concerning
legality of shares being registered pursuant to the
Registration Statement (6)

10.1 Stock Option Plan (1)

10.2 Executive Employment Agreement between the Company and Vincent
Montelione dated as of May 2, 1996 (1)

10.2(a) Revised Executive Employment Agreement between the Company and
Vincent Montelione dated as of May 2, 1996 (1)

10.3 Share Exchange Agreement between the Company and Hirel Inc.
dated as of May 2, 1996 (1)

10.3(a) Addendum dated May 29, 1996 to the Share Exchange Agreement
between the Company and Hirel Marketing, Inc. dated as of
May 2, 1996(1)

10.4 Share Exchange Agreement between the Company and Hirel
Technologies, Inc. dated as of May 2, 1996 (1)

10.4(a) Addendum dated May 29, 1996 to the Share Exchange Agreement
between the Company and Hirel Technologies, Inc. dated as of
May 2, 1996 (1)

10.4(b) Addendum No. 2 dated June 20, 1996 to the Share Exchange
Agreement between the Company and Hirel Technologies, Inc.
dated as of May 2, 1996 (1)

II-3

<PAGE>

10.5 Sublease Agreement with Hirel Marketing, Inc. and Cutler
Induction Systems, Inc. dated October 23, 1995 (1)

10.6 Sublease Agreement with Hirel Technologies, Inc. and Cutler
Induction Systems, Inc. dated October 23, 1995 (1)

10.7 Ocean Bank Line of Credit Loan Agreement dated 12/26/95 due
6/26/00 re: $2,000,000 (1)

10.8 Ocean Bank Line of Credit Loan Agreement dated 7/5/95 due
6/26/00 re: $1,000,000 (1)

10.9 Technologies Assignment and Royalty Agreement dated May 2,
1996 (1)

10.10 Lease between Hirel Technologies, Inc. and Fenco Tool & Die,
Ltd. dated April 1, 1996 (1)

10.11 Business Valuation Report by Fiske and Company dated January
31, 1996 (1)

10.12 Plan of Reorganization dated January 22, 1997, by and among
Marine Power, Inc., a Louisiana corporation, W.E. Allbright,
Jr., Hirel Technologies, Inc., a Florida corporation, and
Hirel Holdings, Inc., a Delaware corporation (2)

10.13 Employment Agreement dated January 22, 1997, between W.E.
Allbright, Jr. and Hirel Technologies, Inc. (2)

10.14 Sublease Agreement between Parlux Fragrances, Inc. and Hirel
Holdings, Inc. dated September 4, 1996. (3)

10.15 Asset Purchase Agreement between Fenco Tool & Die, Ltd. and
Hirel Technologies, Inc. dated January 10, 1997. (3)

10.16 Option Agreement between Hirel Marketing, Inc. and Group 32
dated March 21, 1997. (3)

10.17 Form of 5.0% Convertible Debenture Purchase Agreement
including Form of 5% Convertible Debenture and Form of Warrant
to Purchase (4)

10.18 Asset Purchase Agreement by and among Hirel Holdings, Inc.;
Jerry's Marine Services, Inc.; Jerry's Marine Service of Fort
Lauderdale, Inc.; and Helen Lewis, Joe Lewis, Bobby LaBorde
and Douglas Lewis dated July 8, 1997. (5)

II-4

<PAGE>

21 Subsidiaries of the Company (1)

23.1 Consent of Moore Stephens P.C. (formerly Mortenson &
Associates, P.C.)(6)

23.2 Consent of Atlas, Pearlman, Trop & Borkson, P.A.(included in
Exhibit 5.1)(6)

23.3 Consent of Fiske & Company (1)

- -------------------
(1) Incorporated by reference from the Company's Registration Statement on
Form SB-2, File No. 333-4686-A.

(2) Incorporated by reference from the Company's report on Form 8-K/A,
Amendment No. 1, dated February 6, 1997.

(3) Incorporated by reference from the Company's Annual Report of Form
10-KSB for the fiscal year ended December 31, 1996.

(4) Incorporated by reference from the Company's Report on Form 8-K dated
June 18, 1997 (4)

(5) Incorporated by reference from the Company's Report on Form 8-K dated
July 23, 1997 (5)

(6) Filed herewith.

Item 17. Undertakings.

(1) The undersigned Registrant hereby undertakes:

(a) to file, during any period in which it offers or sells
securities, a post-effective amendment to this Registration Statement to include
any additional or changed material information on the plan of distribution;

(b) that, for determining any liability under the Securities Act,
treat each such post-effective amendment as a new Registration Statement of the
securities offered at that time shall be deemed to be the initial bona fide
offering thereof; and

(c) to file a post-effective amendment to remove from registration
any of the securities that remain unsold at the end of the offering.

(2) Insofar as indemnification for liabilities arising under the Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for

II-5

<PAGE>

indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a Director, officer of controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such Director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.

II-6

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Fort Lauderdale and the State of Florida, on the
28th day of July, 1997

HIREL HOLDINGS, INC.

By: /s/ Vincent Montelione
----------------------------------------
Vincent Montelione
Chairman of the Board,
Chief Executive Officer and President

Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.

Signature Title Date
--------- ----- ----

/s/ Vincent Montelione Chairman of the Board,
- --------------------------- (Principal Executive July 28, 1997
Vincent Montelione Officer), Principal
Financial and Accounting
Officer

/s/ Gregory S. Fenech Vice President of
- --------------------------- Operations and
Gregory S. Fenech Director July 28, 1997

/s/ Vincent P. Fagnani, Jr.
- --------------------------- Vice President of Sales
Vincent P. Fagnani, Jr. and Marketing July 28, 1997

II-7

<PAGE>

EXHIBIT INDEX

5.1 Opinion of Atlas, Pearlman, Trop & Borkson P.A.

23.01 Consent of Moore Stephens P.C.

23.02 Consent of Atlas, Pearlman, Trop & Borkson, P.A.
(Included in Exhibit 5.1)

EXHIBIT 5.1

OPINION OF ATLAS, PEARLMAN, TROP & BORKSON, P.A.

<PAGE>

ATLAS, PEARLMAN, TROP & BORKSON, P.A.
200 East Las Olas Boulevard
Suite 1900
Fort Lauderdale, FL 33301

July 23, 1997

Hirel Holdings, Inc.
650 SW 16th Terrace
Pompano Beach, FL 33069

Re: Registration Statement on Form S-3; Hirel Holdings, Inc.
(the "Company"); 1,041,666 Shares of Common Stock

Gentlemen:

This opinion is submitted pursuant to the applicable rules of the
Securities and Exchange Commission with respect to the registration by the
Company of the resale of an aggregate of 1,041,666 shares of Common Stock, par
value $.01 per share (the "Common Stock") to be sold by the Selling Shareholders
designated in the Registration Statement.

In our capacity as counsel to the Company, we have examined the
original, certified, conformed, photostat or other copies of the Company's
Certificate of Incorporation, By-Laws, corporate minutes provided to us by the
Company and such other documents and instruments as we deemed necessary. In all
such examinations, we have assumed the genuineness of all signatures on original
documents, and the conformity to originals or certified documents of all copies
submitted to us as conformed, photostat or other copies. In passing upon certain
corporate records and documents of the Company, we have necessarily assumed the
correctness and completeness of the statements made or included therein by the
Company, and we express no opinion thereon.

Based upon and in reliance of the foregoing, we are of opinion that the
Common Stock is validly issued, fully paid and non-assessable.

We hereby consent to the use of this opinion in the Registration
Statement on Form S-3 to be filed with the Commission.

Very truly yours,

ATLAS, PEARLMAN, TROP & BORKSON, P.A.

/s/ Atlas, Pearlman, Trop & Borkson, P.A.
---------------------------------------------

EXHIBIT 23.01

CONSENT OF MOORE STEPHENS P.C.

<PAGE>

CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

The Board of Directors and Stockholders of
Hirel Holdings, Inc.
Pompano Beach, Florida

We hereby consent to the use in the Prospectus constituting a part of
this Registration Statement on Form S-3 of our report dated March 6, 1997,
relating to the consolidated financial statements of Hirel Holdings, Inc. which
is contained in the Prospectus.

We also consent to the reference to us under the caption "Experts" in
the Prospectus.

/s/ Moore Stephens, P.C.
--------------------------------------------
MOORE STEPHENS, P.C.
Certified Public Accountants

Cranford, New Jersey
July 25, 1997