<PAGE> 1
SECURITY AND EXCHANGE COMMISSION
WASHINGTON, DC.
FORM 10 - QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended December 31, 1995 Commission File No: 0-2661
Harrell International, Inc.
---------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-194618
(State of jurisdiction) (I.R.S. Employer
identification No.)
17218 Preston Road, Suite 3200, Dallas, TX 75252
------------------------------------------------
(Address of Principal executive offices)
(214)250-6370
-------------------------------------------------
(Registrant's telephone no., including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
(1) Yes X No
----- -----
(2) Yes X No
----- -----
The number of shares outstanding of the registrant's Class A, $.01 par
value common stock as of May 21, 1996, was 976,580.
<PAGE> 2
HARRELL INTERNATIONAL, INC.
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C>
Part I Financial Information
Item 1 Financial Statements
Consolidated Balance Sheets 3
-- As of December 31, 1995 and September 30 1995
Consolidated Statements of Income 4
-- Three Months Ended December 31, 1995 and 1994
Consolidated Statements of Cash Flows 5
-- Three Months Ended December 31, 1995 and 1994
Notes to Consolidated Financial Statements 6
Item 2 Management's discussion and analysis of Financial 7
Condition and Results of Operation
Part II Other Information 8
Signature Page 9
</TABLE>
2
<PAGE> 3
Part I FINANCIAL INFORMATION
Item 1 Financial Statements
HARRELL INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, 1995 September 30, 1995
(Unaudited) (Audited)
------------------ ------------------
<S> <C> <C>
ASSETS
------
Current Assets:
- ---------------
Cash $ 48,087 $ 36,843
Accounts Receivable 35,672 41,201
Other Current Assets 9,213 5,961
------------------ ------------------
Total Current Assets $ 92,972 $ 84,005
Investment in Joint Ventures (7,711) (9,009)
Furniture & Equipment (net) 3,885 4,071
------------------ ------------------
Total Assets $ 89,147 $ 79,067
================== ==================
LIABILITIES & STOCKHOLDERS' DEFICIT
-----------------------------------
Current Liabilities:
- --------------------
Accounts Payable and Accrued Liabilities $ 90,454 $ 50,819
Amounts Payable to Related Parties 26,675 15,077
Accrued Salaries & Payroll Taxes 0 16,516
------------------ ------------------
Total Current Liabilities $ 117,128 $ 82,412
Note Payable 0 0
------------------ ------------------
Total Liabilities $ 117,128 $ 82,412
Stockholders' Deficit:
- ----------------------
Preferred Stock to be issued $ 243,331 $ 243,331
Common Stock:
Class A $.01 par value, 9,000,000 shares authorized,
976580 issued and outstanding 9,766 9,766
Class B $.01 par value, 1,000,000 shares authorized,
No shares issued or outstanding 0 0
Additional Paid in Capital 2,077,287 2,077,287
Accumulated Deficit (2,358,366) (2,333,729)
------------------ ------------------
Total Stockholders' Deficit $ (27,982) $ (3,345)
------------------ ------------------
Total Liabilities & Stockholders' Deficit $ 89,147 $ 79,067
================== ==================
</TABLE>
3
<PAGE> 4
HARRELL INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
For the Three Months Ended December 31
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Revenues:
- ---------
Management Fees $ 89,973 $ 48,077
Accounting Fees 0 0
Consulting Fees 0 70,000
Equity in earnings (losses) of Joint Ventures 2,049 2,719
Other Income 1,215 2,079
-------- --------
Total Revenues $ 93,236 $122,875
Expenses:
- ---------
Employee Compensation & Related 57,849 68,251
General & Administrative Expenses 15,181 20,541
-------- --------
Total Expenses $ 73,030 $ 88,792
Income (Loss) before Income Taxes $ 20,206 $ 34,083
Provision for Income Taxes 0 0
-------- --------
Net Income (Loss) $ 20,206 $ 34,083
======== ========
Income (Loss) per common share $ 0.02 $ 0.03
Weighted average number of common shares outstanding 976,580 976,580
</TABLE>
4
<PAGE> 5
HARRELL INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
For the Three Months Ended December 31
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Cash Flows from Operating Activities:
- -------------------------------------
Net Income (Loss) $ 20,206 $ 34,083
Adjustments to reconcile Net Income (Loss) to Net
- -------------------------------------------------
Cash Provided (Used) for Operating Activities:
- ----------------------------------------------
Depreciation Expense 590 914
Equity in (Earnings) Losses of Joint Ventures (1,239) (1,909)
Accretion of Equity Interest in Assets of Joint Ventures
over Initial Investments (810) (810)
Distribution Received from Joint Ventures 750 1,200
Equity Contribution to Joint Ventures 0 0
Changes in Assets and Liabilities:
- ----------------------------------
(Increase) Decrease in Accounts Receivable 5,531 16,062
(Increase) Decrease in Other Current Assets 404 (3,391)
Purchase of Furniture & Equipment (404) (196)
Increase (Decrease) in Accounts Payable and Accrued
Liabilities 2,733 (14,514)
Increase (Decrease) in Accrued Salaries & Related (16,517) (22,643)
Payment of Accrued bonus 0 0
Decrease in Deferred Income 0 0
---------- ----------
Net Cash provided (used) by Operating Activities $ 11,243 $ 8,796
Cash Flows from Financing Activities:
- -------------------------------------
Increase in Note Payable 0 (216,933)
Increase in Preferred Stock 0 243,331
---------- ----------
Net Increase (Decrease) in Cash $ 11,243 $ 35,194
========== ==========
Cash at Beginning of Period 36,843 7,997
Cash at End of Period 48,087 43,191
---------- ----------
Net Increase (Decrease) in Cash $ 11,243 $ 35,194
========== ==========
</TABLE>
5
<PAGE> 6
HARRELL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. PRINCIPLES OF DISCLOSURE
The balance sheet as of December 31, 1995, and the related statements of income
and cash flows for the three month period ended December 31, 1995 and 1994, are
consolidated with the company's wholly-owned subsidiary (Hotel Management
Group, Inc.), and it's wholly owned subsidiaries Hotel Management Group
(California) and Hotel Management Group (Mississippi), and are unaudited. In
the opinion of management, all adjustments necessary for a fair presentation of
such financial statements have been included.
The financial statements and notes are presented as permitted by Form 10-QSB,
and do not contain certain information included in the Registrant's annual
financial statements and notes.
6
<PAGE> 7
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
Material Changes in the Results of Operations.
(1) Joint Venture Projects
The Company recognizes revenue or expenses from its joint
venture projects in two respects. First, the Company records
income or losses from the normal operations of the ventures
which take into consideration the revenue and expenses from the
operation of the apartment projects owned and operated by them.
Second, the Company recognizes other income to the extent it
accretes over the assets' lives the difference between its
investment in the joint ventures and its share of the joint
ventures' initial net assets. This accretion into income is
produced as a result of the Company having received an interest
in the joint ventures without making an initial investment. For
the three month period ended December 31, 1995, the Company's
share of the amount of the earnings from joint ventures was a
net income of $1,239 and the accretion into other income was
$810.
(2) Hotel Management Group, Inc. (HMG)
Hotel Management Group formed a wholly owned subsidiary Hotel
Management Group (California), Inc. [HMG(CA)] to operate its
California properties and Hotel Management Group Mississippi,
Inc. [HMG (MS)] to operate its Mississippi property. HMG (CA)
began operations January 1, 1994. HMG (MS) began operations July
1, 1994.
The following reflects a summary of the results of operations
for the three months ended December 31, 1995, and is fully
consolidated with Hotel Management Group (California) and Hotel
Management Group (Mississippi).
3 months
----------
Total Revenues 91,188
Total Expenses 24,913
Net Income 66,275
These results are fully consolidated with the Company on the
enclosed financial statements. Also they do not reflect any
management fee charged to HMG by Harrell International, which
are charged on an annual basis.
At the end of the quarter HMG managed two hotels and three
apartment complexes. A substantial amount of time and effort was
given by the principals of HMG to the location of additional
management contracts.
7
<PAGE> 8
Part II. OTHER INFORMATION
Item 1. Legal.
There were no material legal proceedings, either on-going,
instituted by or against, or otherwise involving the Registrant
during the quarter ended December 31, 1995.
Item 2. Change in Securities.
There were no changes in the Registrant's securities during the
quarter ended December 31, 1995.
Item 3. Defaults Upon Senior Securities.
The Registrant does not have any outstanding debt or securities
of this nature.
Item 4. Submission of Matters to a Vote of Security Holders.
The Registrant did not submit any matters to a vote of the
security holders during the quarter ended December 31, 1995.
Item 5. Other Information.
The Registrant had no events that would require disclosure under
this section during the quarter ended December 31, 1995.
Item 6. Exhibits and Reports on Form 8-K.
(a) No report on Form 8-K was filed by the Registrant for the
quarter ended December 31, 1995.
8
<PAGE> 9
S I G N A T U R E S
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto fully authorized.
HARRELL INTERNATIONAL, INC.
Date: /s/ Paul L. Barham
--------------- ----------------------------------
Paul L. Barham
Vice President, Chief Financial
Officer and Director
9
<PAGE> 10
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
27 - Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 48,087
<SECURITIES> 0
<RECEIVABLES> 35,672
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 92,972
<PP&E> 22,301
<DEPRECIATION> 18,415
<TOTAL-ASSETS> 89,147
<CURRENT-LIABILITIES> 117,128
<BONDS> 0
0
243,331
<COMMON> 9,766
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 89,147
<SALES> 0
<TOTAL-REVENUES> 93,236
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 73,030
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 58
<INCOME-PRETAX> 20,206
<INCOME-TAX> 0
<INCOME-CONTINUING> 20,206
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 20,206
<EPS-PRIMARY> 0.02
<EPS-DILUTED> 0.02
</TABLE>
