[CURRENCY] U.S.DOLLARS
[FISCAL-YEAR-END] SEP-30-1998
[PERIOD-END] DEC-31-1997
<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, 1997
Commission File No: 0-2661
Harrell International, Inc.
(Exact name of registrant as specified in its charter)
Delaware (State of jurisdiction)
13-194618 (I.R.S. Employer identification No.)
211 Louisiana Street, McKinney, Texas 75069
(Address of Principal executive offices)
(972)542-9525
(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 December 31, 1997, was 976,580. The number of shares
outstanding of the registrant's $1.00 par value preferred stock as of
December 31, 1997 was 243,331.
<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, 1997, and September 30 1997
Consolidated Statements of Income 4
-- Three Months Ended December 31, 1997 and 1996
Consolidated Statements of Cash Flows 5
-- Three Months Ended December 31, 1997 and 1996
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>
Page 2
<PAGE> 3
Part FINANCIAL INFORMATION
Item 1 Financial Statements
HARRELL INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION> December 31, 1997 September 30, 1997
(Unaudited) (Audited)
<S> <C> <C>
ASSETS
Current Assets:
Cash $ 113,513 $ 98,908
Accounts Receivable 69,343 89,464
Other Current Assets 1,897 3,939
Total Current Assets $ 184,754 $ 192,311
Note Receivable 9,869 9,869
Investment in Joint Ventures 1,500 1,200
Investment in Limited Partnership 100,000 100,000
Furniture & Equipment (net) 12,115 8,163
Total Assets $ 308,238 $ 311,543
LIABILITIES & STOCKHOLDERS' DEFICIT
Current Liabilities:
Accounts Payable and
Accrued Liabilities $ 17,688 $ 56,308
Amounts Payable to Related Parties 8,000 8,000
Accrued Salaries & Payroll Taxes 15,189 8,215
Total Current Liabilities $ 40,877 $ 72,523
Note Payable 0 0
Total Liabilities $ 40,877 $ 72,523
Stockholders' Deficit:
Preferred Stock $ 243,331 $ 243,331
Common Stock:
Class A $.01 par value, 9,000,000
shares authorized, 976,580
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 (2,063,023) (2,091,364)
Total Stockholders' Deficit $ 267,360 $ 239,020
Total Liabilities &
Stockholders' Deficit $ 308,238 $ 311,543
</TABLE>
Page 3
<PAGE> 4
HARRELL INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended December 31 1997 1996
<S> <C> <C>
Revenues:
Management Fees $ 125,305 $ 87,161
Accounting Fees 0 0
Consulting Fees 0 41,300
Equity in earnings (losses) of
Joint Ventures 0 0
Other Income 5,315 118
Total Revenues $ 130,620 $ 128,579
Expenses:
Employee Compensation & Related 78,769 95,359
General & Administrative Expenses 23,514 23,369
Total Expenses $ 102,283 $ 118,728
Income before Gain on Sale of
Joint Ventures 28,336 9,851
Gain of Sale of Joint Venture 0 53,638
Income before Income Taxes 28,336 63,490
Provision for Income Taxes 0 0
Net Income $ 28,336 $ 63,490
Income per common share $0.03 $0.07
Weighted average number of common shares
outstanding 976,580 976,580
</TABLE>
Page 4
<PAGE> 5
HARRELL INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended December 31 1997 1996
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income (Loss) $ 28,336 $ 63,490
Adjustments to reconcile Net Income (Loss)
to Net Cash Provided (Used) for
Operating Activities:
Depreciation Expense 598 598
Equity in (Earnings) Losses of Joint Ventures 0 (10,577)
Accretion of Equity Interest in Assets of
Joint Ventures over Initial Investments 0 (88)
Distribution Received from Joint Ventures 0 501
Equity Contribution to Joint Ventures (300) 0
Changes in Assets and Liabilities:
(Increase) Decrease in Accounts Receivable 20,121 (2,065)
(Increase) Decrease in Other Current Assets 2,042 (525)
Purchase of Furniture & Equipment (4,550) (0)
Investment in Four Points Sheraton 0 (100,000)
Increase (Decrease) in Accounts Payable and
Accrued Liabilities (38,620) (36,870)
Increase (Decrease) in Accrued Salaries &
Related Expense 6,974 1,116
Net Cash provided (used) by
Operating Activities $ 14,601 $ (84,419)
Cash Flows from Financing Activities:
Note Receivable 0 (9,869)
Increase in Note Payable 0 0
Increase in Preferred Stock 0 0
Increase in Capital Stock 0 0
Net Increase (Decrease) in Cash $ 14,601 $ (94,288)
Cash at Beginning of Period 98,908 140,287
Cash at End of Period 113,513 45,999
Net Increase (Decrease) in Cash $ 14,605 $ (94,288)
</TABLE>
Page 5
<PAGE> 6
HARRELL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. PRINCIPLES OF DISCLOSURE
The balance sheet as of December 31, 1997, and the related statements of
income and cash flows for the three month period ended December 31, 1997
and 1996, are consolidated with the company's wholly-owned subsidiary
(Hotel Management Group, Inc.), and it's wholly owned subsidiaries Hotel
Management Group (California), Hotel Management Group (Tennessee), Hotel
Management Group (Oklahoma) 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.
Page 6
<PAGE> 7
Item MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
Material Changes in the Results of Operations.
(1) 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, Hotel Management
Group (Mississippi), Inc. [HMG(MS)]to operate its
Mississippi property, Hotel Management Group
(Tennessee), Inc. [HMG (TN)] to operate its
Tennessee property, and Hotel Management Group
(Oklahoma), Inc. [HMG(OK)] to operate its Oklahoma
Property. HMG (CA) began operations January 1, 1994. HMG(TN)
began operations October 17, 1996. HMG(OK) began operations
June 4, 1997. HMG(MS) began operations in July 1994 and
ceased operations in July 1996 due to
the cancellation of the Management Contract because the
property was to be domolished by the State Highway
Department. The following reflects a summary of the
results of operations for the three months ended
December 31, 1997, and is fully consolidated with HMG(CA)
HMG(TN), and HMG(OK).
3 months
Total Revenues 130,431
Total Expenses 35,318
Net Income 95,113
These results are fully consolidated with the Company on
the enclosed financial statements. Also they do not
reflect any management fees charged to HMG by Harrell
International, which are charged on an annual basis.
(2) At the end of the quarter HMG managed five hotels and two
apartment complexes. A substantial amount of time and
effort was given by the principals of HMG to the
location of additional management contracts.
(3) The Company has entered into negotiations with LW-LP,
Inc. for the sale of its limited
partnership interest in Texas Memphis Investors, Ltd.
The Company expects to receive the return of its
investment. At the point of consummation of such a
transaction, HMG(TN) will resign as manager of the
Memphis Four Points Hotel.
The loss of the management fee derived from the management
of the Memphis Four Points Hotel is not expected to have
a material impact on future financial results or the
future financial conditions of the Company.
Page 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, 1997.
Item 2. Change in Securities.
There were no changes in securities during the quarter.
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.
No items were submitted to a vote of the security holders
during this quarter.
Item 5. Other Information.
None
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, 1997.
Page 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: 2/12/98 /S/Paul L. Barham
----------------------
Vice President, Chief
Financial Officer and
Director
Page 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>
<LEGEND>
<RESTATED>
<CIK> 45694
<NAME> HARRELL INTERNATIONAL
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> DEC-31-1997
<PERIOD-TYPE> 3-MOS
<EXCHANGE-RATE> 1
<CASH> 113,513
<SECURITIES> 0
<RECEIVABLES> 69,343
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 184,754
<PP&E> 35,317
<DEPRECIATION> 23,202
<TOTAL-ASSETS> 308,238
<CURRENT-LIABILITIES> 40,877
<BONDS> 0
0
243,331
<COMMON> 9,766
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 308,238
<SALES> 0
<TOTAL-REVENUES> 130,620
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 102,283
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 28,336
<INCOME-TAX> 0
<INCOME-CONTINUING> 28,336
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 28,336
<EPS-PRIMARY> 0.03
<EPS-DILUTED> 0.03
