<PAGE>
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 June 30, 1999 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.)
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 June 30, 1999, was 976,580. The
number of shares outstanding of the registrant's $1.00 par value
preferred stock as of June 30, 1999 was 243,331.
In October 1997, the Company changed transfer agents from Chase Mellon
to Registrar and Transfer Company. When transferring the records to
Registrar and Transfer Company, Chase Mellon showed additional shares
of common stock of the Company as being issued and outstanding. Chase
Mellon gave no explanation for this discrepancy, and for the past
several years has consistently reported the number of shares
outstanding as approximately 976,580. The Company has made three
written inquiries to Chase Mellon but has received no response. The
Company will continue to follow up. It is not known at this time
whether Chase Mellon's records are in error, and for purposes of this
report and until a satisfactory answer is received from Chase Mellon,
the Company shall continue to use 976,580 as the number of outstanding
shares.
<PAGE>
HARRELL INTERNATIONAL, INC.
INDEX
<TABLE>
<CAPTION> Page
<S> <C>
Part I Financial Information
Item 1 Financial Statements
Consolidated Balance Sheets 3
-- As of June 30, 1999, and September 30 1998
Consolidated Statements of Income 4
-- Nine Months Ended June 30, 1999 and 1998
Consolidated Statements of Cash Flows 5
-- Nine Months Ended June 30, 1999 and 1998
Notes to Consolidated Financial Statements 6
Item 2 Management's discussion and analysis of Finan 7
Condition and Results of Operation
Part II Other Information 8
Signature Page 9
</TABLE>
2
<PAGE>
Part I FINANCIAL INFORMATION
Item 1 Financial Statements
HARRELL INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, Sept 30,
1999 1998
(Unaudited) (Audited)
<S> <C> <C>
ASSETS
Current Assets:
Cash $ 248,673 $ 194,792
Accounts Receivable 116,206 116,543
Other Current Assets 1,350 150
Total Current Assets $ 366,231 $ 311,485
Note Receivable 0 9,869
Investment in Joint Ventures 1,850 1,850
Investment in Limited Partnership 0 0
Furniture & Equipment (net) 11,820 16,044
Total Assets $ 379,901 $ 339,248
LIABILITIES & STOCKHOLDERS' DEFICIT
Current Liabilities:
Accounts Payable and Accrued Liabili $ 86,341 $ 30,400
Amounts Payable to Related Parties 0 8,000
Accrued Salaries & Payroll Taxes 4,195 16,496
Total Current Liabilities $ 90,536 $ 54,896
Note Payable 0 0
Total Liabilities $ 90,536 $ 54,896
Stockholders' Deficit:
Preferred Stock $ 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 -2,041,019 -2,046,032
Total Stockholders' Deficit $ 289,364 $ 284,352
Total Liabilities & Stockho $ 379,901 $ 339,248
</TABLE>
3
<PAGE>
HARRELL INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION> For the Three Months For Nine Months
Ended June 30 Ended June 30
<S> <C> <C> <C> <C>
1999 1998 1999 1998
Revenues:
Management Fees $ 151,396 159,964 414,422 435,509
Accounting Fees 0 0 0 0
Consulting Fees 0 0 6,300 0
Other Income 1,963 533 5,109 6,052
Total Revenues $ 153,359 160,497 425,831 441,561
Expenses:
Employee
Compensation & Related 110,119 104,411 317,474 281,388
General &
Administrative Expenses 33,762 31,252 103,345 80,936
Total Expenses $ 143,881 135,663 420,819 362,324
Income before Income Taxes 9,479 24,834 5,012 79,238
Provision for Income Taxes 0 0 0 0
Net Income (Loss) $ 9,479 24,834 5,012 79,238
Income (Loss) per
common share $0.01 $0.03 $0.01 $0.08
Weighted average
number of common
shares outstanding 976,580 976,580 976,580 976,580
</TABLE>
4
<PAGE>
HARRELL INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION> For the Nine Months Ended June 30
1999 1998
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income (Loss) $ 5,012 $ 79,238
Adjustments to reconcile Net Income
(Loss) to Net Cash Provided (Used) for
Operating Activities:
Depreciation Expense 4,698 1,795
Equity in (Earnings) Losses of Joint Ventures 0 0
Accretion of Equity Interest in Assets
of Joint Ventures over Initial 0 0
Investments
Distribution Received from Joint Ventures 0 0
Equity Contribution to Joint Ventures 0 0
Changes in Assets and Liabilities:
(Increase) Decrease in Accounts Receivable 336 (42,885)
(Increase) Decrease in Other Current Assets (1,201) 1,544
Purchase of Furniture & Equipment (474) (10,636)
Investment in Four Points Sheraton 0 100,000
Investment in McKinney Hotel Project 0 (650)
Increase (Decrease) in Accounts Payable
and Accrued Liabilities 55,941 (34,317)
Increase (Decrease) in Amounts Due to
Related Parties (8,000) 0
Increase (Decrease) in Accrued Salaries
& Related (12,301) (3,940)
Net Cash provided (used) by Operatin $ 44,013 $ 90,149
Cash Flows from Financing Activities:
Note Receivable 9,869 0
Increase in Note Payable 0 0
Increase in Preferred Stock 0 0
Increase in Capital Stock 0 0
Net Increase (Decrease) in Cash $ 53,882 $ 90,149
Cash at Beginning of Period 194,792 98,908
Cash at End of Period 248,674 189,057
Net Increase (Decrease) in Cash $ 53,882 $ 90,149
</TABLE>
5
<PAGE>
HARRELL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. PRINCIPLES OF DISCLOSURE
The balance sheet as of June 30, 1999, and the related
statements of income and cash flows for the nine month
period ended June 30, 1999 and 1998, 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), Hotel
Management Group (Virginia), H M Group (Alabama), 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>
Item 2. 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)
The Company's wholly owned subsidiary (HMG) has the
following wholly owned subsidiaries:
Hotel Management Group - California, Inc. (HMG(CA))
Hotel Management Group - Mississippi, Inc. (HMG(MS))
Hotel Management Group - Tennessee, Inc. (HMG(TN))
Hotel Management Group - Oklahoma, Inc. (HMG(OK))
Hotel Management Group - Virginia, Inc. (HMG(VA))
H M Group - Alabama, Inc. (HMG(AL))
The following reflects a summary of the results of
operations for the nine months ended June 30,
1999, and is fully consolidated with HMG, HMG(CA)
HMG(TN), HMG(OK), HMG(VA), and HMG(AL).
9 months
Total Revenues 425,831
Total Expenses 420,819
Net Income 5,012
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) In August 1997, HMG entered into a management
agreement to manage the Holiday Inn Express in
Ennis, Texas. Under the agreement HMG received a
management fee of $2,500 per month. The owners
decided to operate the hotel without the use of a
third party management company and by mutual
agreement the contract was terminated effective
February 1, 1999.
(3) On February 26, 1999, HMG entered into a Technical
Service Agreement and on March 17, 1999, a
Management Agreement, with Second Century
Investments, a Dallas based development company
for the pre and post opening management of a
proposed Hilton Garden Inn to be developed in
Allen, Texas.
(4) At the end of the quarter HMG managed three 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.
7
<PAGE>
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
June 30, 1999.
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
June 30, 1999.
8
<PAGE>
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:
Paul L. Barham
Vice President, Chief Financial
Officer and Director
9
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<CIK> 45694
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-01-1998
<PERIOD-END> JUN-30-1999
<PERIOD-TYPE> 9-MOS
<EXCHANGE-RATE> 1
<CASH> 248,674
<SECURITIES> 0
<RECEIVABLES> 116,207
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 366,231
<PP&E> 42,482
<DEPRECIATION> 30,662
<TOTAL-ASSETS> 379,901
<CURRENT-LIABILITIES> 90,537
<BONDS> 0
0
243,331
<COMMON> 9,766
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 379,901
<SALES> 0
<TOTAL-REVENUES> 425,831
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 420,819
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 5,012
<INCOME-TAX> 0
<INCOME-CONTINUING> 5,012
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,012
<EPS-BASIC> 0.01
<EPS-DILUTED> 0.01
</TABLE>
