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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 March 31, 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 March 31, 1999, was 976,580. The
number of shares outstanding of the registrant's $1.00 par value
preferred stock as of March 31, 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.
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HARRELL INTERNATIONAL, INC.
INDEX
<TABLE>
<CAPTION> Page
<S> <C>
Part I Financial Information
Item 1 Financial Statements
Consolidated Balance Sheets 3
-- As of March 31, 1999, and Sept 30 1998
Consolidated Statements of Income 4
-- Six Months Ended March 31, 1999 and 1998
Consolidated Statements of Cash Flows 5
-- Six Months Ended March 31, 1999 and 1998
Notes to Consolidated Financial Statemen 6
Item 2 Management's discussion and analysis of 7
Condition and Results of Operation
Part II Other Information 8
Signature Page 9
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2
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Part I FINANCIAL INFORMATION
Item 1 Financial Statements
HARRELL INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, Sept 30,
1999 1998
(Unaudited) (Audited)
<S> <C> <C>
ASSETS
Current Assets:
Cash $ 216,668 $ 194,792
Accounts Receivable 119,371 116,543
Other Current Assets 0 150
Total Current Assets $ 336,039 $ 311,485
Note Receivable 9,869 9,869
Investment in Joint Ventures 1,850 1,850
Investment in Limited Partnership 0 0
Furniture & Equipment (net) 13,386 16,044
Total Assets $ 361,144 $ 339,248
LIABILITIES & STOCKHOLDERS' DEFICIT
Current Liabilities:
Accounts Payable and Accrued Lia $ 69,063 $ 30,400
Amounts Payable to Related Parties 8,000 8,000
Accrued Salaries & Payroll Taxes 4,195 16,496
Total Current Liabilitie $ 81,258 $ 54,896
Note Payable 0 0
Total Liabilities $ 81,258 $ 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
Additional Paid in Capital 2,077,287 2,077,287
Accumulated Deficit (2,050,498) (2,046,032)
Total Stockholders' Deficit $ 279,886 $ 284,352
Total Liabilities &
stockholders' deficit $ 361,144 $ 339,248
</TABLE>
3
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HARRELL INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended March 31 Ended March 31
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Revenues:
Management Fees $146,180 $150,240 $263,026 $275,545
Accounting Fees 0 0 0 0
Consulting Fees 6,300 0 6,300 0
Equity in earnings
(losses)
of Joint Ventures 0 0 0 0
Other Income 1,468 205 3,146 5,519
Total Revenues $153,948 $150,445 $272,472 $281,065
Expenses:
Employee Compensation
& Related 97,505 98,208 207,355 176,977
General & Adminis-
trative Expense 36,015 26,170 69,583 49,684
Total Expenses $133,520 $124,378 $276,938 $226,661
Income(Loss)
before Income Tax $ 20,428 $ 26,066 $ (4,466) $ 54,403
Provision for
Income Taxes 0 0 0 0
Net Income (Loss) $ 20,428 $ 26,066 $ (4,466) $ 54,403
Income (Loss) per
common share $0.02 $0.03 ($0.00) $0.06
Weighted average
number of common
shares outstanding 976,580 976,580 976,580 976,580
</TABLE>
4
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HARRELL INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
For the Six Months Ended March 31
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income (Loss) $( 4,466) $ 54,403
Adjustments to reconcile Net
Income (Loss) to Net Cash Provided
(Used) for Operating Activities:
Depreciation Expense 3,132 1,196
Equity in (Earnings) Losses of Joint Ventures 0 0
Accretion of Equity Interest in Assets of
Joint Ventures over Initial Investments 0 0
Distribution Received from Joint Venture 0 0
Equity Contribution to Joint Ventures 0 0
Changes in Assets and Liabilities:
(Increase) Decrease in Accounts Receivables ( 2,828) ( 25,042)
(Increase) Decrease in Other Current Assets 150 2,804
Purchase of Furniture & Equipment ( 474) ( 9,430)
Investment in Four Points Sheraton 0 0
Investment in McKinney Hotel Project 0 ( 300)
Increase (Decrease) in Accounts Payable and
Accrued Liabilities 38,662 ( 37,786)
Increase (Decrease) in Amounts Due to 0 0
Related Parties
Increase (Decrease) in Accrued Salaries ( 12,301) ( 886)
Net Cash provided (used) by Operations $ 21,875 $ ( 15,041)
Cash Flows from Financing Activities:
Note Receivable 0 0
Increase in Note Payable 0 0
Increase in Preferred Stock 0 0
Increase in Capital Stock 0 0
Net Increase (Decrease) in Cash $ 21,875 $ ( 15,041)
Cash at Beginning of Period 194,792 98,908
Cash at End of Period 216,668 83,867
Net Increase (Decrease) in Cash $ 21,875 $ ( 15,041)
</TABLE>
5
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HARRELL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. PRINCIPLES OF DISCLOSURE
The balance sheet as of March 31, 1999, and the related
statements of income and cash flows for the six month period
ended March 31, 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
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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 six months ended March 31, 1999,
and is fully consolidated with HMG, HMG(CA),
HMG(TN), HMG(OK), HMG(VA), and HMG(AL).
6 months
Total Revenues 272,472
Total Expenses 276,938
Net Income (4,466)
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
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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
March 31, 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 March 31,
1999.
8
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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> JAN-01-1999
<PERIOD-END> MAR-31-1999
<PERIOD-TYPE> 6-MOS
<EXCHANGE-RATE> 1
<CASH> 216,668
<SECURITIES> 0
<RECEIVABLES> 119,371
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 336,039
<PP&E> 42,482
<DEPRECIATION> 29,096
<TOTAL-ASSETS> 361,144
<CURRENT-LIABILITIES> 69,063
<BONDS> 0
0
243,331
<COMMON> 9,766
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 361,144
<SALES> 0
<TOTAL-REVENUES> 272,472
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 276,938
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> ( 4,466)
<INCOME-TAX> 0
<INCOME-CONTINUING> ( 4,466)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> ( 4,466)
<EPS-PRIMARY> (0.00)
<EPS-DILUTED> (0.00)
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