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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 December 31, 1999 Commission File
No: 0-2661
Harrell International, Inc.
(Exact name of registrant as specified in its charter)
Delaware 13-1946181
(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 December 31, 1999, was
1,226,580. The number of shares outstanding of the registrant's
$1.00 par value preferred stock as of December 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
for that time period.
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HARRELL INTERNATIONAL, INC.
INDEX
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Part I - FINANCIAL INFORMATION ................ 3
Item 1 FINANCIAL STATEMENTS .............. 3
CONSOLIDATED BALANCE SHEETS ............. 3
CONSOLIDATED STATEMENT OF OPERATIONS ........ 4
CONSOLIDATED STATEMENT OF CASH FLOWS ........ 5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ..... 6
Item 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS ...... 7
Part II. OTHER INFORMATION .................. 9
SIGNATURES ......................... 10
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Part I - FINANCIAL INFORMATION Item 1 FINANCIAL STATEMENTS
HARRELL INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
As of December 31, 1999 and September 30, 1999
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December September
31, 1999 30, 1999
(Unaudited) (Audited)
ASSETS
Current Assets
Cash $ 475,204 $ 263,694
Accounts Receivable 51,839 66,995
Other Current Assets 15,887 14,237
Total Current Assets $ 542,930 $ 344,925
Investment in Joint Ventures 1,850 1,850
Furniture & Equipment (Net) 9,571 10,254
Total Assets $ 554,352 $ 357,029
LIABILITIES & STOCKHOLDERS'
EQUITY
Current Liabilities:
Accounts Payable and Accrued $ 33,924 $ 39,518
Liabilities
Dividends Payable 0 24,331
Accrued Salaries and Payroll 0 6,632
Taxes
Total Current Liabilities $ 33,924 $ 70,480
Total Liabilities $ 33,924 70,480
Stockholders' Equity:
Preferred Stock $ 243,331 $ 243,331
Common Stock:
Class A $.01 par value, 12,266 9,766
9,000,000 shares authorized,
1,225,580 issued and outstanding
Class B $.01 par value,
1,000,000 shares authorized, No
shares issued and outstanding
Additional Paid-in Capital 2,324,787 2,077,287
Accumulated Equity (2,059,956) (2,043,835)
Total Stockholders' Equity $ 520,427 $ 286,549
Total Liabilities & $ 554,352 $ 357,029
Stockholders' Equity
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HARRELL INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
For the Three Months Ended December 31
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1999 1998
Revenues:
Management Fees $ 115,236 $ 116,846
Accounting Fees 0 0
Consulting Fees 0 0
Other Income 12,318 1,678
Total Revenues $ 127,553 $ 118,524
Expenses:
Employee Compensation & $ 110,210 $ 109,850
Related
General & Administrative 33,465 33,568
Expenses
Total Expenses $ 143,675 $ 143,418
Income (Loss) before Income $ (16,122) $ (24,894)
Taxes
Provision for Income Taxes 0 0
Net Income (Loss) $ (16,122) $ (24,894)
Income (Loss) per common share (0.01) (0.03)
Weighted average number of 1,097,459 976,580
shares outstanding
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HARRELL INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
For the Three Months Ended December 31
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Cash Flows from Operating
Activities:
Net Income (Loss) $ (16,122) $ (24,894)
Adjustments to reconcile the
Net Income (Loss) to Net Cash
Provided (Used) for Operating
Activities:
Depreciation Expense 1,224 1,567
Changes in Assets and
Liabilities:
(Increase) Decrease in Accounts 15,155 39,938
Receivable
(Increase) Decrease in Other (1,650) (1,756)
Current Assets
Purchase of Furniture and (540) (291)
Equipment
Increase (Decrease) in Accounts (29,925) 5,003
Payable and Accrued Liabilities
Increase (Decrease) in Accrued (6,632) 2,778
Salaries and Related
Net Cash Provided (Used) by $ (38,490) $ 22,346
Operations
Cash Flows from Financing
Activities:
Additional Paid-in Capital $ 247,500 $ 0
Increase in Capital Stock 2,500 0
Net Increase (Decrease) in Cash $ 211,510 $ 22,346
Cash at Beginning of Period $ 263,694 $ 194,792
Cash at End of Period 475,204 217,138
Net Increase (Decrease) in Cash $ 211,510 $ 22,346
</TABLE>
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HARRELL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. PRINCIPLES OF DISCLOSURE
The balance sheet as of December 31, 1999, and the related
statements of income and cash flows for the three month period
ended December 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.
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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 three months ended December 31, 1999, and
is fully consolidated with HMG, HMG(CA) HMG(TN), HMG(OK),
HMG(VA), and HMG(AL).
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Three Months
Total Revenues $ 127,553
Total Expenses $ 143,675
Net Loss $ (16,122)
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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 December 1, 1998, HMG(AL) entered into a management
agreement to manage the Governors House Hotel and Conference
Center in Montgomery, Alabama. Under the agreement, HMG(AL)
receives a management fee of $5,000 per month for the first
year and $4,500 per month for the second year, with
additional incentive fees based on achieving performance
goals.
4. 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.
5. On November 23, 1999, the Company entered into a Stock
Acquisition and Option Agreement (the "Stock Agreement")
with Merchant Capital Holdings, Ltd. ("MCH"), a British
Virgin Islands Company, whereby MCH agreed to buy 1,000,000
shares of the Company's Class A Common Stock for US$1.00 per
share, together with certain options to purchase additional
shares of Class A Common Stock. As part of the Stock
Agreement, two advisors of MCH, Geoffrey Dart ("Dart") and
Gerard Thompson ("Thompson") were appointed to the Board of
Directors of the Company, with Dart appointed as Chairman of
the Board. In connection with the transactions contemplated
under the Stock Agreement, the Company, MCH, Norman L. Marks
(and his family affiliates) and Paul L. Barham (and his
family affiliates) entered into a Shareholders Agreement,
providing for certain transfer restrictions and voting
agreements, on the Class A Common Stock held by certain of
the parties. Also, MCH required, as part of the Stock
Agreement, that two Employment Agreements be entered into
between the Company and Norman Marks and Paul Barham. On
December 15th, 1999, MCH funded the initial installment of
$250,000 and was issued 250,000 shares and 250,000 options
in accordance with the Stock Agreement.
6. On September 30, 1999, the Villa Martinique Apartments were
sold. As a result of that transaction, the contract to
manage that property was terminated.
7. At the end of the quarter HMG managed three hotels and one
apartment complex. A substantial amount of time and effort
was given by the principals of HMG to the location of
additional management contracts.
Subsequent Events
In early February 2000, the Athena Gardens Apartments were sold.
As a result of that transaction the contract to manage that
property was terminated.
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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 December 31, 1999
Item 2. Change in Securities.
250,000 shares of the Company's Class A Common Stock were
issued to Merchant Capital Holdings, Ltd. in a private
transaction, exempt under Section 4(2) of the 1933
Securities Act.
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, 1999
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SIGNATURES
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
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<S> <C>
<CIK> 45694
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<FISCAL-YEAR-END> SEP-30-2000
<PERIOD-START> OCT-01-1999
<PERIOD-END> DEC-31-1999
<PERIOD-TYPE> 3-MOS
<EXCHANGE-RATE> 1
<CASH> 475,204
<SECURITIES> 0
<RECEIVABLES> 51,839
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 542,930
<PP&E> 43,024
<DEPRECIATION> 33,453
<TOTAL-ASSETS> 554,352
<CURRENT-LIABILITIES> 33,924
<BONDS> 0
0
243,331
<COMMON> 12,266
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 554,352
<SALES> 0
<TOTAL-REVENUES> 127,553
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 143,675
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (16,122)
<INCOME-TAX> 0
<INCOME-CONTINUING> (16,122)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (16,122)
<EPS-BASIC> (0.01)
<EPS-DILUTED> (0.01)
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