**UNITED STATES**
**SECURITIES AND EXCHANGE COMMISSION**
**WASHINGTON, DC. 20549**
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**FORM 10 - QSB/A**
****(Mark One)
[ X ]	QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES     		EXCHANGE ACT OF 1934

or the quarterly period ended       June 30, 2005        

[     ]	TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

For the transition period from to 

Commission File No:  0-2661                                             

Harrell Hospitality Group, Inc.                                                                                                     .
(Exact name of small business issuer as specified in its charter)

Delaware                                                          13_1946181                                                        (State of jurisdiction of incorporation)                 (IRS Employer identification No.)

16475 North Dallas Parkway, Suite 410, Addison, Texas 75001                                                    
(Address of principal executive offices)

(972) 380-0273                                                                                                                             
(Issuer's telephone number)

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the last 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.  Yes [ X ]    No [   ]

**APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY**
**PROCEEDINGS DURING THE PRECEDING FIVE YEARS**
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        Check whether the registrant filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act after the distribution of securities under a plan confirmed by a court. Yes [   ]  No  [   ]

**APPLICABLE ONLY TO CORPORATE ISSUERS**
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          State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date:   As of August 8, 2005, the issuer had outstanding 12,564,907 shares of Class A common stock, $.002 par value per share.

Transitional Small Business Disclosure Format (Check One): Yes [   ]  No  [ X ]

**HARRELL HOSPITALITY GROUP, INC. and SUBSIDIARIES**
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**INDEX**
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	Part I - FINANCIAL INFORMATION4
	Item 1	FINANCIAL STATEMENTS4
	CONSOLIDATED BALANCE SHEETS4
	CONSOLIDATED STATEMENTS OF OPERATIONS 5
	CONSOLIDATED STATEMENTS OF CASH FLOWS  7
	NOTES TO CONSOLIDATED FINANCIAL STATEMENTS9
	Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.12

	Item 3.	CONTROLS AND PROCEDURES.  17
	Part II.	OTHER INFORMATION18
	SIGNATURES19

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**Part I - FINANCIAL INFORMATION**
**Item 1.	FINANCIAL STATEMENTS**
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**HARRELL HOSPITALITY GROUP, INC. AND SUBSIDIARIES**
**CONSOLIDATED BALANCE SHEETS**
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ASSETS June 30, 
2005
(Unaudited) September 30, 2004 
(Audited)Current assets:    Cash and cash equivalents$45,820$20,629Accounts receivable, net of allowance for doubtful accounts of $0 and $40,728
 
87,891
 
16,592
Other assets 601 25,865
	Total current assets 134,312 63,086
Property & equipment, net 2,744 2,551
Deposits 1,848 -  
	Total assets$138,904$65,637
LIABILITIES & STOCKHOLDERS' DEFICIT    Current liabilities:    Notes payable$- $15,000Accounts payable and accrued liabilities 107,081 98,064Accrued liabilities - related parties 262,491 211,229Net liabilities of discontinued operations -  185,438Total current liabilities 369,572 509,731     Stockholders'deficit:    Preferred stock:    Class A, $1.00 par, 1,000,000 shares authorized, 243,331 shares issued and outstanding, $1.00 per share involuntary liquidation preference
 
243,331
 
243,331
Common stock:    
Class A $.002 par value, 100,000,000 shares authorized, 12,564,907 and 13,064,907 outstanding
 
25,129
 
26,129
Additional paid-in capital 4,023,267 4,064,268
Accumulated deficit (4,522,395) (4,534,935)
Accumulated other comprehensive income  -  7,838
Deferred stock compensation -  (250,725)
	Total stockholders' deficit (230,668) (444,094)
	Total liabilities & stockholders' deficit$138,904$65,637

See accompanying notes to consolidated financial statements.
**HARRELL HOSPITALITY GROUP, INC. AND SUBSIDIARIES**
**CONSOLIDATED STATEMENTS OF OPERATIONS**
**(Unaudited)******
**** For the Three Months Ended June 30,For the Nine Months  Ended June 30, 2005200420052004
Revenues:        Hotel human capital reimbursements$1,202,114$1,188,086$3,630,332$3,596,845Management fees 57,997 48,572 145,185 224,501Total revenues 1,260,111 1,236,658 3,775,517 3,821,346         Expenses:        Employee compensation related 	 	expenses 1,280,963 1,306,099 3,862,305 3,969,560General and administrative 50,324 139,827 247,853 311,246Total expenses 1,331,287 1,445,926 4,110,158 4,280,806         Operating loss (71,176) (209,268) (334,641) (459,460)         Other Income (Expense):        Realized losses on marketable securities -  (4,546) -  (26,230)Interest expense -  (15,748) (1,073) (49,998)Other income 300 3,643 9,995 6,758Total other income (expense) 300 (16,651) 8,922 (69,470)         Loss from continuing operations (70,876) (225,919) (325,719) (528,930)         Discontinued Operations:        Loss from discontinued operations -  (47,104) (131,436) (255,199)Gain on sale of discontinued operations -  -  469,695 - Income (loss) from discontinued                        operations -  (47,104) 338,259 (255,199)         Preferred stock dividends -  (6,083) -  (18,249)Net income (loss) attributable to                        common stockholders$(70,876)$(279,106)$12,540$(802,378)         Earnings (loss)  per share:        Loss from continuing operations - basic$(0.01)$(0.02)$(0.03)$(0.04)Income (loss) from discontinued                        operations - basic$0.00$0.00$0.03$(0.02)Net income (loss) attributable to                      common stockholders:        - Basic$(0.01)$(0.02)$0.00$(0.06)- Diluted$(0.01)$(0.02)$0.00$(0.06)         Weighted average number of common shares outstanding        - Basic 12,564,907 13,064,907 12,898,242 12,940,407- Diluted 12,564,907 13,064,907 20,864,618 12,940,407 
Comprehensive income (loss) for the three months ended June 30, 2005 and 2004 was $(70,876) and $(446,284),  respectively.  Comprehensive income (loss) for the nine months ended June 30, 2005 and 2004 was $4,702 and $(1,144,460), respectively.  This includes the change in available-for-sale marketable securities, foreign currency translation gain (loss) and net income (loss) attributable to common stockholders.
See accompanying notes to consolidated financial statements.    

**HARRELL HOSPITALITY GROUP, INC. AND SUBSIDIARIES**
**CONSOLIDATED STATEMENTS OF CASH FLOWS**
**(Unaudited)******
**For the Nine Months Ended June 30**,
  **2005** **2004**Operating activities:    Net loss from continuing operations$(325,719)$(528,930)Adjustments to reconcile net loss from continuing operations to net cash used in operating activities:    Realized losses on marketable securities -   21,684 Depreciation 1,655 1,569Deferred stock compensation
 
250,725
 
-  
Gain on settlement of accrued liabilities to related parties (160,350) -  
Changes in assets and liabilities:    
Accounts receivable (71,299) (4,334)
Other assets 10,264 5,356
Restricted cash and deposits (1,848) 206,498
Accounts payable and accrued liabilities 220,628 235,164
Net cash used in operating activities (75,944) (62,993)
     
Investing activities:    
Purchase of property and equipment (1,848) - 
Net proceeds from sale o discontinued operations 298,000 - 
Proceeds from sales of marketable securities -  106,384
 Net cash provided by investing activities 296,152 106,384
     
Financing activities:    
Proceeds from notes payable - related parties 27,500 33,000
Payment on notes payable - related parties (27,500) - 
Repurchase of stock from former director (42,000) - 
Preferred stock dividends -   (18,249)
Redemption of shares subject to mandatory redemption -   (174,315)
Net cash provided by (used in) financing activities: (42,000) (159,564)
     
Discontinued operations:    
Operating activities (153,017) (92,926)
Investing activities -  - 
Financing activities -  189,735
Net cash provided by (used in) discontinued operations (153,017) 96,809
     
Net increase (decrease) in cash and cash equivalents 25,191 (19,364)
     
Cash and cash equivalents at beginning of period 20,629 31,697
Cash and cash equivalents at end of period$45,820$12,333
     
Supplemental Cash Flow Information:    
Cash paid during the period for interest$- $18,230
     
Cash paid during the period for income taxes$-  $-  

During the third quarter of 2005, the Company surrendered its cash surrender value life insurance policies on certain executive officers, of which $15,000 was offset against amounts previously borrowed against.  Such cash surrender value life insurance policy has been reflected as a non- cash item.

See accompanying notes to consolidated financial statements.

**HARRELL HOSPITALITY GROUP, INC. AND SUBSIDIARIES**
**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**
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ORGANIZATION
Harrell Hospitality Group, Inc. (the "Company" or "HHG") is a Delaware corporation, originally incorporated in 1959 in the state of Massachusetts under the name of Formula 409, Inc.  The Company is primarily involved in the management and development of hotels, mainly in the states of California and Texas, and the United Kingdom.  The Company's corporate offices are located in Addison, Texas.

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****	In February 2003, the Company began operations in the United Kingdom with the formation of Harrell Hotels Europe, Ltd. ("HHE"), a wholly-owned subsidiary of the Company.  The Company's United Kingdom offices were located in London, England. The Company sold HHE on March 31, 2005, as described in Discontinued Operations below.

BASIS OF PRESENTATION

	The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-QSB of Regulation S-B.  They do not include all information and footnotes required by generally accepted accounting principles for complete financial statements.  However, except as disclosed herein, there has been no material change in the information disclosed in the notes to the consolidated financial statements for the year ended September 30, 2004,  included in the Company's Annual Report on Form 10-KSB filed with the Securities and Exchange Commission.  The interim unaudited consolidated financial statements should be read in conjunction with those financial statements included in the Form 10-KSB.  In the opinion of management, all adjustments considered necessary for a fair presentation, consisting solely of normal recurring adjustments, have been made. Operating results for the nine months ended June 30, 2005 are not necessarily indicative of the results that may be expected for the year ending September 30, 2005.

GOING CONCERN

	The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company has continued to incur net operating losses which have resulted in a significant accumulated deficit and stockholders' deficit at June 30, 2005. The Company had net income (loss) attributable to common stockholders of $12,540  and ($802,378) for the nine months ended June 30, 2005 and 2004, respectively. At June 30, 2005, current liabilities exceeded current assets by $235,260 and the accumulated deficit was $4,522,395.

	The ability of the Company to continue as a going concern is dependent on the successful implementation of its business plan, obtaining additional capital, and generating sufficient revenues and cash flows. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

	The time required for the Company to become profitable is highly uncertain, and we cannot be assured that it will achieve or sustain profitability or generate sufficient cash flow from operations to meet planned capital expenditures and working capital needs. Although at present the Company has no third-party borrowings, if additional working capital is needed and must be borrowed, the ability to obtain additional financing from other sources also depends on many factors beyond the control of the Company, including the state of the capital markets and the prospects for business growth. The necessary additional financing may not be available or may be available only on terms that would result in further dilution to the current owners of the Company's common stock.  The financial statements do not include any adjustments to reflect the possible effects on recoverability and classification of assets or the amounts and classification of liabilities which may result from the inability of the Company to continue as a going concern.

	However,  the Company believes that its existing cash, the improving US economy, continued UK activity through consulting opportunities with HHE, possible negotiated private sales of the Company's Class A common stock, together with anticipated cash flows from operations and possible borrowings, if necessary, will be sufficient to meet its cash requirements during the next 12 months.  The foregoing statement regarding the Company's expectations for continued liquidity is a forward-looking statement, and actual results may differ materially depending on a variety of factors, including variable operating results, difficulty borrowing or selling securities or presently unexpected uses of cash, such as for acquisitions, or to fund losses.

STOCK OPTIONS

	The Company accounts for its stock options under the recognition and measurement principles of Accounting Principles Board ("APB") opinion No. 25, *Accounting for Stock Issued to Employees*, and related interpretations.  The following table illustrates the effect on net income (loss) and earnings (loss) per share if the Company had applied the fair value recognition provisions of Statement of Financial Accounting Standards ("SFAS") No. 123, *Accounting for Stock Based Compensation*, to stock-based employee compensation: 

 For the three months ended June 30,For the nine months ended June 30, 2005200420052004Net income (loss) attributable to                        common stockholders, as reported$(70,876)$(279,106)$12,540$(802,378)Add: stock-based employee compensation included in reported net  	income (loss) -  -  250,725 3,781Less: total stock-based employee 	 	compensation expense determined  	under the fair value based method for  	all awards (16,439) (28,188) (300,042) (88,345)Pro forma net income (loss) attributable to common stockholders$(87,315)$(307,294)$(36,777)$(886,942)         Earnings (loss) per share:        Basic - as reported$(0.01)$(0.02)$0.00$(0.06)Diluted - as reported$(0.01)$(0.02)$0.00$(0.06)Basic - pro forma$(0.01)$(0.02)$0.00$(0.07)Diluted - pro forma$(0.01)$(0.02)$0.00$(0.07)

NOTES PAYABLE - RELATED PARTIES

In December 2004, Geoffrey Dart, Clive Russell, and Paul Barham made short-term loans to the Company in the amounts of £5000, $9,000 and $9,000 respectively, to be used for the payment of the current creditors of the Company.  The loans bore interest at 5% per annum, and were due upon the sale of HHE or February 28, 2005, whichever was earlier.  One loan was repaid on March 31, 2005, and the other two were repaid in early April 2005 from the funds arising from the sale of HHE discussed below.	

COMMON STOCK

On March 8, 2005, as part of negotiated settlements of amounts owed to Clive Russell and RP Corporate Strategy ("RPC"), in exchange for waiving all amounts due through March 31, 2005, totaling approximately $160,000, a new agreement between RPC and the Company was signed, which agreement removed the eight acquired hotels requirement and negated the Company's option to repurchase 987,772 shares of Class A common stock for a nominal sum from RPC, resulting in $250,725 stock compensation expense recognized in the Company's statement of operations for the quarter ended March 31, 2005.

On April 1, 2005, as part of a settlement with Norman Marks upon his resignation, it was agreed that 500,000 shares of Class A common stock beneficially owned by Mr. Marks would be repurchased by the Company for $42,000, and the options beneficially held by Mr. Marks to purchase 5,000,000 shares of Class A common stock would be canceled.  Such shares were repurchased and options canceled on April 1, 2005.

DISCONTINUED OPERATIONS

On March 31, 2005, the Company completed the sale of one of its subsidiaries, HHE, to Red Leopard Holdings ("RLH"), for £461,840 (approximately $868,000) in cash, and up to 56,250,000 shares of stock in RLH.  Out of the cash portion of the sale,  £90,000 (approximately $171,000) was retained by RLH to be used to pay off an estimated £72,000 (approximately $137,000) in HHE liabilities with £211,840 (approximately $398,000) retained by RLH to settle amounts due from the Company to HHE prior to disposition, and £160,000 (approximately $298,000) remitted to the Company at closing.  The funds remaining from the approximate $171,000 retained by RLH to pay HHE liabilities at May 31, 2005 were approximately $51,000, which was remitted by RLH to the Company in July 2005.  The Company used the approximate $349,000 received in March and July to pay off the Company's existing liabilities and for ongoing working capital.  

In addition, the Company received 30,769,230 shares, of the above mentioned 56,250,000 shares, of RLH valued at £1,000,000 (approximately $1,879,000) at March 31, 2005.  Such shares received will not be tradable until March 31, 2006.  The additional 25,480,770 shares that may be earned, up to a total of 56,250,000 shares, are contingent upon certain accomplishments in an on-going relationship with RLH. In connection with the sale, the Company recorded a gain of $469,695 as a result of the cash received.  The gain related to the shares received will be deferred until such shares are tradable.  Accordingly, the value of the shares received from RLH as purchase consideration, on March 31, 2006 will be recognized as a gain on sale of discontinued operations on the statement of operations and the same value recorded as marketable securities on the balance sheet.  The value of the 30,769,230 shares of RLH is $1,400,000 at September 30, 2005.  The subsidiary's operations have been accounted  for  as discontinued operations under accounting principles generally accepted  in  the  United States of America and therefore, the subsidiary's results of operations  and  cash  flows  have  been reflected separately  from the Company's consolidated results  of  continuing  operations  and cash flows for all periods presented in the accompanying financial statements.

**Item 2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.**
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	Except for the historical information contained herein, this quarterly report on Form 10-QSB contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Act of 1934, as amended.   Investors are cautioned that forward-looking statements are inherently uncertain.  Actual performance and results of operations may differ materially from those projected or suggested in the forward-looking statements due to certain risks and uncertainties, including but not limited to the risks of market fluctuations in any securities held by the Company.  The forward looking-statements contained herein represent the Company's judgment as of the date of this report, and the Company cautions the reader not to place undue reliance on such matters.
1.	OPERATIONS

	A.	Revenues
	Revenues for the quarter ended June 30, 2005 were $1,260,111, an increase of $23,453 over the same quarter of the prior year. For the nine months ended June 30, 2005, the revenues of $3,775,517 were $45,829 less than the same nine month period in 2004.  Fee revenues for the three month period ending June 30, 2005 from California hotels showed an improvement over the same quarter in the prior year, but the fees in the nine month period ending June 30,2005  are still lower than the prior year as a result of depressed results from the hotel in the Silicon Valley.

	A substantial amount of time and effort was given by the executives of the Company searching for additional management contracts and potential acquisitions of hotels.  The problems of the hospitality industry are creating needs for professional management companies that can turn around the performance of financially distressed hotels. The Company believes it has the management skill to help in such turn around efforts, and this difficult business environment may actually boost the Company's opportunities to assume the management, and in some cases acquire ownership, of additional  hotels.

	B.	Expenses

	Expenses were $4,110,158 for the nine months ended June 30, 2005, a decrease of $170,648 from 2004, driven by savings in payroll and operating expenses.  Expenses of the quarter were decreased from prior quarter by more than $135,000, the savings driven primarily by a reduction in consulting and legal fees.

	C. Discontinued operations

	On March 31, 2005, the Company completed the sale of one of its subsidiaries, HHE, to Red Leopard Holdings ("RLH"), for £461,840 (approximately $868,000) in cash, and up to 56,250,000 shares of stock in RLH.  Out of the cash portion of the sale,  £90,000 (approximately $171,000) was retained by RLH to be used to pay off an estimated £72,000 (approximately $137,000) in HHE liabilities with £211,840 (approximately $398,000)  paid by HHG to HHE to repay the intercompany account, and £160,000 (approximately $298,000) remitted to HHG.  The funds remaining at May 31, 2005, approximately $51,000, were remitted by RLH to the Company in July 2005.  The Company used the £160,000 (approximately $298,000) received in March and June to pay off the Company's existing liabilities and for ongoing working capital.  In addition, the Company received 30,769,230 shares of RLH valued at £1,000,000 (approximately $1,879,000) at March 31, 2005, according to the Share Sales Agreement.  Such shares received will not be tradable until March 31, 2006.  The additional 25,480,770 shares that may be earned, up to a total of 56,250,000 shares, are contingent upon certain accomplishments in an on-going relationship with RLH. In connection with the sale, the Company recorded a gain of $469,695 as a result of the cash received.  The gain related to the shares received will be deferred until such shares are tradable.  The subsidiary's operations have been accounted  for  as discontinued operations under accounting principles generally accepted  in  the  United States of America and therefore, the subsidiary's results of operations  and  cash  flows  have  been reflected separately from the Company's consolidated results  of  continuing  operations  and cash flows for all periods presented in this document.

	Although the deferring of the gain may be required under generally accepted accounting principles ("GAAP"), the Company's management believes that these financial statements do not necessarily reflect the values of the Company's assets for various corporate law determinations.   The Company owns 30,769,230 shares of RLH that have no debt leverage against them, and the RLH shares are listed on the AIM London Exchange and are quoted at 2.25 pence per share as of close of business on June 29, 2005.  Therefore, as of June 29, 2005, the shares of RLH owned by the Company have an aggregate value  based on the quoted market price per share, of approximately $1,257,000 (based on an exchange rate as of June 29, 2005 of $1.00 = £0.5508).  While management recognizes that pursuant to the Share Sales Agreement the Company may not dispose of these shares until after March 31, 2006 and that the RLH shares may be lightly traded at this time, the board of directors does not consider the RLH shares to be wholly without value.   Management believes that the fair value of the Company's assets for corporate law purposes exceeds  the fair value of its liabilities and that the Company's  capital is not impaired.

2.	BUSINESS DEVELOPMENT
	A. 	HARRELL HOTELS (EUROPE) LTD - UNITED KINGDOM / EUROPE

In anticipation of potential hotel acquisitions in the United Kingdom ("UK"), in February 2002, HHG formed a UK subsidiary named Red Lion Hotels and Suites Limited.  On February 20, 2003,  the name was changed to Harrell Hotels (Europe) Ltd. ("HHE").  HHE's operations are based in London, and pursued the acquisition of hotel properties with others and providing property management, asset management and consulting services to hospitality clients in the UK and Europe.

On January 25, 2004, HHE signed a Letter of Intent with Marriott Hotels International B.V., in which HHE agreed to develop ten Courtyard Hotels in the UK between 2005 and 2007.  HHE had identified a number of potential sites in the UK for Marriott Courtyard Hotels and was working with architects to develop a prototype Courtyard for the UK market. Plans called for the Company to manage the hotel properties and participate in ownership. 

In the summer of 2004 the Company became aware of and pursued the acquisition of eleven existing Courtyard by Marriott hotels being sold in the UK by Whitbread, Plc.  HHE sought equity partners and lenders with whom it could potentially acquire the portfolio.  HHE met with a number of potential suitors for equity and banks for debt.  HHE reached an agreement with Global Investment Partners and Halifax Bank of Scotland (Joint Ventures) to obtain the equity and financing.  With the backing of its partners, HHE prepared the bid to Whitbread.  Although the HHE group was one of the four finalists for the acquisition, Whitbread received a higher cash bid from another party, and the purchase contract was awarded to a competitor.

After the unsuccessful pursuit of this portfolio, HHE again refocused its attention on the development of new Courtyard by Marriott hotels in the UK.  It was evident, however, that it was likely to take significant time and funds to bring one or more of such developments to a conclusion. The Company started to pursue other sources of funding to assist in the program.

In the fall of 2004, in light of the Company's need for additional working capital and to pursue the UK Courtyard development program, the Company sought to sell HHE. The Company received a letter of intent from RLH, a private UK Company that may be deemed an affiliate of Geoffrey Dart.  On December 13, 2004, Geoffrey Dart resigned from the board of directors of the Company and of HHE in order to reduce the potential for any conflict of interest in the possible disposition of HHE. 
On March 31, 2005, the Company completed the sale of HHE, to RLH, for £461,840 (approximately $868,000) in cash, and up to 56,250,000 shares of stock in RLH.  Out of the cash portion of the sale,  £90,000 (approximately $171,000) was retained by RLH to be used to pay off an estimated £72,000 (approximately $137,000) in HHE liabilities with £211,840 (approximately $398,000)  paid by HHG to HHE to repay the intercompany account, and £160,000 (approximately $298,000) remitted to HHG.  The funds remaining at May 31, 2005, approximately $51,000, were also remitted by RLH to the Company in July 2005.  The Company used the £160,000 (approximately $298,000) received in March and June to pay off the Company's existing liabilities and for ongoing working capital.  In addition, the Company received 30,769,230 shares of RLH valued at £1,000,000 (approximately $1,879,000) at March 31, 2005, according to the Share Sales Agreement.  Such shares received will not be tradable until March 31, 2006.  The additional 25,480,770 shares that may be earned, up to a total of 56,250,000 shares, are contingent upon certain accomplishments in an on-going relationship with RLH. In connection with the sale, the Company recorded a gain of $469,695 as a result of the cash received.  The gain related to the shares received will be deferred until such shares are tradable.  The subsidiary's operations have been accounted  for  as discontinued operations under accounting principles generally accepted  in  the  United States of America and therefore, the subsidiary's results of operations  and  cash  flows  have  been reflected separately from the Company's consolidated results  of  continuing  operations  and cash flows for all periods presented in this document.

Since March 31, 2005, the Company has provided consultancy services to RLH under the terms of the HHE Sale Agreement in regard to the Courtyard Development program in the UK.  During the quarter, RLH/HHE advanced the development of a project known as North Brentford Quarter, in the design and potential costs of the project. TRI, a UK based market feasibility firm, conducted its feasibility of the project and the market in which it sits, and issued a supportive report. The master plan developer, Barratts, continued to advance the planning permission process, with final permission now expected in October 2005. In the meantime RLH/HHE is consulting with the architects, project managers, and administrators of Marriott International on the final UK specifications for the Courtyard product.
RLH/HHE, with support from the Company, are also pursuing additional sites in the UK, with the anticipation that one or two more will be secured in the short term. 
	B. 	UNITED STATES OF AMERICA

	Effective August 1, 2004, the Company entered into a technical services agreement with the owners of the Belmont Hotel, a 77-room boutique hotel being developed  south of downtown Dallas.  The technical services fee is $4,000 per month until the opening of the hotel, which is anticipated in October 2005. 

3.	LIQUIDITY AND CAPITAL RESOURCES
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****	In the summer of 2004, in pursuing  the acquisition of Courtyard by Marriott hotels in the UK, the Company spent approximately $37,500 on third-party due diligence costs.  During the period of July to December 2004, the Company's cash flow continued to be negative. 

	Because of declining revenues, the Company implemented a number of measures to reduce expenses.  The Company froze wages of the onsite employees on a temporary basis until financial conditions improve.  In addition Paul L. Barham, the chief executive officer of the Company deferred all of his salary and director fees from April 2004 through November 2004, and Clive Russell / RPC and Geoffrey Dart / Apsley Estates deferred their director and consulting fees. 

	In early December 2004, the Company discussed moving from its office space with the building landlord, and as a result, the landlord permitted the Company to retain its tenancy, forgave three months rent, and agreed to rent at $1,000 per month for December 2004 through February 2005, with a review in February 2005.  In April 2005 the office landlord agreed to extend the reduced rent of $1,000 per month until July 2005 and agreed to review the agreement again at that time.  However, not all creditors were  willing to reduce or defer payment, and as a result, Geoffrey Dart, Clive Russell, and Paul Barham made short-term loans to the Company in the amounts of £5000, $9,000 and $9,000 respectively, to be used for the payment of the current creditors of the Company.  The loans bore interest at 5% per annum, and were due upon the sale of HHE or February 28, 2005, whichever was earlier.  The loans were repaid in April 2005 from the funds arising from the sale of HHE to RLH discussed below.

	The Board had recognized during the Summer of 2004 that if it was not successful in the acquisition of the 11 Courtyard hotels in the UK, it would then refocus its attention on the UK development activity and in that regard, seek an investor in the Company (or HHE) to alleviate the cash flow drain.

	As previously discussed, on March 31, 2005, the Company completed the sale of HHE to RLH.  From the cash proceeds from the sale, the Company used the approximately $298,000 received in March and June to pay off the Company's existing liabilities and for ongoing working capital.  In addition, the Company received approximately $51,000 from RLH in July 2005 after RLH paid the remaining HHE liabilities.  The Company will use these funds for additional working capital.

 	At the time of filing this report, the three hotels that the Company operates are generating insufficient cash to meet the Company's monthly operating and development expenses because (i) the softness of the United States economy, (ii) the Biltmore Hotel has been negatively impacted by the downturn in the Silicon Valley economy, (iii) the Santa Ynez Valley Marriott is in its off season, and (iv) the hospitality industry in general continues to suffer lower revenues in the wake of the slow recovery of the US economy. 

	However, the Company believes that its existing cash, the improving US economy, continued UK activity through consulting opportunities with HHE, negotiated private sales of the Company's Class A common stock, together with anticipated cash flows from operations and further borrowings, will be sufficient to meet its cash requirements during the next 12 months.  The foregoing statement regarding the Company's expectations for continued liquidity is a forward-looking statement, and actual results may differ materially depending on a variety of factors, including variable operating results, difficulty borrowing or selling securities or presently unexpected uses of cash, such as for acquisitions, or to fund losses.

**Item 3.	CONTROLS AND PROCEDURES**
	(a)	Evaluation of Disclosure Controls and Procedures.  

	Disclosure controls are procedures that are designed with an objective of ensuring that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms.  For a small company such as ours, the information filings and regulatory compliance is a significant expense, and the available manpower within the Company is limited.  Such compliance is becoming increasingly more difficult as regulations and rules have been changing over the past several years.  As of the last day of the period covered by this report, our management, including the Chief Executive Officer and Chief Financial Officer, have reviewed and evaluated the disclosure controls of the Company and found such controls to be effective.  While management believes that it is making continuing and good faith efforts to comply in all material respects with the regulations regarding information disclosures, deficiencies in certain internal controls are noted, such as obtaining timely copies and evidence of compliance by the directors, officers and significant shareholder filings to report changes in stock ownership as required under Section 16(a) of the Exchange Act.  The Chief Executive Officer has written to each Director, Officer and Significant Shareholder reiterating the need for their compliance in this regard, and of the need to notify the Company of their compliance. Additionally, the Company's VP Controller  will send reminders to each Director, Officer and Significant Shareholder in advance of the year end.
	(b)	Changes in Internal Controls. ****

****
****There were no significant changes in the Company's internal controls or in other factors that could significantly affect the Company's internal controls subsequent to the date of their evaluation. 

Part II.	OTHER INFORMATION

Item 5.	Other Information

In March 2005, because the Company was not current in the filing of its Form 10- KSB, the NASD suspended quotation of the Company on the Bulletin Board.  In July 2005 the Company completed its audit, filed all delinquent reports, and requested its market makers to file the NASD Form 211 to be reinstated and eligible for quotation.  

			Norman Marks resigned as President and Director of the Company on April 1, 2005.  As part of the settlement of all amounts owed to him, the Company acquired the 500,000 shares of Class A common stock for $42,000 and cancelled the options held by Marks and Associates, Inc., a Company affiliated with Norman Marks, to purchase up to 5 million shares of the Class A Common stock of the Company.

Item 6.	Exhibits

	31.1	Certification of Chief Executive Officer and Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)

	32.1	Certification of Chief Executive officer  and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith)

**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 HOSPITALITY GROUP, INC.  	

Date: __________________________________        Paul L. Barham
Chief Executive Officer and Director