UNITED STATES
               SECURITIES AND EXCHANGE COMMISSION
                     Washington, D. C. 20549

                          FORM 10-KSB.

     [X]    ANNUAL REPORT UNDER TO SECTION 13 or 15(d) OF
               THE SECURITIES EXCHANGE ACT OF 1934

        For the fiscal year ended:     September 30, 2000

     [   ]     TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF
               THE SECURITIES EXCHANGE ACT OF 1934

               For the transition period   from    to

                 Commission File No.:     0-2661

                 HARRELL HOSPITALITY GROUP, INC.
         (Name of small business issuer in its charter)

               Delaware            13-1946181
  (State of Incorporation)            (I.R.S. Employer Id. No.)

   16475 North Dallas Parkway, Suite 410, Dallas, Texas 75248
      (Address of principal executive offices)  (Zip Code)

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

Securities registered pursuant to Section 12(b) of the Act:  None

   Securities registered pursuant to Section 12(g) of the Act:

              Class A Common Stock, Par Value $.002
                        (Title of Class)

     Check whether the issuer (1) filed all reports required to
be filed by Section 13 or 15(d) of the Exchange Act during the
past 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
     Check if there is no disclosure of delinquent filers in
response to Item 405 of Regulation S-B is not contained in this
form, and no disclosure will be contained, to the best of 
<PAGE>
registrant's
knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this form 10-
KSB or any amendment to this Form 10-KSB.
[ X]
     State issuer's revenues for its most recent fiscal year:
$7,662,843.
      The aggregate market value of the registrant's Class A
Common Stock held by non-affiliates of the registrant, computed
by reference to the average bid and asked prices of such stock as
of December 22, 2000, the last available quotation date:
Approximately $1,242,654.
     State the number of shares outstanding of each of the
issuer's classes of common equity, as of the latest practical
al
date.  The number of shares of the registrant's Class A, $.002
par value Common Stock outstanding as of December 22, 2000 was
7,932,900.

     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. The Company continued to follow up with Registrar
and Transfer Company, which investigated the history of activity
and concluded that the additional shares were actually
unexchanged shares arising from splits and reverse splits in the
Company's stock various times in the past. After its review, the
Company accepted the findings of Registrar & Transfer Company.

     The number of shares shown above reflect the 5 for 1 split
of common stock declared by the Board of Directors on September
1, 2000.

                             PART I

Item I. Description of Business

(A) Business Development: During the last three years the Company
has focused on hotel management and in the acquisition,
development and management of hotels through joint ventures and
partnerships.

(B) Business of the Issuer:

                             HISTORY

     HARRELL HOSPITALITY GROUP, INC. (Formerly HARRELL
INTERNATIONAL, INC.) (the "Company") is a Delaware corporation
which was originally incorporated in 1959 in Massachusetts under
the name of Formula 409, Inc.  In 1967, the Company's name was
changed to The Harrell Corporation and in 1968 to Harrell
International, Inc.  The Company changed its state of
incorporation from Massachusetts to Delaware in March, 1987.  The
Company originally manufactured and sold a multi-purpose
household spray cleaner under the registered trademark "Formula
409."  In 1970, the Company sold the rights to "Formula 409" to
Clorox Corporation.  During the period 1970 to 1983 the Company
was primarily engaged in the business of acquiring and operating
food and non-food brokers which represented the products of
various unrelated manufacturers to either the U. S. Domestic
Civilian Market or to the U. S. Military Resale System.  In 1983,
the Company completed the divestiture of its consumer products
brokerage businesses and entered a phase during which its 
<PAGE>
revenues were
derived primarily from the collection of
receivables acquired in connection with such divestitures.

     From 1983 to 1990 the Company was largely inactive, and
Wilson Harrell, the president of the Company at that time, sought
possible merger candidates. In 1991 and 1992 the Company entered
into agreements with Xenex, Inc., now known as Businesship
International (_BI_), to make an equity investment in the Company
and fund certain loans to the Company.

     The Company decided to move into the real estate management
and acquisition business. On August 18,  1992, the Company
entered into an Agreement with Hotel Management Group, Inc., a
Texas corporation ("HMG"), wherein the Company acquired one
hundred percent (100%) of HMG's issued and outstanding shares in
exchange for 200,000 shares of the Company's Class A Common
Stock. The principals of HMG, Paul L. Barham and Norman L. Marks,
had significant experience in hotel operations and management.

     Effective as of September 1, 1996 the Company and BI entered
into a Preferred Stock Purchase and Release of Debt Agreement
that replaced the debt obligation of the Company with 243,331
shares of $1.00, par value preferred stock (the _Preferred
Stock_).  The Preferred Stock is  nonconvertible, nonvoting,
noncumulative dividend, with dividends of 10% of par value.  The
Company has the right, but not the obligation, to redeem the
Preferred Shares at any time at par value. The Preferred Shares
are not  registered under federal securities laws or the laws of
any state.

     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 $0.01 Par Value Common Stock for US$1.00 per
share, together with certain options to purchase  additional
shares.  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 July 19, 2000, the Board approved an extension of time of
90 days each for the second and third installments of the stock
purchase by MCH in the amounts of $250,000 and $500,000,
respectively. As of September 30, 2000, half of the second
installment had been received.  Subsequent to September 30, 2000,
the remaining half of the second installment was received.

     On April 1, 2000, the Company changed its name to Harrell
Hospitality Group, Inc. The name of the Company was changed to
reflect the focus  of the Company on  hotel related services and
business.   Management believes Harrell Hospitality Group, Inc.
more accurately indicates the nature of the Company's business
and believes that this  will aid the marketing efforts of the
Company.

     On September 1, 2000 the Board declared a five-for-one split
of the Company's Class A Common Stock.  By amendment of the 
<PAGE>
articles dated
October 23, the par value of the Class A Common
Stock was changed to $0.002 per share, and the number of
authorized shares of Class A Common Stock was increased to
100,000,000.,


                           OPERATIONS


APARTMENT MANAGEMENT

     In late 1992,  Hotel Management Group assumed the management
of the Athena Gardens Apartments, Athens, Texas, Riviera
Apartments, Dallas, Texas,  and Villa Martinique Apartments,
Irving, Texas. The Riviera Apartments were sold in 1996, the
Villa Martinique Apartments were sold in September 1999, and the
Athena Gardens Apartments were sold in February, 2000. In the
fiscal year ending September 30, 2000. Revenues from apartment
management were approximately $14,833 constituting approximately
0.2% of the Company's total revenues.

HOTEL MANAGEMENT

The primary focus of the Company is on hotel management and
investment in hotels.  At the present time virtually all of the
Company's operating revenue is derived from management contracts
to manage two hotels in California.  The Company is actively
seeking and negotiating additional management contracts with
other hotels.

The Company  has managed nationally recognized franchises,
including Sheraton, Holiday Inn, and Ramada, and is approved as
one of a small group of  independent management companies
accepted by Marriott as a franchise for its full service hotels.
The Company is in negotiation on certain hotel projects that, if
consumated, will result in approval of the Company additionally
by Hilton Hotels.

The Company believes that its approval as a franchisee by these
major franchisors positions the Company ahead of many of its
competitors for management opportunities where a franchise is of
importance.  The Company has and is continuing to pursue such
opportunities to capitalize on this advantage.

The hotel management business is highly competitive, and the
Company's market share in the total industry is insignificant.
The Company competes with larger corporations which have greater
financial resources.

Often, management of a hotel is coupled with some degree of
ownership in the hotel, so the Company, to be competitive, must
be prepared to make an equity investment in a hotel if necessary
to comply with a condition to obtaining a management contract.
The capital injections by MCH into the Company may be used for
such equity investments in hotels, and the Company continues to
seek additional sources of debt or equity to use for hotel
investment.

Executives of the Company have spent considerable time and effort
towards the development of new hotels, the acquisition of
management contracts of existing hotels, investment in hotels to
be managed by the Company and the securing of equity and debt for
these activities.

Hotel Management Subsidiaries
Harrell Hospitality Group - California, Inc.(_HHG
     California_)

          Effective January 1, 1994, Hotel Management Group, Inc.
          formed a wholly owned subsidiary, Hotel Management
          Group - California, Inc., (_HMG California_) to hold
          the management contract for the operations of the
          Biltmore Hotel and Suites in Santa Clara, California.
          The Biltmore Hotel is a 262 room full service hotel
          with 8,000 square feet of meeting space. HMG
          California's management contract is a two-year
          renewable contract that began in January 1992 and has a
          current expiration of December 31, 2002. HMG California
          receives a management fee equal to ten percent (10%) of
          the hotel's net income pre debt, after a 3% reserve for
          furniture, fixtures and equipment.

          HMG California entered into a management contract of
          the Rancho Santa Barbara Marriott in May 1995.The
          Marriott is a 149 room full service hotel with 8,000
          square feet of meeting space and health and spa
          facilities.  HMG California's management contract is a
          two-year renewable contract that began in June 1995 and
          has a current expiration of December 31, 2002.  HMG
          California receives a management fee equal to ten
          percent (10%) of the hotel's net income pre-debt, after
          a 3% reserve for furniture, fixtures and equipment.

          Revenues of HMG California amounted to approximately
          $6,657,437 constituting approximately 86.9% of the
          Company's total revenue.

          In March 2000, HMG California changed its name to
          Harrell Hospitality Group - California, Inc.


     H.M.Group - Alabama, Inc. (_HMG Alabama_)

          On December 1, 1998, H.M.Group - Alabama, Inc. assumed
          the management of the Governors House Hotel in
          Montgomery Alabama, a 200 room full service hotel. The
          contract was terminated by mutual agreement on
          September 6, 2000.  Revenues of HMG Alabama amounted to
          approximately $946,130 constituting approximately 12.3%
          of the Company's total fees.


Number of Employees

     At September 30, 2000, the Company and its subsidiaries had
245 full time employees and 52 part time employees.  Of these
employees, 5 are paid from the revenues of the Company. The
remaining 297 are paid from the revenues of the hotels or
apartments.

Item 2. Description of  Property

(A)  Principal Offices

     The Company maintains its administrative and executive
offices in leased commercial office space located at 16475 North
Dallas Parkway, Suite 410, Dallas, Texas.  In the opinion of
management, the premises are suitable and adequate for the
present requirements of the Company and ample comparable space is
available on comparable terms in the market.

<PAGE>
(B)  Investment Policies


     The Company may from time to time invest in hotel
properties.  Typically such an investment would be a partial
interest in the hotel property in concert with a hotel developer
or other investors.  While it currently has no such investments,
the Company is seeking such investment with both existing hotel
properties and hotels to be constructed.  Expected ownership in
any such hotel would be a minority position in a real estate
limited partnership.  Such hotel ownership is anticipated to be
coupled with a management contract for the hotel(s).  These hotel
investments, if made, are expected to be for long term capital
appreciation rather than primarily for current income.  The
Company has placed no express limitations on the amount or number
of investments in hotel properties.

     The Company may from time to time invest in marketable
securities.

Item 3.  Legal Proceedings

     There were no material legal proceedings, either on-going,
instituted by or against, or otherwise involving the Company
during the period ended September 30, 2000.

Item 4.  Submission of Matters to a Vote of Security Holders

     On September 13, 2000, the holders of a majority of the
shares of common stock of the Company executed a written consent
in lieu of a special meeting of shareholders to approve an
amendment of the articles of incorporation of the Company.  The
holders of 4,828,990 shares of the Company's Class A Common
Stock, representing approximately 72.3% of the shares outstanding
at that time, signed the written consent.  Under Delaware
corporate law, the written consent of the holders of a majority
of the stock may be substituted for a special meeting of
shareholders.   The written consent approved the amendment to the
articles that:

          increased the number of authorized shares of the
          Company's Class A Common Stock to 100,000,000 shares.

          changed the par value of the Class A Common Stock to
          $.002 per share.

          redesignated the Preferred Stock as Class A Preferred
          Stock.

          created a new class of preferred stock (Class B
          Preferred Stock) with 10,000,000 authorized shares
          issuable in series.

The amendment was filed with the Delaware Secretary of State on
September 15, 2000, with a delaying provision that the amendment
would not become effective until October 23, 2000.
All shareholders were notified of this action by delivery of a
copy of the Company's Information Statement filed pursuant to
Section 14-C of the Securities Exchange Act of 1934.

                             PART II

Item 5.  Market for Common Equity and Related Stockholder Matters

     (a)  During the fourth quarter of Fiscal 2000, the Company's
Common Stock commenced trading on the NASD Over-the-Counter
Bulletin Board (the _Bulletin Board_) under the symbol _HLTLA._
There was no material market for the Company stock prior to this
time.  The following table shows the range of closing bid prices
for the Company's Common Stock in the over-the-counter market for
the fiscal quarters indicated, as reported by the Bulletin Board.
The quotations represent limited or sporadic trading and,
therefore, do not constitute an "established public trading
market".  The quotations represent inter-dealer prices, without
retail markup, markdown or commission and may not necessarily
represent actual transactions.

<TABLE>
<CAPTION>
<S>                 <C>                 <C>
                     Fiscal 1999 Bid      Fiscal 2000 Bid

                     High       Low       High       Low



First Quarter          NOT QUOTED           NOT QUOTED
Second Quarter         NOT QUOTED           NOT QUOTED

Third Quarter          NOT QUOTED           NOT QUOTED

Fourth Quarter         NOT QUOTED         0.55       .01


</TABLE>
      (Prices quoted are priced after the 5 for 1 split occurring
September 1, 2000)


     (b)  As of September 30, 2000, there were 694 record holders
of the Company's $.002 par value Class A Common Stock.

     (c)  There have been no cash dividends paid on the Company's
Common Stocks in fiscal years 1996, 1997, 1998, 1999 or any
subsequent year.   On September 30, 2000, the Company paid the
10% dividend on the 243,331 shares of Preferred Stock.  The
Company has no present plans to pay further dividends on the
Company's Common Stock.


Item 6.  Management's Discussion and Analysis or Plan of
Operation

     This discussion contains certain forward-looking statements
that are subject to various factors which could cause actual
results to differ materially from the expectations of management.
These factors include: changes in general, economic and market
conditions involving the hospitality industry, the success of the
Company in securing new management contracts, and the ability of
the Company to make equity investments in hotels.  The Company
does not undertake to update any forward-looking statement,
whether written or oral, that may be made from time to time on
behalf of the Company.


                      RESULTS OF OPERATIONS

A.   Revenues

     Revenues for the periods ended September 30, 1999 and 2000
were primarily produced from the Company's interest in Hotel
Management Group.  Revenues increased from $7,266,463 for the
fiscal year ending September 30, 1999 to $7,662,843 for the
fiscal year ending September 30, 2000.  The increase in revenues
in 2000 over 1999 was a result of  improved performance in the
hotels with incentive based management fees that the Company
operates in California.

     The Company anticipates income from Hotel Management Group
to increase as the subsidiary secures more management contracts
and consulting assignments. The Company expects to be able to
meet its normal cash needs from operations.

B.   Employee Compensation

     Employee compensation expense includes salaries for Messrs
Barham and Marks, the accounting staff of HHG, as well as the
employees in the hotel locations.

     In January 1998, the Company purchased $500,000 and $300,000
increasing life insurance policies on the lives of each Paul L.
Barham and Norman L. Marks, respectively.  The purposes of the
policies are both (i) to protect the Company's financial interest
in the event of the premature death of either of these key
employees, and (ii) to provide an employee benefit to these key
employees.  The Company is the owner and beneficiary of the
policies, although the cash value accumulation will accrue to the
benefit of the key employees and is payable to the employees upon
their retirement or termination of employment, or their heirs in
the event of their death during employment. Additional policies
were added in the year 2000 to bring coverages to $1,500,000
each.

C.   Expenses

     Total Expenses for the fiscal year ending September 30, 1999
were $7,239,937, or 99.6% of revenue, and total expenses for the
fiscal year ending September 30, 2000 were $7,817,931 or 102% of
revenue.  General and Administrative Expenses were increased
because of efforts to generate additional business by securing
additional management contracts and acquisitions. Additional
insurance and legal expenses were incurred as a result of the
Stock Acquisition and Option Agreement.  A London office has been
established to assist in development opportunities in the United
Kingdom, and this is adding additional overhead.

                 LIQUIDITY AND CAPITAL RESOURCES

Funds generated from the sale of common stock has been the major
source of liquidity in the year ended September 30, 2000.  The
Company used $178,147 in cash from operating activities in the
2000 fiscal year in the effort to generate additional business.
At September 30, 2000, the Company had $461,717 in cash and
$1,107,202 in working capital.  The Company expects to make one
or more investments in hotel properties in the next fiscal year.
The source of cash for such investments is expected from sale of
the Company's Class A Stock to MCH pursuant to the Stock
Agreement.  Management of the Company believes that it will have
sufficient working capital to fund its operating and investing
needs during fiscal 2001.

                    YEAR 2000 COMPUTER ISSUES

No significant problems were experienced relating to Year 2000
computer issues.

Item 7.  Financial Statements

     The following financial statements are filed as a part of

<PAGE>
this report:


See the Index to Financial Statements on page F-1 immediately
following page 23 of this report. All such financial statements,
schedules and supplementary data are incorporated herein by this
reference.

Item 8.  Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure

     There were no disagreements regarding matters of accounting
principles or practices, financial statement disclosure, or
auditing scope or procedure.  Thus, pursuant to Item 304 of
Regulation 8-KSB, and Rule 12b-2 under the Exchange Act, no
further disclosure regarding the Company's change in accountants
is necessary or provided herein.

                            PART III

Item 9.  Directors,  Executive Officers, Promoters and Control
Persons:   Compliance with Section 16 (a) of the Exchange Act

     The following table provides certain information concerning
each of the directors of Harrell Hospitality Group, Inc. (the
"Company") as of September 30, 2000.

<TABLE>
<CAPTION>

    <S>            <C>                      <C>         <C>
    Name            Principal Occupation    Consecutive  Age
                    for the past 5 years      Service
                                               Since
    Paul L. Barham  CFO, Hotel Management       1992      47
                    Group, since December
                    1989
                    Current Position:
                    Chief Executive
                    Officer, Harrell
                    Hospitality Group
    Norman L.       President, Hotel            1995      59
    Marks           Management Group,
                    since December 1989
                    Current Position:
                    Chief Operating
                    Officer, Harrell
rell
                    Hospitality Group
    Geoffrey G.     Chairman, Merchant          1999      53
    Dart            Capital Holdings,
                    Ltd.; Director,
                    Avatar, Inc.;
                    Director, Mortgage
                    Advisors, Ltd.,
                    Chairman,
                    Shillington's, Ltd.,

                    Current Position:
                    Chairman, Harrell
                    Hospitality Group

    Name            Principal Occupation    Consecutive  Age
                    for the past 5 years      Service
                                               Since
    Gerard M.       Director, Netcentric        1999      55
    Thompson        Systems, Ltd.,
                    Director, Bariston
                    Associates.

                    Current Position:
                    Director, Harrell
                    Hospitality Group,
                    Inc.

</TABLE>

The following table provides certain information concerning each
of the executive officers of the Company as of September 30,
2000.


<TABLE>
<CAPTION>

<S>               <C>    <C>

Name              Age    All Positions and Terms of Office
                         with the Company and Five Year
                         Employment History

Paul L.           47     Chief   Executive   Officer   from
Barham                   November  1999; Vice-President and
                         Chief  Financial  Officer  of  the
                         Company  from   August  19,  1992,
                         Mem ber of Board  of Directors  of
                         Company  from   August  19,  1992;
                         Secretary to Board of Directors of
                         Company from August 19, 1992; CFO,
                         Hotel   Management   Group   since
                         December 1989.
Norman L.         59     President  since   November  1999;
Marks                    Executive Vice President and Chief
                         Operating Officer  from August 19,
                         1992, Member of Board of Directors
                         from September 20, 1995. President
                         of  Hotel  Management Group,  Inc.
                         since December 1989


</TABLE>

     There has been no involvement by the executive officers or
directors in any legal proceeding during the last five (5) years
that is material to an evaluation of the ability or integrity of
such officer or director.

     The Company has not made inquiry of its Directors, Officers
and 10 % or more security holders, and otherwise does not have
information to determine the level of compliance with the
reporting obligation under Section 16 (a) of the Exchange Act.

Item 10.  Executive Compensation

     The following table contains information concerning the
annual compensation and long-term compensation payable to named
executive officers during each of the last three fiscal years.


<TABLE>
<CAPTION>


                      Summary Compensation Table
             Annual Compensation               Long term Compensation

<S>          <C>   <C>        <C>     <C>     <C>         <C>

Name and     Year    Salary    Bonus   Other  Securities    All Other
Principal                             Annual  Underlying  Compensation
Position                              Compen    Options
                                      sation
Paul L.      2000  $109,900   $2,000     -    937,500           -
Barham,
Chief
Executive
Officer

             1999  $102,375   $2,000     -         -            -


             1998  $101,787   $4,000     -         -            -


Norman L.    2000  $109,900   $2,000     -    937,500           -
Marks,
President
             1999  $102,375   $2,000     -         -            -


             1998  $101,787   $4,000     -         -            -


</TABLE>

This table does not include medical expense reimbursement, club
dues, or the value of automobiles (and their maintenance, repair
and insurance) furnished to all of the executive officers of the
Company, which in the aggregate for all officers amounted to
$15,600 during fiscal year 2000.

     The following table provides information with respect to the
executive officers included in the summary compensation table who
received option grants during the fiscal year ending September
30, 2000.

<TABLE>
<CAPTION>


          Option / SAR Grants in Last Fiscal Year

                     Individual Grants
<S>           <C>           <C>          <C>       <C>

Name            Number of    % of Total  Exercise  Expirat
               Securities     Options     or Base    ion
               Underlying    Granted to    Price     Date
                 Options     Employees
                 Granted     in fiscal
                                year
Paul L.          937,500       44.4%       $0.20   12/31/0
Barham                                      (1)       5
Chief
Executive
Officer
Norman L.        937,500       44.4%       $0.20   12/31/0
Marks                                       (1)       5
President

</TABLE>

     (1)  The exercise price through the year ending  12/31/2000
          is $0.20,  through the year ending 12/31/2001 is $0.22,
          through the year ending 12/31/2002 is $0.24,  through
          the year ending 12/31/2003 is $0.26,  through the year
          ending  12/31/2004 is $0.28, and  through the year
          ending 12/31/2005 is $0.30.

     At the present time the Company has, and at all times during
the past three fiscal years, the Company had no pension, retire-
ment, annuity, deferred compensation, incentive or stock
purchase, thrift or profit-sharing plan, except the accumulated
cash value of the life insurance policies detailed under item 6B
above.

     Each of the Directors of the Company who is not employed by
the Company received Director Fees at the rate of $2,083.33 per
month.


Item 11.  Security Ownership of Certain Beneficial Owners and
Management

     The following table sets forth the persons, as of December
22, 2000,  who were directors or who were known to the Company to
be beneficial owners of more than five percent of each class of
the equity securities of the Company:

<TABLE>
<CAPTION>


<S>          <C>                   <C>           <C>

Class of     Name and Address of    Amount and    Percent of
Securities   Beneficial Owner       Nature of       Class
                                    Beneficial
                                     Owner(1)
             DIRECTORS:

 Class A     Paul L. Barham (2)      [see (2)      [see (2)
Common       16475 N. Dallas          below]        below]
             Parkway #410
             Dallas, Texas 75248

 Class A     Norman L. Marks (3)     [see (3)      [see (3)
Common       16475 N. Dallas          below]        below]
             Parkway #410
             Dallas, Texas 75248

             5% BENEFICIAL
             OWNERS:

 Class A     Merchant Capital       1,000,000       29.3%
Common       Holdings Ltd              plus
             c/o Robert Edwards     1,875,000
             17060 Dallas Parkway    options
             Suite 101
             Dallas, TX 75248
 Class A     Businesship            1,456,140       18.4%
Common       International, Inc.
             One Alhambra Plaza
             Suite 1400
             Coral Gables, FL
             33134

 Class A     Businesship             243,331         100%
Preferred    International, Inc.
             One Alhambra Plaza
             Suite 1400
             Coral Gables, FL
             33134

 Class A     Cybertec Holdings       550,000         6.9%
Common       PLC
             Rosedale House
             Rosedale Road
             Richmond Surrey
             England TW 92 SZ
 Class A     Barham Family         500,000 plus     22.5%
Common       Interests, Inc.        1,568,195
             16475 N. Dallas       options (4)
             Parkway #410
             Dallas, Texas 75248

 Class A     Marks & Associates,   500,000 plus     22.5%
Common       Inc.                   1,568,195
             16475 N. Dallas       options (4)
             Parkway #410
             Dallas, Texas 75248

 Class A     Riverhead Services,     625,000         7.9%
Common       Ltd
             c/o Lloyds TSB Bank
             PLC
             Geneva Branch
             Place Bel-Air 1
             PO Box 5145 CH 1211
             Geneva 11
             Switzerland FR

 Class A     Gerard Thompson       625,000 plus     14.6%
Common       c/o Wachovia Bank        625,000
             Attn: Larry Wachtel     options
             180 Royal Palm Way
             Palm Beach , FL
             33480
 Class A     The Estate of Wilson  822,850 (5)      10.4%
Common       Harrell
             7380 Pine Valley
             Road
             Cumming, GA 30131


</TABLE>

     (1)  Except as noted below, the individual listed has sole
          voting and investment power.
     (2)  Barham and his other family members own 500,000 shares
          through Barham Family Interests, Inc. and Barham Family
          Interests, Inc. also has options to acquire 1,568,195
          shares as set forth in footnote 4 below.

     (3)  Marks and his other family members own 500,000 shares
          through Marks and Associates, Inc., and Marks and
          Associates, Inc. also has options to acquire 1,568,195
          shares as set forth in footnote 4 below.

     (4)  On September 27, 1996, Businesship International
          granted Barham Family Interests, Inc., and Marks and
          Associates, Inc., each an option to acquire 318,195
          shares from BI.  The options shall automatically expire
          on September 30, 2001, if not exercised.  The Company
          granted Marks and Associates, Inc. and Barham Family
          Interests, Inc. each the option to acquire 1,250,000
          shares of the Company's Class A Common stock.  These
          options granted by Company expire, if not exercised, on
          December 31, 2005.

     (5)  The 29,250 shares of Class A Common Stock owned by
          Charlene Echols Harrell, Wilson L. Harrell's widow, are
          included in the estate's beneficial ownership in the
          above table.

Item 12.  Certain Relationships and Related Transactions

Transactions involving related parties in the last two years are
outlined in Item 1 of this report.

                         PART IV


Item 13.  Exhibits and Reports on Form 8-K

(a.) Exhibits -

     1.   The following exhibits, as required by Item 601 of
          Regulation SB, are attached hereto or incorporated
          herein by this reference:
     2.   Restated Certificate of Incorporation as last amended,
          effective as of March 31, 2000, a copy of which was
          filed with the Company's Form 14-C report February 14,
          2000.

     3.   Bylaws as amended July 19, 2000 and filed with the Form
          10-Q report for the quarter ended June 30, 2000
     4.   Material Contracts:

          (a)  Preferred Stock Purchase and Release of Debt
               Agreement between the Company and Businesship
               International, Inc. dated September 1, 1996, a
               copy of which was attached to the Company's Form
               10-KSB for the fiscal year ended September 30,
               1996.
          (b)  Stock Acquisition and Option Agreement between the
               Company and Merchant Capital Holdings, Ltd., dated
               November 23, 1999.

          (c)  Employment Agreements (2) between the Company and
               Messrs. Marks and Barham dated November 23, 1999.
          (d)  Shareholders' Agreement dated November 23, 1999 by
               and among the Company, Merchant Capital Holdings,
               Ltd., Messrs. Marks and Barham, Barham Family
               Interests, Inc., and Marks & Associates, Inc.

     5.   Acquisition or Disposition of Assets reporting the sale
          of 110,000 shares of Class A Common Stock at $2.75 to
          Cybertec Holdings, PLC.
     6.   Other Events statement reporting that effective
          September 5, 2000, the Company relocated its principal
          offices to 16475 Dallas Parkway, Suite 410, Dallas,
          Texas 75248; telephone:(972) 380-0273; fax: (972) 380-
          4795.

     7.   Information Statement filed on September 15, 2000 and
          furnished to the stockholders of record of Harrell
          Hospitality Group, Inc. (the _Company_) as of
          September, 2000, in connection with the adoption of the
          Certificate of Amendment of Restated Certificate of
          Incorporation (the _Certificate of Amendment_) by the
          written consent of the holders of a majority interest
          of the Company's voting capital stock consisting of the
          Company's outstanding Class A Common Stock, $0.01 par
          value (the "Common Stock") and a five-for-one stock
          split of the Company's Common Stock, reporting:
          (a)  an increase in the number of authorized shares of
               the Company's Class A Common Stock to 100,000,000
               shares.

          (b)  a change in the par value of the Class A Common
               Stock to $.002 per share.
          (c)  the redesignation of the Preferred Stock as Class
               A Preferred Stock.

          (d)  the creation of a new class of preferred stock
               (Class B Preferred Stock) with 10,000,000
               authorized shares issuable in series.
     8.   Additional Exhibits:

          (a)  Letter from Chase Mellon Shareholder Services
               dated September 22, 1999, together with an
               attached memorandum dated June 8, 1992 to W.
               Powers, Vice President of Mellon Securities Trust
               Company.

                           SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

                              HARRELL HOSPITALITY GROUP, INC.



                              By:
                                   Paul L. Barham
                                   Chief Executive Officer
                                   And Director

                              DATE: ________________________

     Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons comprising the majority of the current Directors on
behalf of the registrant and in the capacities and on the dates
indicated.



_________________________________________
_________________________________________    __________________
Geoffrey Dart                                Date
Chairman


________________________________________     __________________
Paul L. Barham,                              Date
Chief Executive Officer and Director


_________________________________________    __________________
Norman L. Marks,  President                  Date
Chief Operating Officer and Director










                 HARRELL HOSPITALITY GROUP, INC.
                        AND SUBSIDIARIES


           INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


<TABLE>
<CAPTION>

<S>                                                        <C>
                                                            Page

Independent Auditors' Report...............................F-2

Consolidated Balance Sheets at September 30, 2000 and 1999.F-3

Consolidated Statements of Income For the Years Ended
    September 30, 2000 and 1999 ...........................F-4

Consolidated Statements of Changes in Shareholders' Equity
    For the Years Ended September 30, 2000 and 1999 .......F-5

Consolidated Statements of Cash Flows For the Years Ended
    September 30, 2000 and 1999 ...........................F-6

Notes to Consolidated Financial Statements.................F-7



</TABLE>

                               F-1









                  INDEPENDENT AUDITORS' REPORT



Board of Directors and Shareholders
Harrell Hospitality Group, Inc. and Subsidiaries


We have audited the  accompanying consolidated balance sheets  of
Harrell Hospitality Group, Inc. and subsidiaries as of  September
30, 2000  and 1999, and  the related  consolidated statements  of
income, changes in  shareholders' equity and  cash flows for  the
years  then   ended.   These   financial   statements   are   the
responsibility of the  Company's management.  Our  responsibility
is  to  express  an  opinion  on  these  consolidated   financial
statements based on our audits.

We conducted  our audits  in accordance  with generally  accepted
auditing standards.   Those standards  require that  we plan  and
perform the audits to  obtain reasonable assurance about  whether
the financial statements are  free of material misstatement.   An
audit includes examining,  on a  test basis, evidence  supporting
the amounts  and disclosures  in the  financial  statements.   An
audit also includes assessing the accounting principles used  and
significant estimates made by  management, as well as  evaluating
the overall financial  statement presentation.   We believe  that
our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the  consolidated
financial  position  of  Harrell  Hospitality  Group,  Inc.   and
subsidiaries as of September  30, 2000 and 1999, and the  results
of their operations and their cash flows for the years then ended
in conformity with generally accepted accounting principles.




                                          Jackson & Rhodes P.C.





Dallas, Texas
November 29, 2000




                               F-2

         HARRELL HOSPITALITY GROUP, INC. AND SUBSIDIARIES

<TABLE>
<CAPTION>
                    CONSOLIDATED BALANCE SHEETS
                    September 30, 2000 and 1999


                              Assets
<S>                                     <C>            <C>
                                            2000          1999
Current assets:
   Cash                                    $461,717       $263,693
   Accounts receivable                      101,072         66,994
   Marketable securities (Note 3)           603,859              0
   Other assets                              27,891         14,237
     Total current assets                 1,194,539        344,924

Property and equipment:
   Furniture and fixtures                    46,145         42,483
     Less accumulated depreciation          (40,045)       (32,228)
     Total property and equipment             6,100         10,255


Other assets:
   Investment in limited partnerships
   (Note 5)                                   1,850          1,850

                                         $1,202,489       $357,029

 Liabilities and Shareholders' Equity

Current liabilities:

   Accounts payable and accrued
   liabilities                              $63,006        $39,518
   Dividends payable                         24,331         24,331
   Accrued salaries                           0.000          6,632
     Total current liabilities
                                             87,337         70,481

Commitments and contingencies (Note 8)        0.000          0.000

Shareholders' equity:
   Preferred stock, $1 par, 1,000,000
   shares authorized,

   243,331 shares issued and
   outstanding (Note 4)                     243,331        243,331
   Common stock:
     Class A, $.002 par; 100,000,000
     shares authorized, 7,307,900

     and 4,882,900 shares issued and         14,616          9,766
     outstanding, respectively
   Additional paid-in capital             2,722,437      2,077,287
   Accumulated deficit                   (1,856,336)    (2,043,836)
   Cumulative translation adjustment         (8,896)         0.000
     Total shareholders' equity           1,115,152        286,548


                                         $1,202,489       $357,029

</TABLE>
   See accompanying notes to consolidated financial statements.
                                F-3
         HARRELL HOSPITALITY GROUP, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>

                 CONSOLIDATED STATEMENTS OF INCOME
              Years Ended September 30, 2000 and 1999

<S>                                     <C>            <C>
                                           2000           1999


Revenues:
   Management fees                         $611,485       $568,117
   Consulting fees                           15,000          7,300
   Hotel expense reimbursements           7,036,358      6,691,046
        Total revenues                    7,662,843      7,266,463

Expenses:
   Employee compensation                  7,456,969      7,084,023

   General and administrative               360,962        155,914
        Total expenses                    7,817,931      7,239,937

        Operating income (loss)            (155,088)        26,526

Other income (expense):

   Unrealized gain on marketable            366,919          0.000
   securities
        Total other income (expense)        366,919              0

Net income (see Note 7)                     211,831         26,526

Preferred dividends accrued                  24,331         24,331


Net income available for common            $187,500         $2,195
shareholders

Basic earnings per common share               $0.03          $0.00

Weighted average shares outstanding       6,068,315      4,882,900


</TABLE>










   See accompanying notes to consolidated financial statements.
                                F-4

HARRELL HOSPITALITY GROUP, INC. AND SUBSIDIARIES

<TABLE>
<CAPTION>


CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Years Ended September 30, 2000 and 1999

<S>                           <C>         <C>        <C>
                                                       Common
                                                       Stock -
                                Preferred Stock        Class A
                              Shares       Amount      Shares

Balance, September 30,
1998                            243,331    $243,331   4,882,900

Net income                        0.000       0.000       0.000
Preferred dividends
payable
                                  0.000       0.000       0.000
 ($.10 per share)
Balance, September 30,
1999                            243,331     243,331   4,882,900

Net income                        0.000       0.000       0.000


Cumulative translation            0.000       0.000       0.000
adjustment

Total comprehensive income
                                  0.000       0.000   2,425,000
Sale of common stock
Preferred dividends
payable
 ($.10 per share)                 0.000       0.000       0.000
Balance, September 30,
2000                            243,331    $243,331   7,307,900


   <C>         <C>         <C>           <C>         <C>
    Common
    Stock -    Additional                Cumulative     Total
    Class A      Paid-In   Accumulated   Transaction Shareholders'
    Amount       Capital      Deficit    Adjustment    Equity


       $9,766   $2,077,287  ($2,046,031)     $0.000    $284,353

        0.000        0.000       26,526       0.000      26,526


        0.000        0.000      (24,331)      0.000     (24,331)

        9,766    2,077,287   (2,043,836)      0.000     286,548


        0.000        0.000      211,831       0.000     211,831

        0.000        0.000         0.00      (8,896)     (8,896)

                                                        202,935

        4,850      645,150        0.000       0.000     650,000


        0.000        0.000      (24,331)      0.000     (24,331)


      $14,616   $2,722,437  ($1,856,336)    ($8,896) $1,115,152

</TABLE>


        See accompanying notes to consolidated financial statements.
                                     F-5
          HARRELL HOSPITALITY GROUP, INC. AND SUBSIDIARIES

<TABLE>
<CAPTION>


               CONSOLIDATED STATEMENTS OF CASH FLOWS
              Years Ended September 30, 2000 and 1999


<S>                                        <C>             <C>
                                             2000            1999


Cash flows from operating activities:
  Net income available for common
  shareholders                              $187,500         $2,195
   Adjustments to reconcile net income to

   net cash provided by operating
   activities:
    Depreciation                               7,817          6,240
    Unrealized gain on marketable
          securities                        (366,919)             0
    Changes in assets and liabilities:
     Accounts receivable                     (34,078)        49,549
     Other assets                            (13,654)        (4,218)

     Accounts payable and accrued             23,488         11,921
     liabilities
     Accounts payable to related parties       0.000         (8,000)
     Preferred dividends accrued              24,331         24,331
     Accrued salaries                         (6,632)       (12,642)

       Net cash provided by (used in)       (178,147)        69,376
       operating activities
Cash flows from investing activities:

  Purchase of furniture and equipment         (3,662)          (475)
  Purchase of marketable securities         (245,836)         0.000
       Net cash used in investing
       activities                           (249,498)          (475)

Cash flows from financing activities:
  Sale of common stock                       650,000              0

  Dividends paid                             (24,331)             0
       Net cash provided by financing
       activities                            625,669          0.000

Net increase in cash                         198,024         68,901

Cash at beginning of year                    263,693        194,792

Cash at end of year                         $461,717       $263,693


</TABLE>





    See accompanying notes to consolidated financial statements.
                                F-6


        HARRELL HOSPITALITY GROUP, INC. AND SUBSIDIARIES
           Notes to Consolidated Financial Statements
                   September 30, 2000 and 1999

1. Description of Business

   Organization

   Harrell  Hospitality Group, Inc., a Delaware corporation  (the
   _Company_),  began operations  in 1959.   The Company  changed
   its name  from Harrell International, Inc. on March 31,  2000.
    The  Company entered  into the  acquisition, development  and
   management of real  estate properties including joint ventures
   and  partnerships (in which its  interests would be that of  a
   general partner having  substantial involvement in management)
   beginning December 1990.   The Company plans to focus its real
   estate  activities upon  purchase, development and  management
   of  hotels, and other  income-producing properties located  in
   the  United States.    The Company  acquired Hotel  Management
   Group,  Inc. (_HMG_)  in August 1992.   The  Company has  five
   other wholly-owned subsidiaries _ see Note 5.

2. Summary of Significant Accounting Policies

   Principles of Consolidation

   The consolidated financial  statements include the accounts of
   the   Company   and  its   subsidiaries.     All   significant
   intercompany  balances  and  transactions  are  eliminated  in
   consolidation.

   Use of Estimates and Assumptions

   Preparation   of  the   Company's   financial  statements   in
   conformity  with  generally   accepted  accounting  principles
   requires  management to  make estimates  and assumptions  that
   affect    certain    reported   amounts    and    disclosures.
   Accordingly,   actual   results   could  differ   from   those
   estimates.

   Cash Equivalents

   For  statement of  cash flow purposes,  the Company  considers
   short-term  investments  with  original  maturities  of  three
   months or less to be cash equivalents.

   Property and Equipment

   Property and  equipment is recorded at cost.  Depreciation  is
   computed on the  straight-line method over the estimated lives
   of the assets, principally over three years.




                               F-7




        HARRELL HOSPITALITY GROUP, INC. AND SUBSIDIARIES
           Notes to Consolidated Financial Statements


2. Summary of Significant Accounting Policies (Continued)

   Income Taxes

   The  Company accounts for  income taxes pursuant to  Statement
   of  Financial Accounting  Standards No.  109, _Accounting  for
   Income  Taxes_  (SFAS   109)  which  utilizes  the  asset  and
   liability  method of  computing  deferred income  taxes.   The
   objective  of the asset and  liability method is to  establish
   deferred   tax  assets  and  liabilities  for  the   temporary
   differences between the  financial reporting basis and the tax
   basis of  the Company's assets and liabilities at enacted  tax
   rates expected to  be in effect when such amounts are realized
   or settled.

   Reclassification

   The  1999  financial  statements  have  been  reclassified  to
confirm to the 2000 presentation.

   Earnings Per Common Share

   The Company  computes earnings per common share in  accordance
   with  Statement  of Financial  Accounting Standards  No.  128,
   Earnings  Per  Share  ("SFAS  128").  SFAS  128    provides  a
   different  method of calculating  earnings per share than  was
   formerly  used in APB Opinion  15.  SFAS 128 provides for  the
   calculation  of basic and diluted  earnings per share.   Basic
   earnings  per share  includes no dilution  and is computed  by
   dividing  income  available  to  common  stockholders  by  the
   weighted average  number of common shares outstanding for  the
   period.   Dilutive earnings  per share reflects the  potential
   dilution  of securities  that could share  in the earnings  of
   the  Company.  Because the  Company has no potential  dilutive
   securities outstanding, the  accompanying presentation is only
   of  basic  earnings   per  share.    The  Company's  Board  of
   Directors  has authorized  a common stock  split of  five-for-
   one,  effective as of  September 1, 2000.   All share and  per
   share  amounts in the  accompanying financial statements  have
   been retroactively adjusted for the split.

   Foreign Currency Translation

   The  financial  statements  are  presented  in  United  States
   dollars.     In   accordance  with   Statement  of   Financial
   Accounting  Standards No. 52, _Foreign Currency  Translation,_
   foreign  denominated  monetary   assets  and  liabilities  are
   translated  to their  United States  dollar equivalents  using
   foreign  exchange rates which  prevailed at the balance  sheet
   date.   Revenue and expenses  are translated at average  rates

                               F-8




        HARRELL HOSPITALITY GROUP, INC. AND SUBSIDIARIES
           Notes to Consolidated Financial Statements

   of  exchange during the year. Related translation  adjustments
   are reported as  a separate component of stockholders' equity,
   whereas  gains  or  losses  resulting  from  foreign  currency
   transactions are included in results of operations.



3. Investments in Marketable Securities

   Marketable securities at  September 30, 2000 consist of common
   stocks.  Statement  of Financial Accounting Standards No. 115,
   _Accounting  for  Certain   Investments  in  Debt  and  Equity
   Securities_   (FAS  115)   requires  certain  investments   be
   recorded  at fair  value or amortized  cost.  The  appropriate
   classification   of  the  investments  in  marketable   equity
   securities  is determined  at  the time  of purchase  and  re-
   evaluated   at  each   balance  sheet   date.  The   Company's
   marketable   equity  securities  are  classified  as   trading
   securities.   Marketable equity securities trading  securities
   are  carried at fair value,  with unrealized gains and  losses
   are reported in  the income statement.  The cost of marketable
   equity   securities   sold  is   determined  on   a   specific
   identification  basis.   The fair value  of marketable  equity
   securities is based on quoted market prices.

4. Preferred Stock Transaction

   By  agreement with  Businesship International  (_Businesship_)
   dated  September  27,  1996,  the  outstanding  balance  of  a
   certain  note  of  $243,331,  including  accrued  interest  of
   $26,398,  was converted into preferred  stock to be issued  by
   the  Company.  The preferred  shares were from a new class  of
   stock  authorized  by  the  Company and  are  nonvoting,  non-
   convertible  and will pay  a 10% dividend ($24,331  annually),
   beginning  with  the  year  ended September  30,  1996.    The
   Company  shall have  the  right, but  not the  obligation,  to
   redeem the shares at any time at par value.

5. Acquisition of Hotel Management Group

   In August  1992, the Company purchased 100% of the issued  and
   outstanding  common  stock of  HMG.   HMG  is engaged  in  the
   business  of managing  the  general operations  of hotels  and
   providing them with accounting services.

   Harrell Hospitality Group _ California, Inc.

   Effective   January  1,  1994,   HMG  formed  a   wholly-owned
   subsidiary,  Harrell  Hospitality  Group  _  California,  Inc.
   (formerly Hotel  Management Group - California, Inc.) (_HHG  -
   California_),   to  hold  the  management  contract  for   the

                               F-9




        HARRELL HOSPITALITY GROUP, INC. AND SUBSIDIARIES
           Notes to Consolidated Financial Statements

   operations  of the Biltmore Hotel  and Suites in Santa  Clara,
   California.   HHG  _ California  now also  manages the  Rancho
   Santa Barbara Marriott.






5. Acquisition of Hotel Management Group (Continued)

   Hotel Management Group _ Tennessee, Inc.

   Effective  September  23,  1996,  HMG  formed  a  wholly-owned
   subsidiary, Hotel  Management Group _ Tennessee, Inc. (_HMG  _
   Tennessee_), to hold  the management contract for the Sheraton
   Four  Points Hotel  in Memphis, Tennessee.   The Company  also
   had  a limited partnership interest  in the hotel.  (See  Note
   6.)

   Hotel Management Group _ Oklahoma, Inc.

   Effective May 20,  1997, HMG formed a wholly-owned subsidiary,
   Hotel  Management Group _  Oklahoma, Inc. (_HMG _  Oklahoma_),
   to hold the  management contract for the  Ramada Inn in Tulsa,
   Oklahoma.    The   Company  also  had  a  limited  partnership
   interest in the hotel.  (See Note 6.)

   Hotel Management Group _ Virginia, Inc.

   On  February 17, 1998,  HMG formed a wholly-owned  subsidiary,
   Hotel   Management  Group  _   Virginia,  Inc.  to  hold   the
   management  contract  for  the Chamberlin  Hotel  in  Hampton,
   Virginia which was managed until November 6, 1998.

   H. M. Group _ Alabama, Inc.

   On  December 1,  1998, H.M. Group  _ Alabama,  Inc., a  wholly
   owned  subsidiary  of  HMG,  assumed  the  management  of  the
   Governors  House  Hotel   in  Montgomery,  Alabama  which  was
   managed until September 6, 2000.

6. Hotel Investments

   Tennessee Hotel Project

   On  October 17,  1996 the Company  purchased, for $100,000,  a
   minority  limited partnership  interest in  the Sheraton  Four
   Points  Hotel, located  near the Memphis  Airport in  Memphis,
   Tennessee  and a subsidiary of  the Company was contracted  to
   manage the hotel.

                              F-10




        HARRELL HOSPITALITY GROUP, INC. AND SUBSIDIARIES
           Notes to Consolidated Financial Statements


   The  Company  completed  negotiations  for  the  sale  of  its
   limited  partnership  interest  in  the  hotel,  received  the
   return  of its investment  on April 3,  1998, and resigned  as
   manager.





6. Hotel Investments (Continued)

   Tulsa Hotel Project

    On June 4, 1997,  the Company acquired a limited  partnership
    interest in  the  Ramada  Inn,  located  on  I-44  in  Tulsa,
    Oklahoma.  At  the same closing  a subsidiary of the  Company
    contracted with the new ownership to manage the hotel.

    On June 3, 1998, the  Company sold its interest in the  hotel
    and resigned as manager of the hotel.

7. Income Taxes

   As of  September 30, 2000, the Company had net operating  loss
   carryforwards  of approximately  $1,843,444 for  book and  tax
   purposes.   Unused  operating loss  carryforwards may  provide
   future tax  benefits, although there can be no assurance  that
   these  net operating losses can  be recognized in the  future.
   Accordingly,  deferred  tax assets  have  been offset  in  the
   accompanying financial statements by a valuation allowance.

   The loss carryforwards expire as follows:

<TABLE>
<CAPTION>
          Year of                         Operating Loss
        Expiration                  Carryforward Expirations
     <S>                           <C>

          2002                             $    31,444
          2003                                  26,000
          2004                               1,116,000
          2005                                 278,000
          2006                                  35,000
          2007                                 134,000
          2008                                 105,000
          2009                                 118,000

                                            $1,843,444
</TABLE>



                              F-11




        HARRELL HOSPITALITY GROUP, INC. AND SUBSIDIARIES
           Notes to Consolidated Financial Statements


8. Commitments and Contingencies

   Leases

   The  Company leases  its office facilities  from an  unrelated
   party.   The  lease expires in  February, 2003.   The  Company
   also leases  an off-site storage facility on a  month-to-month
   basis.  Rental  expense for the years ended September 30, 2000
   and 1999 amounted to $87,760 and $29,290, respectively.

8. Commitments and Contingencies (Continued)

    Lease commitments are as follows:

          2001                                 $63,360
          2002                                  63,442
          2003                                  27,007

   Concentration of Credit Risk

   The  Company  invests its  cash  and certificates  of  deposit
   primarily in deposits  with major banks.  Certain deposits, at
   times,  are  in  excess  of federally  insured  limits.    The
   Company has not incurred losses related to its cash.

9. Management Fee Revenues

   The  Company  received  approximately  80% and  81%  of  gross
   management revenues from  the Biltmore Hotel in California for
   the years ended September 30, 2000 and 1999, respectively.

10.
   Shareholders' Equity

   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 5,000,000  shares
   of  the Company's Class A  Common Stock for US$.20 per  share.
   MCH  also  received  certain options  to  purchase  additional
   shares  of Class  A Common Stock.   MCH  has funded the  first
   1,875,000  share  purchase   before  September  30,  2000  and
   requested  an  extension  of  time to  acquire  the  remaining
   3,125,000 shares.   Subsequent to September 30, 2000, MCH  has
   acquired an additional  625,000 shares of its obligation under
   the  Stock Agreement.   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

                              F-12




        HARRELL HOSPITALITY GROUP, INC. AND SUBSIDIARIES
           Notes to Consolidated Financial Statements

   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.




10.
   Shareholders' Equity (Continued)

   The  Company's  Board of  Directors  has authorized  a  common
   stock  split of  five-for-one,  effective as  of September  1,
   2000.   All share  and per share  amounts in the  accompanying
   financial   statements  and  notes  have  been   retroactively
   adjusted  for the split.   The par value for common stock  was
   also changed to  $.002 per share and authorized Class A common
   shares were increased to 100,000,000.

11.
   Stock Options

   In connection with  the Stock Agreement (Note 10), MCH will be
   granted options to  purchase an additional 5,000,000 shares of
   Class  A  Common Stock  upon  receipt by  the Company  of  the
   initial   $1,000,000  investment.     All  such  options   are
   exercisable at a  price which begins at $.20 per share in 2000
   and  escalates $.02  per  share each  year until  the  options
   expire  on December  31,  2005.   Therefore, under  the  Stock
   Agreement, MCH  has agreed to purchase 5,000,000 shares,  and,
   if  it  does  so,  will  also  hold  options  to  purchase  an
   additional 10,000,000 shares.

   As an inducement  to enter into the employment agreements, the
   Company  agreed  to  issue  options to  Barham  and  Marks  to
   acquire  shares of the  Company's Class A  Common Stock.   The
   strike price  and the term of the options to Barham and  Marks
   are the  same as the options issued to MCH.  Barham and  Marks
   will  be granted  options in  installments as  MCH is  granted
   options,  except  that  each will  be  granted the  option  to
   purchase one share  for every two shares that MCH is given the
   option to purchase.


   In  October  1995, the  Financial Accounting  Standards  Board
   (_FASB_)   issued  SFAS   123,  _Accounting  for   Stock-Based
   Compensation._  SFAS  123 defines a fair value based method of
   accounting  for an  employee  stock option  or similar  equity
   instrument  and encourages all  entities to adopt that  method
   of  accounting for  all of their  employee stock  compensation

                              F-13




        HARRELL HOSPITALITY GROUP, INC. AND SUBSIDIARIES
           Notes to Consolidated Financial Statements

   plans.   Under the fair value based method, compensation  cost
   is  measured at  the  grant date  based on  the  value of  the
   award.   However, SFAS 123  also allows an entity to  continue
   to  measure  compensation  cost  for  those  plans  using  the
   intrinsic value  based method of accounting prescribed by  APB
   Opinion No. 25, _Accounting for Stock Issued to Employees._

   Under the  intrinsic value based method, compensation cost  is
   the  excess, if any, of  the quoted market price of the  stock
   at  grant date or  other measurement date  over the amount  an
   employee must pay  to acquire the stock.  Entities electing to
   remain with  the accounting in Opinion 25 must make pro  forma
   disclosures  of net income  and earnings per  share as if  the
   fair value  based method of accounting had been applied.   The
   Company has elected to
1. Stock Options (Continued)


   measure  compensation cost,  including  options issued,  under
   Opinion  25.   Under this  method, there  was no  compensation
   expense for the year ended September 30, 2000.

   Pro  forma disclosures as  required by SFAS  123 for the  year
   ended September 30, 2000 are as follows:

     Net income                    $106,208
     Net income per share          $   0.02