SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
Commission file number 0-13642
HUDSON'S GRILL OF AMERICA, INC.
(Name of small business issuer in its charter)
California
(State or other jurisdiction of incorporation)
95-3477313
(IRS Employer Identification Number)
16970 Dallas Parkway, Suite 402, Dallas, Texas 75248
(Address of Principal Executive Offices)
Issuer's telephone number, including area code:
(972) 931-9237
<PAGE>
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. Yes X No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of
the Exchange Act after the distribution of securities
under a plan confirmed by a court. Yes No
APPLICABLE ONLY TO CORPORATE REGISTRANTS
State the number of shares outstanding of each of the
issuer's classes of common equity, as of the latest
practicable date. 6,056,986
<PAGE>
Item 1. Financial Statements.
HUDSON'S GRILL OF AMERICA, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
ASSETS
June 30, December 28,
1998 1997
CURRENT ASSETS:
Cash and cash equivalents $ 26,230 $ 42,401
Accounts receivable, net of allowance
for doubtful accounts of $47,425
and $49,000 respectively 56,113 69,830
Current portion of notes and leases
receivable 100,000 100,000
Prepaid expenses and other
receivables 134,668 23,185
Total current assets 317,011 235,416
PROPERTY AND EQUIPMENT, at cost:
Leasehold improvements 13,150 2,969
Restaurant equipment 33,378 33,378
Furniture and fixtures 5,851 5,851
Total property and equipment 52,379 42,198
Less accumulated depreciation
and amortization (10,396) (7,030)
Property and equipment, net 41,983 35,168
LONG TERM PORTION OF NOTES
AND LEASES RECEIVABLE, net of
allowance for doubtful accounts
of $33,000 and $33,000 respectively 759,501 791,858
LIQUOR LICENSES-net of
accumulated amortization
of $24,750 at June 30, 1998
and $30,000 at December 28, 1997 20,250 30,815
OTHER ASSETS 16,683 23,463
Total assets $ 1,155,428 $ 1,116,720
HUDSON'S GRILL OF AMERICA, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
LIABILITIES AND SHAREHOLDERS' EQUITY
June 30, December 28,
1998 1997
CURRENT LIABILITIES:
Accounts payable $ 144,205 $ 40,886
Accrued liabilities 217,883 201,343
Total current liabilities 362,088 242,229
LONG-TERM DEBT
OTHER LONG-TERM LIABILITIES 163,315 206,494
DEFERRED INCOME 743,798 778,367
COMMITMENTS AND CONTINGENCIES
(Note 4)
SHAREHOLDERS' EQUITY:
Preferred stock, 5,000,000
shares authorized, none
issued or outstanding
Common stock, no par value
100,000,000 shares authorized
6,056,986 shares issued and
outstanding 4,456,457 4,456,457
Accumulated deficit (4,570,230) (4,566,827)
Total shareholders' equity (113,773) (110,370)
Total liabilities and
and shareholders' equity $1,155,428 $1,116,720
HUDSON'S GRILL OF AMERICA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME
(UNAUDITED)
For the three months ended
June 30, June 30,
1998 1997
REVENUES:
Net sales $ 74,696 $
Franchising fees from restaurants
under sales contracts 4,164
Franchise revenues 61,218 106,871
Equipment lease income 20,548 21,230
Gain on sales of restaurants 20,945 20,041
Other income 17,499 17,792
Total revenues 194,906 170,098
COSTS AND EXPENSES:
Cost of sales 74,882
General and administrative 116,187 143,192
Depreciation and amortization 3,060 8,004
Total costs and expenses 194,129 151,196
Income (loss) from operations 777 18,902
OTHER INCOME (EXPENSE):
Interest expense (251) (106)
Interest income 16,160 20,822
Total other income (expense) 15,909 20,716
INCOME (LOSS) BEFORE INCOME TAXES 16,686 39,618
Provision for income taxes
NET INCOME (LOSS) AND
COMPREHENSIVE INCOME (LOSS) $ 16,686 $ 39,618
INCOME (LOSS) PER SHARE
Basic and diluted net
income (loss) and comprehensive
income (loss) per share $ .0017 $ .004
HUDSON'S GRILL OF AMERICA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME
(UNAUDITED)
For the six months ended
June 30, June 30,
1998 1997
REVENUES:
Net sales $ 301,441 $
Franchising fees from restaurants
under sales contracts 12,257
Franchise revenues 144,192 182,859
Equipment lease income 33,063 38,042
Gain on sales of restaurants 32,368 36,144
Other income 33,829 34,263
Total revenues 544,893 303,565
COSTS AND EXPENSES:
Cost of sales 310,431
General and administrative 255,201 277,426
Depreciation and amortization 6,340 16,303
Total costs and expenses 571,972 293,729
Income (loss) from operations (27,079) 9,836
OTHER INCOME (EXPENSE):
Interest expense (251) (672)
Interest income 23,927 41,179
Total other income (expense) 23,676 40,507
INCOME (LOSS) BEFORE INCOME TAXES (3,403) 50,343
Provision for income taxes
NET INCOME (LOSS) $ (3,403) $ 50,343
INCOME (LOSS) PER SHARE
Basic and diluted net
income (loss) and comprehensive
income (loss) per share $ (.0006) $ .005
HUDSON'S GRILL OF AMERICA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOW
For the six months ended
June 30, June 30,
1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (3,403) $ 50,343
Adjustments to reconcile net income
(loss) to net cash used by operating
activities:
Depreciation and amortization 6,218 16,303
(Gain) loss on sales and closures
of restaurants (28,443) (36,144)
Changes in assets and liabilities:
Accounts receivable (100,549) 28,470
Prepaid expenses and other (3,226) 574
Accounts payable 103,319 (31,720)
Accrued liabilities and other (34,020) (107,718)
Net cash provided (used)
by operating activities (60,104) (79,892)
CASH FLOWS FROM INVESTING ACTIVITIES:
Net proceeds from sale of assets 9,000 4,634
Notes receivable principal payments 18,110 53,991
Leases receivable principal payments 26,994 36,500
Fixed assets and other (10,171)
Net cash provided (used) by
investing activities 43,933 95,125
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of notes payable (35,542)
Net cash provided (used) by
financing activities (35,542)
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (16,171) (20,309)
CASH AND CASH EQUIVALENTS, beginning
of period 42,401 78,680
CASH AND CASH EQUIVALENTS, end
of period $ 26,230 $ 58,371
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ 251 $ 902
Income taxes paid $ $
HUDSON'S GRILL OF AMERICA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS, continued
SUPPLEMENTAL DISCLOSURES OF NON-CASH TRANSACTIONS:
Period ended June 30, 1998
The Company sold the restaurant located in Carrollton, TX. No note
receivable or lease receivable was generated with this sale.
Period ended June 30, 1997
In connection with the sale of a restaurant and equipment, the Company
received a note receivable of $114,200 and a lease receivable of
$240,000.
HUDSON'S GRILL OF AMERICA, INC.
Notes to Consolidated Financial Statements
A. Basis of Presentation
Certain information and footnote disclosures normally
included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations, although
management believes the disclosures are adequate to make the
information presented not misleading. These interim financial
statements should be read in conjunction with the Company's
annual report and most recent audited financial statements
included in the report on Form 10-KSB for the year ended
December 28, 1997, filed with the Securities and Exchange
Commission.
The interim financial information included hereto is
unaudited; however, such information reflects all the adjustments
(consisting solely of normal recurring adjustments) which are, in
the opinion of management, necessary for a fair statement of
results of operations and cash flows for the interim periods.
The results of operations for the six months ended June 30, 1998
are not necessarily indicative of the results to be expected for
the full year.
Item 2. Management Discussion and Analysis.
Material changes in the financial condition of the issuer and in the
results of its operations since the end of its last fiscal year and its
results from the comparable period in its last fiscal year include the
following.
The issuer's prepaid expenses and other receivables at June 30, 1998
("Q2") were $134,668 as compared to $23,185 at December 28, 1997 ("FYE").
Leasehold improvements at Q2 were $13,150, while at FYE they were $2,969. The
increase in the prepaid expenses and other receivables was due mostly to
construction expenses incurred by a subsidiary of the issuer for a new
Hudson's Grill located in Richardson, Texas, and due to an increase in
interest receivables from the issuer's franchisees in Pomona, California, and
Lancaster, California.
Current liabilities increased at Q2 to $362,088 from $242,229 at FYE.
The increase was mostly attributed to an increase in accounts payable to
$144,205 for Q2 from $40,886 for FYE. This occurred because of an actual
increase in payables of $54,347, and costs related to the Richardson
construction of $48,972. Other long term liabilities decreased to $163,315
for Q@ from $206,494 for FYE, due to the amortization of estimated
liabilities.
Material changes in the results of operations of Q2 compared to the
second quarter of 1997 ("Q97") include the following.
Net Sales increased to $74,696 in Q2 from $0 in Q97, and cost of sales
also increased to $74,882 in Q2 from $0 in Q97. These are a result of the
operations of a subsidiary, and are essentially a wash. Franchise revenues
dropped to $61,218 for Q2 from $106,871 in Q97, which drop reflects a decrease
in new franchise fees and a decrease in franchise fee collection. On the
other hand, general and administrative expenses dropped to $116,187 for Q2
from $143,192 for Q97, reflecting the termination of a consulting agreement
with Dalms, Inc. Overall, income from operations decreased to $777 for Q2
from $18,902 for Q97.
After adding interest income and subtracting interest expense, the issuer
made a profit of $16,686 ($.0017 per share) in Q2 as compared to a profit of
$39,618 ($.004 per share) in Q97.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
The registrant incorporates by reference its response in its Form 10-KSB
filed with the Securities and Exchange Commission on May 15, 1998. Currently
the only litigation against the registrant is the lawsuit involving the lease
at a former Hudson's Grill in Westlake, California, and a lawsuit by a
franchisee attempting to recover expenses incurred by them when they operated
a Hudson's Grill in Pomona, California. The registrant is not aware of any
other material litigation in process.
Item 2. Changes in Securities.
There have been no changes in securities or in the rights of the holders
of the registrant's securities during Q2 except for the adoption and
ratification at the annual shareholders meeting of a plan to incorporate a
subsidiary and the spin off the subsidiary to the current shareholders of the
registrant.
Item 3. Defaults Upon Senior Securities.
The registrant does not currently have any senior securities.
Consequently, there are no defaults on senior securities.
Item 4. Submission of Matters to a Vote of Security Holders.
Several matters were submitted to a vote of security holders during Q2.
On May 29, 1998, at the annual shareholders meeting, shareholders voted
directly and through proxies on the election of three directors, the
appointment of the registrant's auditors, and to adopt and ratify a plan to
incorporate a subsidiary to which most of the registrant's assets were
transferred and then to distribute the shares of the subsidiary to the
registrant's shareholders. As a result of the votes, David Osborn, Thomas
Sacco and Robert Fischer were elected as directors, Hein + Associates were
appointed as the Company's auditors, and the plan to incorporate and spin off
the subsidiary was adopted and ratified.
Item 5. Other Information.
The registrant has been in "off and on" discussions with various
potential franchisees to develop restaurants. At June 1, 1998, the registrant
sold its subsidiary that operated the Carrollton, Texas, Hudson's Grill to its
manager. There was no gain on the sale and no notes were exchanged.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibit Index. Following are the exhibits required under Item 601 of
Regulation S-B for Form 10-QSB:
Item 601
Exhibit No. Description Page Number
(2) Plan of Acquisition, Reorgani-
zation, Arrangement, Liquida-
tion, or Succession n/a
(4) Instruments Defining the Rights
of Holders Including Indentures n/a
(6) No Exhibit Required. n/a
(11) Statement Re: Computation of
Per Share Earnings n/a <FN1>
(12) No Exhibit Required. n/a
(15) Letter on Unaudited Interim
Financial Information n/a <FN2>
(18) Letter on Change in Accounting
Principles n/a
(19) Previously Unfiled Documents n/a
(20) Reports Furnished to Security
Holders n/a
(23) Published Report Regarding
Matters Submitted to Vote n/a
(24) Consent of Experts and Counsel n/a
(25) Power of Attorney n/a
(27) Financial Data Schedule attached
(28) Additional Exhibits n/a
<PAGE>
<FN1> No explanation of the computation of per share earnings on
both the primary and fully diluted basis is necessary because the
computation can be clearly determined from the financial statements and
the notes to the financial statements.
<FN2> No reports on unaudited interim financial information have
been prepared by the Company's independent accountants, and therefore,
no letter is required from the Company's independent accountants.
(b) Reports on Form 8-K. The following reports on Form 8-K were filed
during the quarter ending June 30, 1998:
None
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
(Registrant) HUDSON'S GRILL OF AMERICA, INC.
By: s/s David L. Osborn
David L. Osborn, President
Date: August 17, 1998
elink\filing\10QSB1.982
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S QUARTERLY FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 26,230
<SECURITIES> 0
<RECEIVABLES> 56,113
<ALLOWANCES> 47,425
<INVENTORY> 0
<CURRENT-ASSETS> 317,011
<PP&E> 52,379
<DEPRECIATION> 10,396
<TOTAL-ASSETS> 1,155,428
<CURRENT-LIABILITIES> 362,088
<BONDS> 0
0
0
<COMMON> 4,456,457
<OTHER-SE> (4,570,230)
<TOTAL-LIABILITY-AND-EQUITY> 1,155,428
<SALES> 74,696
<TOTAL-REVENUES> 194,906
<CGS> 74,882
<TOTAL-COSTS> 194,129
<OTHER-EXPENSES> (15,909)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 251
<INCOME-PRETAX> 16,686
<INCOME-TAX> 0
<INCOME-CONTINUING> 16,686
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,686
<EPS-PRIMARY> .002
<EPS-DILUTED> .002
</TABLE>
