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, 1999
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
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>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
<PAGE>
HUDSON'S GRILL OF AMERICA, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
ASSETS
June 30, January 3,
1999 1999
CURRENT ASSETS:
Cash and cash equivalents $ 27,613 $ 22,169
Accounts receivable, net of allowance
for doubtful accounts of $87,185
and $62,000 respectively 7,777 9,992
Other receivable 6,866 101,633
Current portion of notes and leases
receivable 60,350 60,350
Prepaid expenses and other
receivables 25,875 26,354
Total current assets 128,481 220,498
PROPERTY AND EQUIPMENT, at cost:
Leasehold improvements 294,550 282,877
Restaurant equipment 359,285 91,477
Furniture and fixtures 5,851 5,851
Total property and equipment 659,686 380,205
Less accumulated depreciation
and amortization (54,557) (13,763)
Property and equipment, net 605,129 366,442
LONG TERM PORTION OF NOTES
AND LEASES RECEIVABLE, net of
allowance for doubtful accounts
of $-0- and $-0- respectively 110,142 134,521
LIQUOR LICENSES, net of
accumulated amortization
of $-0- and $-0- respectively 3,288
OTHER ASSETS 16,480 15,981
Total assets $ 860,232 $ 740,730
HUDSON'S GRILL OF AMERICA, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
LIABILITIES AND SHAREHOLDERS' EQUITY
June 30, January 3,
1999 1999
CURRENT LIABILITIES:
Current portion of long-term debt
and capital lease obligation $ 45,384 $ 8,689
Accounts payable - trade 234,107 291,772
Advances - related parties 46,982 56,940
Accrued liabilities 260,018 196,210
Total current liabilities 586,491 553,611
LONG-TERM DEBT AND CAPITAL LEASE
OBLIGATION, net of current portion 567,604 258,884
OTHER LONG-TERM LIABILITIES 97,995 130,654
DEFERRED INCOME 208,540 231,852
COMMITMENTS AND CONTINGENCIES
(Note 5)
SHAREHOLDERS' DEFICIT:
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 (5,056,855) (4,890,728)
Total shareholders' equity (600,398) (434,271)
Total liabilities and
and shareholders' equity $ 860,232 $ 740,730
HUDSON'S GRILL OF AMERICA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME
(UNAUDITED)
For the three months ended
June 30, June 30,
1999 1998
REVENUES:
Net sales $ 262,665 $ 74,696
Franchise revenues 62,370 61,218
Equipment lease income 7,427 20,548
Gain on sales of restaurants 10,073 20,945
Other income 20,639 17,499
Total revenues 363,174 194,906
COSTS AND EXPENSES:
Cost of sales 242,591 74,882
General and administrative 143,568 116,187
Depreciation and amortization 20,447 3,060
Total costs and expenses 406,606 194,129
Income (loss) from operations (43,432) 777
OTHER INCOME (EXPENSE):
Interest expense (20,156) (251)
Interest income 4,035 16,160
Total other income (expense) (16,121) 15,909
INCOME (LOSS) BEFORE INCOME TAXES (59,553) 16,686
Provision for income taxes
NET INCOME (LOSS) AND
COMPREHENSIVE INCOME (LOSS) $ (59,553) $ 16,686
INCOME (LOSS) PER SHARE
Basic and diluted net
income (loss) and comprehensive
income (loss) per share $ (.0098) $ .0017
HUDSON'S GRILL OF AMERICA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME
(UNAUDITED)
For the six months ended
June 30, June 30,
1999 1998
REVENUES:
Net sales $ 493,753 $ 301,441
Franchise revenues 102,358 144,192
Equipment lease income 14,276 33,063
Gain on sales of restaurants 16,590 32,368
Other income 42,503 33,829
Total revenues 669,480 544,893
COSTS AND EXPENSES:
Cost of sales 526,075 310,431
General and administrative 247,652 255,201
Depreciation and amortization 40,895 6,340
Total costs and expenses 814,622 571,972
Income (loss) from operations (145,142) (27,079)
OTHER INCOME (EXPENSE):
Interest expense (29,419) (251)
Interest income 8,434 23,927
Total other income (expense) (20,985) 23,676
INCOME (LOSS) BEFORE INCOME TAXES (166,127) (3,403)
Provision for income taxes
NET INCOME (LOSS) AND
COMPREHENSIVE INCOME (LOSS) $ (166,127) $ (3,403)
INCOME (LOSS) PER SHARE
Basic and diluted net
income (loss) and comprehensive
income (loss) per share $ (.0274) $ (.0006)
HUDSON'S GRILL OF AMERICA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOW
For the six months ended
June 30, June 30,
1999 1998
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (166,127) $ (3,403)
Adjustments to reconcile net income
(loss) to net cash used by operating
activities:
Depreciation and amortization 40,895 6,218
(Gain) loss on sales and closures
of restaurants (16,590) (28,443)
Changes in assets and liabilities:
Accounts receivable 71,799 (100,549)
Prepaid expenses and other (12,454) (3,226)
Accounts payable (37,664) 103,319
Accrued liabilities and other 63,734 (34,020)
Net cash provided (used)
by operating activities (56,407) (60,104)
CASH FLOWS FROM INVESTING ACTIVITIES:
Net proceeds from sale of assets 9,000
Notes receivable principal payments 24,379 18,110
Leases receivable principal payments 26,994
Increase in fixed assets (22,657) (10,171)
Net cash provided (used) by
investing activities 1,722 43,933
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt 71,000
Repayments of long-term debt (10,870)
Net cash provided (used) by
financing activities 60,130
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 5,445 (16,171)
CASH AND CASH EQUIVALENTS, beginning
of period 22,168 42,401
CASH AND CASH EQUIVALENTS, end
of period $ 27,613 $ 26,230
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ 4,714 $ 251
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, 1999
In connection with the payment of an existing liability, the company incurred
a long-term debt of $28,460.
In connection with the acquisition of property and equipment, the company
executed a capital lease agreement for $256,824 and incurred long-term debt
of $256,824.
Period ended June 30, 1998.
The Company sold the restaurant located in Carrollton, TX. No notes
receivable or lease receivable was generated with this sale.
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
January 3, 1999, 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, 1999 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 other receivables at June 30, 1999 ("Q2") were $6,866
as compared to $101,633 at January 3, 1999 ("FYE"). Its restaurant
equipment at Q2 was $359,285 as compared to $91,477 at FYE. Equipment
increased because of equipment for the January opening of the Dallas
Hudson's Grill. Accumulated depreciation accordingly increased at Q2 to
$54,557 from $13,763 at FYE.
Trade accounts payable decreased at Q2 to $234,107 from $291,772 at
FYE. On the other hand, the current portion of long term debt increased
to $45,384 at Q2 from $8,689 at FYE; also accrued liabilities increased
at Q2 to $260,018 from $196,210 at FYE. Long term debt and capital
lease obligations increased, too, at Q2 to $567,604 from $258,884 at
FYE. These increases primarily are a result of the loans received during
the first quarter to complete, open and operate the Dallas Hudson's
Grill in Dallas that opened in January 1999. On the other hand, the
other long term liabilities decreased at Q2 to $97,995 from $130,654 at FYE.
Material changes in the results of operations of Q2 compared to the
second quarter of 1998 ("Q98") include the following. Net sales
increased in Q2 to $262,665 from $74,696 in Q98 as a result of the newly
opened Dallas location. Cost of sales increased to $242,591 in Q2 from
$74,882 in Q98. Franchising revenues from restaurants under contract
increased slightly from $61,218 in Q98 to $62,370 in Q2. Depreciation
increased in Q2 to $20,447 from $3,060 in Q98 because of the increased
equipment at the Dallas location. Thus, income from operations
decreased substantially from a gain of $777 in Q98 to a loss of
($43,432) in Q2.
General and administrative expenses increased in Q2 to $143,568
from $116,187 in Q98. Interest expense increased because of the loans
for the new Dallas restaurant; in Q98 there was $251 in interest
expense, but in Q2 the Company incurred $20,156. Interest income
likewise dropped.
Thus, the Company incurred a loss of ($59,553) (($.0098) per share)
in Q2 as compared to a gain of $16,686 ($.0017 per share) in Q98.
The Company does not believe that it will be affected by any Y2K
problems as it concerns computing and administration performed by the
issuer. The Company may be affected by third parties, however, to an
unknown extent. Such third party effects include problems with bank
accounts (paying and depositing funds) and with delays in receiving
franchiser fees and payments from franchisees who encounter Y2K
problems. Since the Company does not rely heavily on computer software
and processing to run its business, problems with changing software to
accommodate the year 2000 and years thereafter are not likely to have a
material impact on the Company.
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 12,
1999. Additionally, the Company received a copy of a lawsuit that had
been filed in California against it by Michael Miller and Ralph Norwood,
current franchisees of the Company, alleging breaches of their franchise
agreement. The lawsuit has not been served properly on the Company, and
the Company believes the lawsuit was filed in an attempt to defend
against a judgment that the Company has obtained in Texas against the
franchisees. The Texas judgment currently is being collected in
California against the franchisees; however, at this time, the Company
believes that an amicable settlement ultimately can be made with the
franchisees.
Item 2. Changes in Securities.
There were no changes in securities or in the rights of the holders
of the registrant's securities during Q2.
Item 3. Defaults Upon Senior Securities.
The registrant does not currently have any senior securities
outstanding. Consequently, there are no defaults on senior securities.
Item 4. Submission of Matters to a Vote of Security Holders.
There were no matters submitted to a vote of security holders during
Q2 except the election of directors and the ratification of the
selection of the Company's auditors.
Item 5. Other Information.
The registrant does not have any material new information that has
not already been disclosed in Forms 8-K and 10-KSB filed since April 1,
1999.
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, 1999, or shortly thereafter:
1. April 23, 1999. The Company announced the opening of a new
Hudson's Grill in Marquette, Michigan, by Sharfe, L.L.C., a franchisee
that is owned by Frank and Jim Stabile. It is a free standing unit based
on the new design. The Company also announced the settlement of a
lawsuit involving the Westlake location formerly operated by the
Company.
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 16, 1999
elink\filing\10QSB.992
<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> JAN-03-1999
<PERIOD-END> JUN-30-1999
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<SECURITIES> 0
<RECEIVABLES> 7,777
<ALLOWANCES> 87,185
<INVENTORY> 0
<CURRENT-ASSETS> 128,481
<PP&E> 659,686
<DEPRECIATION> 54,557
<TOTAL-ASSETS> 860,232
<CURRENT-LIABILITIES> 586,491
<BONDS> 0
0
0
<COMMON> 4,456,457
<OTHER-SE> (5,056,855)
<TOTAL-LIABILITY-AND-EQUITY> 860,232
<SALES> 262,665
<TOTAL-REVENUES> 363,174
<CGS> 242,591
<TOTAL-COSTS> 406,606
<OTHER-EXPENSES> 16,121
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (59,553)
<INCOME-TAX> 0
<INCOME-CONTINUING> (59,553)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (59,553)
<EPS-BASIC> (.01)
<EPS-DILUTED> (.01)
</TABLE>
