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 March 31, 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
HUDSON'S GRILL OF AMERICA, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
ASSETS
March 31, January 3,
1999 1999
CURRENT ASSETS:
Cash and cash equivalents $ 21,045 $ 22,169
Accounts receivable, net of allowance
for doubtful accounts of $73,406
and $62,000 respectively 5,708 9,992
Other receivable 4,877 101,633
Current portion of notes and leases
receivable 60,350 60,350
Prepaid expenses and other
receivables 26,575 26,354
Total current assets 118,555 220,498
PROPERTY AND EQUIPMENT, at cost:
Leasehold improvements 294,373 282,877
Restaurant equipment 356,357 91,477
Furniture and fixtures 5,851 5,851
Total property and equipment 656,581 380,205
Less accumulated depreciation
and amortization (34,160) (13,763)
Property and equipment, net 622,421 366,442
LONG TERM PORTION OF NOTES
AND LEASES RECEIVABLE, net of
allowance for doubtful accounts
of $-0- and $-0- respectively 124,945 134,521
LIQUOR LICENSES, net of
accumulated amortization
of $-0- and $-0- respectively 2,016 3,288
OTHER ASSETS 16,531 15,981
Total assets $ 884,468 $ 740,730
HUDSON'S GRILL OF AMERICA, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
LIABILITIES AND SHAREHOLDERS' EQUITY
March 31, January 3,
1999 1999
CURRENT LIABILITIES:
Current portion of long-term debt
and capital lease obligation $ 36,158 $ 8,689
Accounts payable - trade 229,539 291,772
Advances - related parties 57,150 56,940
Accrued liabilities 225,001 196,210
Total current liabilities 547,848 553,611
LONG-TERM DEBT AND CAPITAL LEASE
OBLIGATION, net of current portion 541,166 258,884
OTHER LONG-TERM LIABILITIES 114,325 130,654
DEFERRED INCOME 221,974 231,852
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 (4,997,302) (4,890,728)
Total shareholders' equity (540,845) (434,271)
Total liabilities and
and shareholders' equity $ 884,468 $ 740,730
HUDSON'S GRILL OF AMERICA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
For the three months ended
March 31, March 31,
1999 1998
REVENUES:
Net sales $ 231,088 $ 226,745
Franchise revenues 39,988 82,974
Equipment lease income 6,849 12,515
Gain on sales of restaurants 6,517 11,423
Other income 21,864 16,330
Total revenues 306,306 349,987
COSTS AND EXPENSES:
Cost of sales 283,484 235,549
General and administrative 104,084 139,014
Depreciation and amortization 20,448 3,280
Total costs and expenses 408,016 377,843
Income (loss) from operations (101,710) (27,856)
OTHER INCOME (EXPENSE):
Interest expense (9,263)
Interest income 4,399 7,767
Total other income (expense) (4,864) 7,767
INCOME (LOSS) BEFORE INCOME TAXES (106,574) (20,089)
Provision for income taxes
NET INCOME (LOSS) AND
COMPREHENSIVE INCOME (LOSS) $ (106,574) $ (20,089)
INCOME (LOSS) PER SHARE
Basic and diluted net
income (loss) and comprehensive
income (loss) per share $ (.0175) $ (.003)
HUDSON'S GRILL OF AMERICA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
For the nine months ended
March 31, March 31,
1999 1998
REVENUES:
Net sales $ 301,441 $ 103,890
Franchising fees from restaurants
under sales contracts 15,573
Franchise revenues 212,952 252,463
Equipment lease income 45,172 56,139
Gain on sales of restaurants 36,591 53,165
Other income 52,164 51,440
Total revenues 648,320 532,670
COSTS AND EXPENSES:
Cost of sales 310,442 116,938
General and administrative 368,155 445,584
Depreciation and amortization 8,324 24,371
Total costs and expenses 686,921 586,893
Income (loss) from operations (38,601) (54,223)
OTHER INCOME (EXPENSE):
Interest expense (251) (672)
Interest income 38,955 61,494
Total other income (expense) 38,704 60,822
INCOME (LOSS) BEFORE INCOME TAXES 103 6,599
Provision for income taxes
NET INCOME (LOSS) $ 103 $ 6,599
INCOME (LOSS) PER SHARE
Basic and diluted net
income (loss) and comprehensive
income (loss) per share $ .00001 $ .0007
HUDSON'S GRILL OF AMERICA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOW
For the three months ended
March 31, March 31,
1999 1998
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (106,574) $ (20,089)
Adjustments to reconcile net income
(loss) to net cash used by operating
activities:
Depreciation and amortization 20,448 3,280
(Gain) loss on sales and closures
of restaurants (6,517) (11,424)
Changes in assets and liabilities:
Accounts receivable 89,635 5,129
Prepaid expenses and other (11,755) 1,292
Accounts payable (62,233) 33,641
Accrued liabilities and other 32,922 (1,819)
Net cash provided (used)
by operating activities (44,074) 10,010
CASH FLOWS FROM INVESTING ACTIVITIES:
Notes receivable principal payments 9,576 7,337
Leases receivable principal payments 7,385
Increase in fixed assets (19,552) (1,922)
Net cash provided (used) by
investing activities (9,976) 12,800
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt 60,000
Repayments of long-term debt (7,073)
Net cash provided (used) by
financing activities 52,927
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (1,123) 22,810
CASH AND CASH EQUIVALENTS, beginning
of period 22,168 42,401
CASH AND CASH EQUIVALENTS, end
of period $ 21,045 $ 65,211
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ 1,479 $
Income taxes paid $ $
HUDSON'S GRILL OF AMERICA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS, continued
SUPPLEMENTAL DISCLOSURES OF NON-CASH TRANSACTIONS:
Period ended March 31, 1999
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.
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
three months ended March 31, 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 March 31, 1999 ("Q1") were
$4,877 as compared to $101,633 at January 3, 1999 ("FYE"). Its
restaurant equipment at Q1 was $356,357 as compared to $91,477 at FYE.
Equipment increased because of equipment for the January opening of the
Dallas Hudson's Grill.
Accounts payable decreased at Q1 to $229,539 from $291,772 at FYE.
On the other hand, the current portion of long term debt increased to
$36,158 at Q1 from $8,689 at FYE; also accrued liabilities increased at
Q1 to $225,001 from $196,210 at FYE. Long term debt and capital lease
obligations increased, too, at Q1 to $541,166 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
that opened in January 1999.
Material changes in the results of operations of Q1 compared to the
first quarter of 1998 ("Q98") include the following. Net Sales remained
about the same, but cost of sales increased to $283,484 in Q1 from
$235,549 in Q98. These are a result of losses that have occurred at the
newly opened Dallas location. Franchising revenues from restaurants
under contract decreased from $82,974 in Q98 to $39,988 in Q1 because of
fewer operating franchises and because some of the franchises have not
been paying their fees. The Company is pursuing these fees through
litigation. Thus, income from operations decreased substantially from a
loss of ($27,856) in Q98 to ($101,710) in Q1.
General and administrative expenses dropped somewhat in Q1 to $104,
084 from $139,014 in Q98. Interest expense increased because of the
loans for the new Dallas restaurant; in Q98 there was no interest
expense, but in Q1 the Company incurred $9,263.
The Company incurred a loss of ($106,574) (($.0175) per share) in
Q1 as compared to a loss of ($20,089) (($.003) 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. The registrant is not aware of any other litigation not already
disclosed in its recently filed SEC Form 10-KSB.
Item 2. Changes in Securities.
There were no changes in securities or in the rights of the holders
of the registrant's securities during Q1.
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
Q1.
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 January
1, 1998.
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 March 31, 1998, or shortly thereafter:
1. January 29, 1999. The Company announced the opening of its
Dallas, Texas, location, which is the first Company owned and operated
location to be built in many years. It is a free standing unit based on
the Company's most recent design.
2. 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: May 15, 1999
elink\filing\10QSB.991
<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> 3-MOS
<FISCAL-YEAR-END> JAN-03-1999
<PERIOD-END> MAR-31-1999
<CASH> 21,045
<SECURITIES> 0
<RECEIVABLES> 10,585
<ALLOWANCES> 73,406
<INVENTORY> 0
<CURRENT-ASSETS> 118,555
<PP&E> 656,581
<DEPRECIATION> 34,160
<TOTAL-ASSETS> 884,468
<CURRENT-LIABILITIES> 547,848
<BONDS> 0
0
0
<COMMON> 4,456,457
<OTHER-SE> (4,997,302)
<TOTAL-LIABILITY-AND-EQUITY> 884,468
<SALES> 231,088
<TOTAL-REVENUES> 306,306
<CGS> 283,484
<TOTAL-COSTS> 408,016
<OTHER-EXPENSES> 4,864
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (106,574)
<INCOME-TAX> 0
<INCOME-CONTINUING> (106,574)
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (106,574)
<EPS-PRIMARY> (.018)
<EPS-DILUTED> (.018)
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