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 September 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
HUDSON'S GRILL OF AMERICA, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
ASSETS
September 30, January 31,
1999 1999
CURRENT ASSETS:
Cash and cash equivalents $ 16,795 $ 22,169
Accounts receivable, net of allowance
for doubtful accounts of $99,180
and $62,000 respectively 7,220 9,992
Other receivable 5,291 101,633
Current portion of notes and leases
receivable 60,350 60,350
Prepaid expenses and other
receivables 31,558 26,354
Total current assets 121,214 220,498
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 (74,954) (13,763)
Property and equipment, net 584,732 366,442
LONG TERM PORTION OF NOTES
AND LEASES RECEIVABLE, net of
allowance for doubtful accounts
of $-0- and $-0- respectively 100,072 134,521
LIQUOR LICENSES, net of
accumulated amortization
of $-0- and $-0- respectively 3,288
OTHER ASSETS 16,429 15,981
Total assets $ 822,447 $ 740,730
HUDSON'S GRILL OF AMERICA, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
LIABILITIES AND SHAREHOLDERS' EQUITY
September 30, January 3,
1999 1999
CURRENT LIABILITIES:
Current portion of long-term debt
and capital lease obligation $ 57,879 $ 8,689
Accounts payable - trade 247,462 291,772
Advances - related parties 59,124 56,940
Accrued liabilities 280,187 196,210
Total current liabilities 644,652 553,611
LONG-TERM DEBT AND CAPITAL LEASE
OBLIGATION, net of current portion 550,795 258,884
OTHER LONG-TERM LIABILITIES 81,665 130,654
DEFERRED INCOME 198,327 231,852
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 (5,109,449) (4,890,728)
Total shareholders' equity (652,992) (434,271)
Total liabilities and
and shareholders' equity $ 822,447 $ 740,730
HUDSON'S GRILL OF AMERICA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME
(UNAUDITED)
For the three months ended
September 30, September 30,
1999 1998
REVENUES:
Net sales $ 233,332 $
Franchise revenues 66,388 68,760
Equipment lease income 7,084 12,109
Gain on sales of restaurants 6,853 4,223
Other income 16,330 18,335
Total revenues 329,987 103,427
COSTS AND EXPENSES:
Cost of sales 225,241 11
General and administrative 120,392 112,954
Depreciation and amortization 20,449 1,984
Total costs and expenses 366,082 114,949
Income (loss) from operations (36,095) (11,522)
OTHER INCOME (EXPENSE):
Interest expense (20,166)
Interest income 3,668 15,028
Total other income (expense) (16,498) 15,028
INCOME (LOSS) BEFORE INCOME TAXES (52,593) 3,506
Provision for income taxes
NET INCOME (LOSS) AND
COMPREHENSIVE INCOME (LOSS) $ (52,593) $ 3,506
INCOME (LOSS) PER SHARE
Basic and diluted net
income (loss) and comprehensive
income (loss) per share $ (.00868) $ .0003
HUDSON'S GRILL OF AMERICA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME
(UNAUDITED)
For the nine months ended
September 30, September 30,
1999 1998
REVENUES:
Net sales $ 727,085 $ 301,441
Franchise revenues 168,746 212,952
Equipment lease income 21,360 45,172
Gain on sales of restaurants 23,443 36,591
Other income 58,833 52,164
Total revenues 999,467 648,320
COSTS AND EXPENSES:
Cost of sales 751,316 310,442
General and administrative 368,044 368,155
Depreciation and amortization 61,344 8,324
Total costs and expenses 1,180,704 686,921
Income (loss) from operations (181,237) (38,601)
OTHER INCOME (EXPENSE):
Interest expense (49,585) (251)
Interest income 12,102 38,955
Total other income (expense) (37,483) 38,704
INCOME (LOSS) BEFORE INCOME TAXES (218,720) 103
Provision for income taxes
NET INCOME (LOSS) AND
COMPREHENSIVE INCOME (LOSS) $ (218,720) $ 103
INCOME (LOSS) PER SHARE
Basic and diluted net
income (loss) and comprehensive
income (loss) per share $ (.03611) $ .00001
HUDSON'S GRILL OF AMERICA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOW
For the nine months ended
September 30, September 30,
1999 1998
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (218,720) $ 103
Adjustments to reconcile net income
(loss) to net cash used by operating
activities:
Depreciation and amortization 61,343 8,324
(Gain) loss on sales and closures
of restaurants (23,443) (36,591)
Changes in assets and liabilities:
Accounts receivable 61,935 (19,273)
Prepaid expenses and other (22,686) (4,947)
Accounts payable (24,309) 32,770
Accrued liabilities and other 92,897 (5,534)
Net cash provided (used)
by operating activities (72,983) (25,148)
CASH FLOWS FROM INVESTING ACTIVITIES:
Net proceeds from sale of assets 20,120
Notes receivable principal payments 34,449 31,712
Leases receivable principal payments 37,148
Increase in fixed assets (22,657) (126,016)
Net cash provided (used) by
investing activities 11,792 (37,036)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt 71,000 100,000
Repayments of long-term debt (15,183)
Net cash provided (used) by
financing activities 55,817 100,000
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (5,374) 37,816
CASH AND CASH EQUIVALENTS, beginning
of period 22,169 42,401
CASH AND CASH EQUIVALENTS, end
of period $ 16,795 $ 80,217
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ 8,218 $ 251
Income taxes paid $ $
HUDSON'S GRILL OF AMERICA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS, continued
SUPPLEMENTAL DISCLOSURES OF NON-CASH TRANSACTIONS:
Period ended September 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 September 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 nine months ended September 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 September 30, 1999 ("Q3")
were $5,291 as compared to $101,633 at January 3, 1999 ("FYE"). Its
restaurant equipment at Q3 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 Q3 to $74,954 from $13,763 at FYE.
Trade accounts payable decreased at Q3 to $247,462 from
$291,772 at FYE. On the other hand, the current portion of long term
debt increased to $57,879 at Q3 from $8,689 at FYE; also accrued
liabilities increased at Q3 to $280,187 from $196,210 at FYE. Long
term debt and capital lease obligations increased, too, at Q3 to
$550,795 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 Q3 to $81,665 from $130,654 at FYE.
Material changes in the results of operations of Q3 compared to
the second quarter of 1998 ("Q98") include the following. Net
sales increased in Q3 to $233,665 from $0 in Q98 as a result of the
newly opened Dallas location. As a consequent, cost of sales
increased to $225,241 in Q3 from $11 in Q98. Franchising revenues
from restaurants decreased slightly from $68,760 in Q98 to $66,388
in Q3. Depreciation increased in Q3 to $20,166 from $1,984 in Q98
because of the increased equipment at the Dallas location. Thus,
income from operations decreased substantially from a loss of
($11,522) in Q98 to a loss of ($36,095) in Q3.
General and administrative expenses increased in Q3 to $120,392
from $112,954 in Q98. Interest expense increased because of the
loans for the new Dallas restaurant; in Q98 there was $0 in interest
expense, but in Q3 the Company incurred $20,166. Interest income
likewise dropped from $15,028 in Q98 to $3,668 in Q3.
Thus, the Company incurred a loss of ($52,593) (($.0087) per
share) in Q3 as compared to a gain of $3,506 ($.0003 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 Pearlstein case has been dismissed. 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 Company believes the lawsuit was filed in an attempt
to defend against a judgment that the Company has obtained in Texas
against the franchisees. Mr. Miller has since filed personal
bankruptcy, and the registrant is unsure what impact that will have
on the lawsuit. The Texas judgment currently is being collected in
California against the franchisee; however, at this time, the
Company is unsure what it will collect, if anything, on its judgment
against the franchisee. The registrant also has been served with a
lawsuit stemming from the closure of the Lancaster, California
location by the franchisee that operated at that location. The
registrant feels that the lawsuit is without merit since it offered
to operate that location, but was turned down by the landlord. The
registrant believes that it will be served with a lawsuit from the
landlord of the Pomona, California location of a previous
franchisee. The Whittier lease lawsuit also continues, without any
real possibility of settlement.
Item 2. Changes in Securities.
There were no changes in securities or in the rights of the
holders of the registrant's securities during Q3. Since the end of
Q3, the directors decided to issue 600,000 shares to David Osborn,
Clifford Osborn, and Robert Fischer, in exchange for some debt
reduction.
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 Q3.
Item 5. Other Information.
The registrant does not have any material new information that
has not already been disclosed in Forms 8-K, 10-QSB and 10-KSB filed
since April 1, 1999, other than it plans to sell its Dallas Hudson's
Grill because of its poor performance; it hopes to find a buyer by
the end of the year and hopes to spin off the Hudson's Grill
International, Inc., subsidiary in the early part of 2000.
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 September 30, 1999, or shortly
thereafter: none.
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: November 19, 1999
elink\filing\10QSB.993
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<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> 9-MOS
<FISCAL-YEAR-END> JAN-03-1999
<PERIOD-END> SEP-30-1999
<CASH> 16,795
<SECURITIES> 0
<RECEIVABLES> 7,220
<ALLOWANCES> 99,180
<INVENTORY> 0
<CURRENT-ASSETS> 121,214
<PP&E> 659,686
<DEPRECIATION> 74,954
<TOTAL-ASSETS> 822,447
<CURRENT-LIABILITIES> 644,652
<BONDS> 0
0
0
<COMMON> 4,456,457
<OTHER-SE> (5,109,449)
<TOTAL-LIABILITY-AND-EQUITY> 822,447
<SALES> 727,085
<TOTAL-REVENUES> 999,467
<CGS> 751,316
<TOTAL-COSTS> 1,180,704
<OTHER-EXPENSES> 37,483
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (218,720)
<INCOME-TAX> 0
<INCOME-CONTINUING> (218,720)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (218,720)
<EPS-BASIC> (.0361)
<EPS-DILUTED> (.0361)
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