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, 1995
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:
(214) 931-9743
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
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
PAGE
HUDSON'S GRILL OF AMERICA, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
September 30, 1995 and January 1, 1995
September 30, January 1,
1995 1995
ASSETS
Current assets:
Cash and cash equivalents $ 3,568 $ 92,750
Accounts receivable, no allowance
for doubtful accounts considered
necessary 57,265 44,098
Current portion of notes and lease
receivable 427,483 203,005
Prepaid expenses and other 29,664 14,871
Total current assets 517,980 354,724
Property and equipment, at cost:
Leasehold improvements 662,879 933,250
Restaurant equipment 480,933 772,812
Furniture and fixtures 196,052 297,266
Total property and equipment 1,339,864 2,003,328
Less accumulated depreciation
and amortization (1,191,591) (1,481,435)
Property and equipment-net 148,273 521,893
Long term portion of notes
and lease receivable 1,841,530 1,836,679
Liquor licenses-net of
accumulated amortization
of $66,491 and $53,191
respectively 162,124 243,138
Other assets 48,913 74,144
Total assets $ 2,718,820 $ 3,030,578
PAGE
HUDSON'S GRILL OF AMERICA, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
September 30, 1995 and January 1, 1995
September 30, January 1,
1995 1995
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 147,714 $ 126,684
Accounts payable 101,151 154,309
Accrued liabilities 112,899 110,466
Total current liabilities 361,764 391,459
Long-term debt 1,135,776 1,238,187
Other long-term liabilities 335,403 523,436
Deferred income 313,224 348,782
Commitments and contingencies
(Note 4)
Shareholders' equity:
Preferred stock, 1,000,000
shares authorized, none
issued or outstanding
Common stock, no par value
10,000,000 shares authorized
6,056,986 shares issued and
outstanding 4,456,457 4,456,457
Accumulated deficit (3,883,804) (3,927,743)
Total shareholders' equity 572,653 528,714
Total liabilities and
and shareholders' equity $2,718,820 $3,030,578
PAGE
HUDSON'S GRILL OF AMERICA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
For the three months ended September 30, 1995 and September 30, 1994
September 30, September 30,
1995 1994
Franchise revenue $ 50,750 $ 21,272
Capital lease income 16,437
Joint venture revenues -
equipment lease income 39,608 135,792
106,795 157,064
Costs and expenses:
Restaurant operations - net 40,671
General and administrative 118,770 71,558
Depreciation and amortization 20,307 65,573
Franchise expense
179,748 137,131
Income (loss) from operations (72,953) 19,933
Interest expense (25,295) (33,928)
Interest income 38,838 33,412
Gain on sale of assets 7,412 348,782
Miscellaneous income 5,780
Gain (loss) on store closure 86,766 (8,045)
Loss from impairment of assets
Amortization of deferred income 3,326
Net income before provision for
income taxes and extraordinary item 40,548 363,480
Provision for income taxes
Net income before
extraordinary item 40,548 363,480
Extraordinary item - Gain from
extinguishment of debt
Net income 40,548 363,480
Net income attributable to
common shares 40,548 363,480
Net income common share $ .0041 $ .06
PAGE
HUDSON'S GRILL OF AMERICA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
For the nine months ended September 30, 1995 and September 30, 1994
September 30, September 30,
1995 1994
Franchise revenue $ 198,891 $ 58,398
Capital lease income 51,183
Joint venture revenues -
and equipment lease income 155,960 408,560
406,034 466,958
Costs and expenses:
Restaurant operations - net 86,517 1,510
General and administrative 367,561 303,662
Depreciation and amortization 66,821 272,237
Franchise expense 5,000
520,899 582,409
Loss from operations (114,865) (115,451)
Interest expense (78,220) (170,952)
Interest income 125,677 103,075
Gain on sale of assets 13,684 371,282
Miscellaneous income 10,899
Gain (loss) on store closure 86,766 (9,441)
Loss from impairment of assets (576,827)
Amortization of deferred income 3,326
Net income (loss) before provision
for income taxes and
extraordinary item 43,941 (394,988)
Provision for income taxes
Net income (loss) before
extraordinary item 43,941 (394,988)
Extraordinary item - Gain from
extinguishment of debt 1,747,233
Net income 43,941 1,352,245
Net income attributable to
common shares 43,941 1,352,245
Net income common share $ .0044 $ .22
PAGE
HUDSON'S GRILL OF AMERICA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOW
For the nine months ended
September 30, 1995 and September 30, 1994
September 30, September 30,
1995 1994
Cash flows from operating
activities:
Net income $ 43,941 $ 1,352,245
Adjustment to reconcile income
to net cash flows from operating
activities:
Depreciation and amortization 66,821 272,237
Amortization of deferred income (51,907) (3,326)
Gain on sale of assets (13,684) (371,282)
Loss from impairment of assets 576,827
Gain from extinguishment of debt (1,747,233)
Non-cash income and expense (132,400)
Net cash provided by (used for)
changes in assets and liabilities:
Accounts receivable (24,569) 222,606
Prepaid expenses and other (16,356) 55,556
Accounts payable (9,214) (522,455)
Accrued and other liabilities 2,055 31,635
Net cash flows from operating activities (135,313) (133,190)
Cash flows from investing activities:
Proceeds from sale of assets 12,182 25,595
Note receivable principal payments 84,358 180,030
Payments on lease receivables 80,377
Other assets 7,787 8,843
Additions to notes receivable (1,000,000)
Net cash flows from investing
activities 184,704 (785,532)
Net cash flows from financing
activities:
Repayment of long term debt (80,801) (384,970)
Proceeds from notes payable 25,000 120,000
Repayment of long term liabilities (82,772)
Net cash flows from financing
activities: (138,573) (264,970)
PAGE
HUDSON'S GRILL OF AMERICA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONT'D)
For the nine months ended
September 30, 1995 and September 30, 1994
September 30, September 30,
1995 1994
Net decrease in cash (89,182) (1,183,692)
Cash at beginning of period 92,750 1,294,602
Cash at end of period $ 3,568 $ 110,910
Supplemental cash flow
information:
Interest paid $ 78,656 $ 81,899
Income taxes paid $ $ 800
PAGE
HUDSON'S GRILL OF AMERICA, INC.
Notes to Consolidated Financial Statements
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Hudson's Grill of America, Inc. (the "Company") franchises
and previously owned and operated full-service restaurants,
primarily in Southern California and Texas. As of September 30,
1995, the Company has franchised fourteen restaurants.
Additionally, they own four restaurants, all of which are held
for sale. (See Notes 2 and 8).
The consolidated financial statements include the Company
and its wholly-owned subsidiaries, Equipco, Inc. and Hudson's
Grill of Whittier, Inc. All significant intercompany balances
and transactions have been eliminated in consolidation.
Management is in the process of attempting to sell and
franchise the Company's restaurants and believes that these and
other cost cutting actions will assist the Company in meeting its
cash flow requirements over the next twelve months.
Restaurants Held for Sale
As of September 30, 1995, restaurants held for sale are
operated under formal and informal joint venture agreements with
prospective purchasers except for its Whittier location. The
Company has ceased recording operating revenues and expenses on
these joint ventured locations, but records joint venture and
equipment rental fees (see Note 8). The Company has recorded the
net operating expense of the Whittier location. Gross revenues
and expenses for the three months and nine months ended September
30, 1995 were:
Three months Nine months
Gross revenue $170,521 $320,670
Cost of sales and
operating expense (211,192) (407,187)
Restaurant operations - net $(40,671) $(86,517)
Management has evaluated the remaining net assets and
believes the carrying values do not exceed the net realizable
values of those assets.
Cash and Cash Equivalents
Cash and cash equivalents for purposes of the statement of
cash flows consist of cash and short-term investments purchased
with an original maturity of three months or less.
PAGE
HUDSON'S GRILL OF AMERICA, INC.
Notes to Consolidated Financial Statements (Cont'd)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONT'D)
Non-current Assets
Depreciation of property and equipment is recognized using
the straight-line method over the estimated lives of the assets
(generally five to seven years).
Amortization of leaseholds is recognized using the straight-
line method over the shorter of the initial term of the
respective lease or the service life of the leased asset.
Goodwill was recorded as the difference between the purchase
price and the fair value of net assets acquired upon purchase of
the initial restaurants, and was amortized on the straight-line
method over forty years. The Company charged against income a
total of approximately $3,500,000 of the remaining goodwill
balances during the years ended January 1, 1995 and January 2,
1994 in connection with the sales and closures of the related
restaurants and the restructuring of the related acquisition
debt. All goodwill had been eliminated as of January 1, 1995.
Liquor licenses are recorded at cost and are amortized over
ten years.
Income Taxes
In the fiscal year beginning January 4, 1993, the Company
adopted Statement of Financial Accounting Standard (SFAS) No.
109, "Accounting for Income Taxes". Adoption of the new
statement did not have a material effect on the Company's
financial statements.
Pursuant to SFAS No. 109, income taxes are provided for the
tax effects of transactions reported in the financial statements
and consist of taxes currently due plus deferred taxes related
primarily to differences between the financial and income tax
reporting bases of assets and liabilities. The deferred tax
assets and liabilities represent the future tax return
consequences of those differences, which will either be taxable
or deductible when the assets and liabilities are recovered or
settled.
PAGE
HUDSON'S GRILL OF AMERICA, INC.
Notes to Consolidated Financial Statements (Cont'd)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONT'D)
Income (loss) per share
Income per common share is computed based upon the weighted
average number of common and common equivalent shares (unless the
effect of the common equivalent shares is antidilutive)
outstanding during the year. Common stock equivalents consist of
outstanding stock options and warrants. Common stock equivalents
are assumed to be exercised with the related proceeds used to
repurchase outstanding shares except when the effect would be
antidilutive.
The weighted average number of shares outstanding used in
the income (loss) per share computation was 10,056,986 for the
nine months ended September 30, 1995 and 6,056,986 for the nine
months ended September 30, 1994.
2. FRANCHISE ACTIVITIES
In 1991, the Company commenced franchising its Hudson's
Grill concept. Under the terms of the standard franchise
agreement, the franchisees are obligated to pay the Company an
initial franchise fee of $25,000, and a weekly continuing royalty
fee of 4% of gross restaurant revenues, and must spend 3% of
gross sales on approved advertising, including a weekly 1%
marketing fee contributed to the Company's marketing fund. The
Company is obligated to provide initial training, continuing
management assistance, administration of advertising and sales
promotion programs and establishment and monitoring of a
marketing fund. Franchising revenues consisted of:
Nine months Nine months
ended ended
September 30, September 30,
1995 1994
Initial franchise revenues $ 49,374 $
Continuing franchise
revenues 149,517 58,398
Total franchise revenues $ 198,891 $ 58,398
PAGE
HUDSON'S GRILL OF AMERICA, INC.
Notes to Consolidated Financial Statements (Cont'd)
3. NOTES AND LEASES RECEIVABLE
At January 1, 1995 the Company has a $1,199,114 note
receivable from its Texas franchisee. A principal shareholder of
the Company owns an interest in this entity and Travis L. Bryant
(see Note 5) owned an interest in this entity until 1994.
Monthly payments of $7,994, interest only through August 1995 and
then monthly payments of principal and interest in the amount of
$14,549 are required at a rate of 8% per year for ten years. The
last payment will consist of all remaining principal and accrued
interest due at that time. The note is collateralized by
restaurant equipment and improvements. In addition, an offset
agreement exists in which the Company can offset any past due
amounts on the note against a note payable of $1,154,420 to
Travis L. Bryant. See Note 5.
In connection with the sale of restaurants in the year ended
January 2, 1994, the Company received a note for $490,000 with
annual installments totalling $86,667, over four years with the
balance due in the fifth year, plus interest at prime plus 2%.
The balance of the note at January 1, 1995 and at September 30,
1995 was $316,667 and $256,667 respectively.
In connection with the sale of a restaurant in the year
ended January 1, 1995, the Company received a note for $262,800.
The note bears interest at a rate equal to the greater of prime
plus 2% or 9%, adjusted on a quarterly basis. Payments of
interest only are required for one year, after which ninety-six
monthly payments are required in amounts necessary to amortize
the remaining principal balance of the note. The Company also
leased the restaurant equipment to the purchaser under a ten year
lease that has been classified as a sales-type lease. The net
carrying value of the lease receivable at September 30, 1995 and
January 1, 1995, is composed of the following:
September 30, January 1,
1995 1995
Future lease payments due
in fiscal year ending:
December 31, 1995 $ 12,923 $ 48,000
December 29, 1996 48,000 48,000
January 4, 1998 48,000 48,000
January 3, 1999 48,000 48,000
January 2, 2000 48,000 48,000
Thereafter 224,308 224,308
Total 429,231 464,308
Less amount representing
unearned interest (212,660) (241,775)
$ 216,571 $ 222,533
PAGE
HUDSON'S GRILL OF AMERICA, INC.
Notes to Consolidated Financial Statements (Cont'd)
3. NOTES AND LEASE RECEIVABLE (CONT'D)
In connection with the sale of two restaurants to a single
buyer which closed during the nine months ended September 30,
1995, the Company received notes in the amount of $100,000. The
notes bear interest at 7.5% and are amortized over five years
starting September 30, 1993 (the date the purchase agreement was
reached). The Company also leased the restaurants' equipment to
the purchaser under two five year leases (beginning October 1,
1993) that have been classified as sales-type leases. The net
carrying value of the lease receivables at September 30, 1995 is
composed of the following:
September 30,
1995
Future lease payments due
fiscal year ending:
December 31, 1995 $ 24,000
December 29, 1996 96,000
January 4, 1998 96,000
January 3, 1999 72,000
Total 288,000
Less amount representing
unearned interest (77,360)
$ 210,640
4. COMMITMENTS AND CONTINGENT LIABILITIES
Most of the Company's restaurant buildings and equipment are
operated under noncancelable operating leases. Terms of these
leases extend from 3 to 25 years. Certain leases are guaranteed
by former directors. In addition to amounts included below, the
leases generally provide that the Company pay taxes, maintenance,
insurance and certain other operating expenses applicable to the
leased property, plus a percentage of gross receipts in excess of
certain limits stated in the lease agreements. As explained in
Note 8, most of the Company's remaining restaurants are operated
by third parties under joint venture agreements and the rental
payments are being made by those parties.
PAGE
HUDSON'S GRILL OF AMERICA, INC.
Notes to Consolidated Financial Statements (Cont'd)
4. COMMITMENTS AND CONTINGENT LIABILITIES (CONT'D)
The following is a summary by years of future minimum lease
payments on the restaurant locations:
Fiscal Year Ending:
December 31, 1995 $ 532,200
December 29, 1996 528,714
January 4, 1998 500,496
January 3, 1999 500,496
January 2, 2000 500,496
Thereafter 6,558,148
Total minimum lease payments $9,120,550
The Company has assigned to the purchasers, the leases on
buildings for seven of the restaurants sold prior to September
30, 1995. Under the terms of the leases, the Company is
secondarily liable for the lease payments on these restaurants
should the purchasers not fulfill their responsibility under the
leases. The future lease payments for these restaurants total
approximately $6,134,312 at January 1, 1995 and September 30,
1995. In addition, the Company may be secondarily liable under
other leases for restaurants sold in prior years.
Total rental expenses for operating leases was $66,934 and
$71,021 for the nine months ended September 30, 1995, and
September 30, 1994, respectively.
5. LONG-TERM DEBT
Long-term debt at September 30, 1995 and January 1, 1995,
which is collateralized by substantially all of the assets of the
Company, is summarized as follows:
September 30, January 31,
1995 1995
Note payable to Travis L.
Bryant, a former director
of the Company and a former
part owner of the Company's
Texas franchisee, monthly
interest payments of $7,696
through November, 1995 and
monthly installments of
$14,006 including interest
at 8% through November, 2005.
(See below and Note 3.) $1,154,420 $1,154,420
PAGE
HUDSON'S GRILL OF AMERICA, INC.
Notes to Consolidated Financial Statements (Cont'd)
5. LONG-TERM DEBT (CONT'D):
September 30, January 31,
1995 1995
Note payable to Corona Market
Partnership, due in monthly
installments of $5,327,
including interest of 8%
through June, 1997. 104,070 144,414
Note payable, interest at
12%. Principal and interest
due December 26, 1995. 25,000
Note payable in monthly
principal installments of
$5,555, plus interest at prime
rate plus 2% (total of 10.5%
at January 1, 1995), due April
1995. 22,229
Note payable, due in monthly
installments of $1,435,
including interest at 12%,
through May 1996. 23,527
Note payable, due in monthly
installments of $6,793,
including interest at 7%,
through March 1995. 20,281
Total 1,283,490 1,364,871
Less current portion (147,714) (126,684)
Long-term debt $1,135,776 $1,238,187
PAGE
HUDSON'S GRILL OF AMERICA, INC.
Notes to Consolidated Financial Statements (Cont'd)
5. LONG-TERM DEBT (CONT'D)
Principal payments due in the fiscal years subsequent to
January 1, 1995 are as follows:
Fiscal Year Ending:
December 31, 1995 $ 126,684
December 29, 1996 147,932
January 4, 1998 116,879
January 3, 1999 82,758
January 2, 2000 100,456
Thereafter 790,162
Total $1,364,871
No covenants of the debt agreements at January 1, 1995 are
considered to be materially restrictive.
In the year ended January 1, 1995, Travis L. Bryant formally
agreed to reduce a $3,360,000 note payable to him into a
$1,300,000 note due in monthly installments as described above.
In addition, Bryant agreed to forgive certain other amounts due
him by the Company, which totalled approximately $720,000. In
connection with the restructuring transaction, Bryant also
received a warrant to purchase 4,000,000 shares of the Company's
common stock at $.0625 per share anytime over the next ten years.
Consummation of the agreement was contingent on the Company's
performance of certain conditions, including the loan of an
additional amount to the Texas franchisee to increase that note
receivable from $300,000 to $1,300,000 (see Note 3) and the
compromise and satisfaction of certain liabilities due lessors of
certain closed restaurant locations (See Note 4). These
conditions were satisfied in the year ended January 1, 1995 and
the debt restructure was consummated. The total debt forgiveness
of $1,747,233, net of approximately $1,033,000 of the write-off
of associated goodwill, has been recorded as an extraordinary
item.
PAGE
HUDSON'S GRILL OF AMERICA, INC.
Notes to Consolidated Financial Statements (Cont'd)
6. INCOME TAXES
Deferred income taxes are provided for temporary differences
between income tax and financial reporting as of September 30,
1995 and January 1, 1995 as follows:
September 30, January 1,
1995 1995
Deferred tax asset:
Depreciation $ 230,000 $ 230,000
Net operating loss 167,000 167,000
Accrued settlement 60,000 60,000
Valuation allowance (457,000) (457,000)
$ $
At January 1, 1995, and at September 30, 1995 the Company
had net operating loss and investment tax credit carryforwards
for Federal income tax purposes of $900,000 and $200,000,
respectively. Use of these carryforwards is limited following
issuance of the warrant described in Note 5.
7. SHAREHOLDERS' EQUITY
The Company is authorized to issue 1,000,000 shares of
preferred stock with rights and preferences as designated by the
Board of Directors.
In connection with a transaction with another company in
1991, the Company issued a warrant to acquire 100,000 shares of
the Company's common stock at $1.00 per share, which expires
January 1, 1996.
In January 1994, in connection with a debt restructuring
agreement described in Note 5, the Company issued warrants to
Travis L. Bryant. The warrants are exercisable for 4,000,000
shares of common stock at $.0625 per share and expire in ten
years. The exercise price approximated the market value of the
stock at the time of grant.
The directors also voted to grant to Mr. Sacco options to
purchase 400,000 shares of the Company's stock. One hundred
thousand shares will vest each year on May 1st, starting in 1995
and ending in 1998. The exercise price will be set at the time
of vesting at the average between the closing bid and asked on
the day of vesting (or the next business day if May 1 is not a
PAGE
HUDSON'S GRILL OF AMERICA, INC.
Notes to Consolidated Financial Statements (Cont'd)
7. SHAREHOLDERS' EQUITY (CONT'D)
business day). The 1995 options are already vested with an
option exercise price of 10.9 cents. All of the options vest in
the event a tender offer is made for all of the Company's stock.
8. RESTAURANT SALES AND CLOSURES
During the year ended January 1, 1995, the company sold one
restaurant and recorded a deferred gain of $348,782 on the sale,
which has been recorded as a liability as of January 1, 1995.
The liability will be amortized into income as gain on sale of
assets over the terms of the related note and lease receivables
(see Note 3).
On January 31, 1994, the Company closed its Irvine
restaurant. In connection with this closure, a loss of $460,000
was recorded at January 2, 1994 to write off goodwill and
estimate the settlement of lease obligations. An additional
$188,000 of losses related to the closure of the Irvine
restaurant were recorded in the year ended January 1, 1995.
On September 5, 1995, the Company negotiated a settlement of
the lease obligations for $85,000 payable $50,000 at closing,
$20,000 on October 4, 1995 and $15,000 on November 6, 1995. This
settlement was less than the accrued liability and resulted in a
gain of $86,766.
The Company is endeavoring to sell all remaining restaurants
and has granted purchase options for three of the remaining
restaurants owned. These purchase options also include certain
joint venture provisions, which began in the second half of the
year ended January 2, 1994, whereby, the future purchasers
operate the restaurants and the Company receives a joint
venturer's fee based on sales, net of certain operating expenses.
In addition, certain joint venturer's have agreed to lease in-
store assets over the term of the joint venture agreements, which
expire upon sale of the restaurants. Joint venture fees and the
related lease income for the nine months ended September 30, 1995
and nine months ended September 30, 1994 were $155,960 and
$408,560, respectively. After the sale of the restaurants,
revenue from the lease of the store assets to the buyer is
reported as capital lease income. Capital lease income for the
nine months ended September 30, 1995 and September 30, 1994 was
$51,183 and $-0-, respectively. Based on the option price
provided in these agreements, management does not anticipate
recording a loss on sale of these restaurants.
PAGE
HUDSON'S GRILL OF AMERICA, INC.
Notes to Consolidated Financial Statements (Cont'd)
8. RESTAURANT SALES AND CLOSURES (CONT'D)
The Company has written down the carrying value of the one
remaining restaurant held for sale by approximately $587,000
during the year ended January 1, 1995 due to diminished prospects
for the sale of the restaurant.
PAGE
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
April 14, 1995 (see Item 3 on page 5 of the Form 10-KSB).
Currently all major litigation involving the registrant has been
settled, and registrant is not aware of any material litigation
in process.
Item 5. Other Information.
The registrant has been in discussions with Gregory Georgas
and William Georgas, who through four corporations own four of
the registrant's franchises, concerning expansion opportunities
in California and New Jersey. Tentative agreements have been
made for the construction over the next 15 years of 24 Hudson's
Grills to be opened in the middle western part of California and
in certain northern counties in New Jersey. At the same time
tentative agreements have been made with the Georgas' concerning
the prepayment of franchise fees in exchange for a reduction in
their franchise fee rates and certain other modifications to
their current franchise agreements covering their four
franchises. The registrant hopes to conclude formally these
agreements shortly.
The registrant has also tentatively sold its Whittier,
California Hudson' Grill restaurant, currently operated by a
subsidiary, to its current manager. The Hudson's Grill will be
sold after California regulatory authorities permit the transfer
of various assets and after a new corporation has been properly
formed to operate in California as the new owner of the
operations of the restaurant.
The registrant was recently informed of the sale by its
Texas franchise developer of four of the its Hudson's Grills.
Two restaurants are located in the Dallas, Texas area, and two
are located in the Austin, Texas area. By October 1, 1995, three
of the restaurants will have begun paying the registrant an
increased franchise fee of 4%, which is to continue for the
remainder of the twenty year term of their franchise agreements.
Beginning on November 1, 1996, the Carrollton, Texas Hudson's
Grill will begin paying a 4% franchise fee for the rest of its
franchise term; until November 1, 1996, it will pay a 2%
franchise fee.
PAGE
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.
<FN2> No reports on unaudited interim financial information
has 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, 1995:
1. September 15, 1995. The registrant reported that it
had settled the "Torres v. Hudson's Grill of America" case
involving its Whittier, California Hudson's Grill. Terms of the
settlement were confidential, and the settlement was paid by the
registrant's insurer.
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 14, 1995
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