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, 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
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
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
HUDSON'S GRILL OF AMERICA, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
ASSETS
March 31, December 28,
1998 1997
CURRENT ASSETS:
Cash and cash equivalents $ 65,211 $ 42,401
Accounts receivable, net of allowance
for doubtful accounts of $47,425
and $49,000 respectively 43,506 69,830
Current portion of notes and leases
receivable 100,000 100,000
Prepaid expenses and other 38,531 23,185
Total current assets 247,248 235,416
PROPERTY AND EQUIPMENT, at cost:
Leasehold improvements 3,986 2,969
Restaurant equipment 33,678 33,378
Furniture and fixtures 5,851 5,851
Total property and equipment 43,515 42,198
Less accumulated depreciation
and amortization (8,728) (7,030)
Property and equipment, net 34,787 35,168
LONG TERM PORTION OF NOTES
AND LEASES RECEIVABLE, net of
allowance for doubtful accounts
of $33,000 and $33,000 respectively 775,865 791,858
LIQUOR LICENSES-net of
accumulated amortization
of $31,500 at March 31, 1998
and $30,000 at December 28, 1997 28,500 30,815
OTHER ASSETS 17,318 23,463
Total assets $ 1,103,718 $ 1,116,720
HUDSON'S GRILL OF AMERICA, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
LIABILITIES AND SHAREHOLDERS' EQUITY
March 31, December 28,
1998 1997
CURRENT LIABILITIES:
Accounts payable $ 74,527 $ 40,886
Accrued liabilities 217,124 201,343
Total current liabilities 291,651 242,229
LONG-TERM DEBT
OTHER LONG-TERM LIABILITIES 179,645 206,494
DEFERRED INCOME 762,881 778,367
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 (4,586,916) (4,566,827)
Total shareholders' equity (130,459) (110,370)
Total liabilities and
and shareholders' equity $1,103,718 $1,116,720
HUDSON'S GRILL OF AMERICA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME
(UNAUDITED)
For the three months ended
March 31, March 31,
1998 1997
REVENUES:
Net sales $ 226,745 $
Franchising fees from restaurants
under sales contracts 8,093
Franchise revenues 82,974 75,988
Equipment lease income 12,515 16,812
Gain on sales of restaurants 11,423 16,103
Other income 16,330 16,471
Total revenues 349,987 133,467
COSTS AND EXPENSES:
Cost of sales 235,549
General and administrative 139,014 134,234
Depreciation and amortization 3,280 8,299
Total costs and expenses 377,843 142,533
Income (loss) from operations (27,856) (9,066)
OTHER INCOME (EXPENSE):
Interest expense (566)
Interest income 7,767 20,357
Total other income (expense) 7,767 19,791
INCOME (LOSS) BEFORE INCOME TAXES (20,089) 10,725
Provision for income taxes
NET INCOME (LOSS) AND
COMPREHENSIVE INCOME (LOSS) $ (20,089) $ 10,725
INCOME (LOSS) PER SHARE
Basic and diluted net income
(loss) and comprehensive
income (loss) per share $ (.003) $ .001
HUDSON'S GRILL OF AMERICA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOW
For the three months ended
March 31, March 31,
1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (20,089) $ 10,725
Adjustments to reconcile net income
(loss) to net cash used by operating
activities:
Depreciation and amortization 3,280 8,299
(Gain) loss on sales and closures
of restaurants (11,424) (16,103)
Changes in assets and liabilities:
Accounts receivable 5,129 29,829
Prepaid expenses and other 1,292 758
Accounts payable 33,641 (32,305)
Accrued liabilities and other (1,819) (59,143)
Net cash provided (used)
by operating activities 10,010 (57,940)
CASH FLOWS FROM INVESTING ACTIVITIES:
Net proceeds from sale of assets 4,634
Notes receivable principal payments 7,337 37,106
Leases receivable principal payments 7,385 17,923
Fixed assets and other (1,922)
Net cash provided (used) by
investing activities 12,800 59,663
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of notes payable (19,771)
Net cash provided (used) by
financing activities (19,771)
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 22,810 (18,048)
CASH AND CASH EQUIVALENTS, beginning
of period 42,401 78,680
CASH AND CASH EQUIVALENTS, end
of period $ 65,211 $ 60,632
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ $ 691
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, 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
three months ended March 31, 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 accounts receivable at March 31, 1998 ("Q1") were
$43,506 as compared to $69,830 at December 28, 1997 ("FYE").
Accounts payable increased at Q1 to $74,527 from $40,886 at FYE.
Material changes in the results of operations of Q1 compared to the
first quarter of 1997 ("Q97") include the following. Net Sales
increased to $226,745 in Q1 from $0 in Q97, and cost of sales also
increased to $235,549 in Q1 from $0 in Q97. These are a result of the
repossession of a restaurant during the first quarter of 1998 and the
continued operation of another location; they were operated by
subsidiaries and affiliates of the Company, and their results were
consolidated into the financial statements of the Company. Franchising
fees from restaurants under contract decreased from $8,093 in Q97 to $0
in Q1 because there are currently no restaurants operating while under a
sales contract. Franchising fees, franchise revenues, equipment lease
income, gains on sale of restaurants, and other income remained about
the same from Q97 to Q1. Income from operations decreased slightly from
a loss of ($9,066) to a loss of ($27,856).
General and administrative expenses also remained about the same
from Q97 to Q1. Interest income has dropped from $20,357 in Q97 to
$7,767 in Q1. Some of this is due to the declining principal of the
Company's notes receivable.
The issuer incurred a loss of ($20,089) (($.003) per share) in Q1
as compared to a profit of $10,725 ($.001 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 5,
1998. 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
<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. April 3, 1998. The Company announced that in March 1998 it had
signed a new franchise agreement with Sharfe, L.L.C. to build a Hudson's
Grill in Marquette, Michigan, and had already received a franchise fee
from Sharfe. Sharfe plans to build a freestanding Hudson's Grill
restaurant.
The Company's directors decided to ask for a shareholder vote at the
next annual meeting to ratify the transfer of assets to Hudson's Grill
International, Inc.; to recommend a vote to register the shares of
Hudson's Grill International; and then to distribute the shares to the
shareholders of the Company. On January 20, 1998, the Company formed a
subsidiary, Hudson's Grill of Denton/Trinity, Inc., to operate the
Carrollton, Texas, Hudson's Grill on a month to month basis. Hudson's
Grill of Whittier, Inc., a subsidiary that operated the Westlake,
California, Hudson's Grill, shut down operations at the Westlake
location and turned the premises and furniture, non-proprietary fixtures
and equipment over to the landlord on March 9, 1998. Also, the
Guatemala City, Guatemala, Hudson's Grill was closed in February 1998 by
the local franchisee because of insufficient sales.
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, 1998
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