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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
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[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended: June 30, 2009
or
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from: _____________ to _____________
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HUDSON'S GRILL INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
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Texas 333-94797 75-2738727
- ------------------------------ -------------------- -----------------------
(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification No.)
27 Chicora Ave
Toronto, ON, M5R 1T7
(Address of Principal Executive Office) (Zip Code)
416-928-3095
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year,
if changed since last report)
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Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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 |X| Yes |_| No days.
Please indicate by check mark whether the registrant has submitted
electronically and posted on its corporate website, if any, every interactive
data file required to be submitted and posted pursuant to Rule 405 of Regulation
S-T(232.405 of this chapter) during the preceding 12 months (or for shorter
period that the registrant was required to submit and file such post). |_| Yes
|_| No
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company. See
the definitions of "large accelerated filer," "accelerated filer," and "smaller
reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer |_| Accelerated filer |_| Non-accelerated filer
Small reporting company |X|
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Act). |X| Yes |_| No
State the number of shares of outstanding of each of the issuer's classes of
common equity, as of the latest practicable date. 10,388,986 shares of Class A
Common Stock outstanding as of July 29, 2009.
1
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
HUDSON'S GRILL INTERNATIONAL, INC.
Consolidated
Balance Sheets
June 30, December 31,
2009 2008
(unaudited)
Assets
Total assets............................... $ -- $ --
---------- ------------
Liabilities and Stockholders' Deficit
Current liabilities:
Accounts payable and accrued liabilities......... -- 1,023
---------- ------------
Total current liabilities.................. -- 1,023
========== ============
Commitments and contingencies
Stockholders' deficit:
Common stock, no par value; 100,000,000 shares
authorized, 10,388,986 shares issued and
outstanding at June 30, 2009 and December 31,
2008........................................... 423,895 402,678
Common stock, Class B, no par value, 15,000,000
shares authorized, no shares issued and
outstanding.................................... -- --
Accumulated deficit.............................. (423,895) (403,701)
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Total stockholders' deficit................ -- (1,023)
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Total liabilities and stockholders' deficit $ -- $ --
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The accompanying notes are an integral part of these financial statements.
2
HUDSON'S GRILL INTERNATIONAL, INC.
Consolidated
Statements of Operations
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
----------- ----------- ----------- ------------
2009 2008 2009 2008
----------- ----------- ----------- ------------
Operating costs:
General and administrative $ 5,188 $ -- $ 20,194 $ --
----------- ----------- ----------- ------------
Total 5,188 -- 20,194 --
----------- ----------- ----------- ------------
Loss from continuing
operations (5,188) -- (20,194) --
----------- ----------- ----------- ------------
Discontinued operations
Loss on discontinued
operations -- (179,924) -- (205,255)
----------- ----------- ----------- ------------
Total loss on discontinued
operations -- (179,924) -- (205,255)
----------- ----------- ----------- ------------
Net loss $ (5,188) $ (179,924) $ (20,194) $ (205,255)
----------- ----------- ----------- ------------
Net loss per share - basic
and diluted
Continuing operations $ 0.00 $ 0.00 $ 0.00 $ 0.00
Discontinued operations $ 0.00 $ (0.02) $ 0.00 $ (0.03)
Net loss per share $ 0.00 $ (0.02) $ 0.00 $ (0.03)
Weighted average outstanding
shares
Basic and diluted 10,388,986 7,643,986 10,388,986 7,643,986
The accompanying notes are an integral part of these financial statements.
3
HUDSON'S GRILL INTERNATIONAL, INC.
Consolidated
Statements of Cash Flows
(unaudited)
Six Months Ended
June 30,
-------------------------
2009 2008
----------- ------------
Cash flows from operating activities:
Net loss...................................... $ (20,194) $ (205,255)
Items not involving cash:
Amortization of loan costs -- 5,386
Depreciation -- 526
Loss on disposal of operations -- 153,696
Changes in operating assets and liabilities
Other current assets -- (982)
Accounts receivable -- (21,661)
Accounts payable and accrued expenses (1,023) 11,769
Accounts payable to related parties -- 58,258
----------- ------------
Net cash provided by (used in)
operating activities.................... (21,217) 1,737
----------- ------------
Cash flows from financing activities:
Capital contributions 21,217 --
----------- ------------
Net cash provided by
financing activities.................... 21,217 --
----------- ------------
Net change in cash...................... -- 1,737
Cash, beginning of period....................... -- 5,279
----------- ------------
Cash, end of period............................. $ -- $ 7,016
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Supplemental disclosure of cash flow information:
Income taxes paid........................... $ -- $ --
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Interest paid............................... $ -- $ 20,876
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Non-cash transaction
Cancellation of debt through building
foreclosure and new $35,000 note payable $ -- $ 1,110,362
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The accompanying notes are an integral part of these financial statements.
4
HUDSON'S GRILL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. UNAUDITED INFORMATION
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The consolidated balance sheet of Hudson's Grill International, Inc.
(the "Company") as of June 30, 2009, and the consolidated statements of
operations for the three month period and six month periods ended June 30, 2009
and 2008, have not been audited. However, in the opinion of management, such
information includes all adjustments (consisting only of normal recurring
adjustments) which are necessary to properly reflect the financial position of
the Company as of June 30, 2009, and the results of operations for the three
months and six months ended June 30, 2009 and 2008.
Certain information and notes normally included in financial statements
prepared in accordance with accounting principles generally accepted in the
United States of America have been condensed or omitted, although management
believes that the disclosures are adequate to make the information presented not
misleading. Interim period results are not necessarily indicative of the results
to be achieved for an entire year. These financial statements should be read in
conjunction with the financial statements and notes to financial statements
included in the Company's consolidated financial statements as filed on Form
10-K for the year ended December 31, 2008.
2. DISCONTINUED OPERATIONS
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In August 2008 the Company entered into an Asset Purchase Agreement
with Concept Franchising, LLC. Under this agreement the Company delivered
1,975,000 shares of the Company's common stock and transferred all assets to
Concepts Franchising, LLC in exchange for Concept's assumption of all the
liabilities of the Company. Concept received assets of $61,704 and assumed
$258,427 in liabilities resulting in an increase in stockholders equity of
$196,723.
The results of discontinued operations after the Asset Purchase
Agreement are as follows:
Three Three Six Six
Months Months Months Months
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
2009 2008 2009 2008
----------- ----------- ----------- ------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Revenues:
Franchise fees - 59,432 - 116,138
----------- ----------- ----------- ------------
Total revenues - 59,432 - 116,138
Expenses:
----------- ----------- ----------- ------------
Total expenses - (239,356) - (321,393)
----------- ----------- ----------- ------------
Loss from
discontinued
operations - (179,924) - (205,255)
----------- ----------- ----------- ------------
On June 9, 2006, HGI-Oshkosh LLC ("HGIO"), a Texas limited liability
company and wholly owned subsidiary of the Company, purchased a building and
land in Oshkosh, Wisconsin, for $1,115,000. It also purchased furniture and
equipment for $114,927, which was used to finish out the building as a Hudson's
Grill. HGIO borrowed $1,075,000 on a twenty year note from the Upper Peninsula
State Bank in Escanaba, Michigan, and $50,000 from the Company, to buy the
building, land, furniture and equipment; the Company borrowed the $50,000 that
it loaned to HGIO from Border City Ale House, Inc. ("BCAH"), a company owned by
Anthony B. Duncan, one of the Company's directors. HGIO leased the building,
land, furniture and equipment to two franchisees, but each one failed, and the
property became vacant in August 2007.
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Effective November 1, 2007, pursuant to a forbearance agreement, the
monthly payments were reduced; however, the bank had the power to file a deed in
lieu of foreclosure at the earlier of July 1, 2008, or a default on the
forbearance agreement by the Company. In May 2008, the Company defaulted on the
forbearance agreement, and the bank exercised its right to file the deed on May
14, 2008. The bank now has title to the real property and all of the Company's
personal property that was situated on the premises. Subsequent to the transfer
of the property to the bank, the bank has agreed to accept $35,000 for a
complete release of any remaining liability. The $35,000 was to be paid when the
Company reorganizes and is not interest bearing as a result of the short time
frame.
The Company was paying interest only on the BCAH note. The unpaid
balance of the BCAH note was due on May 23, 2008, but it has been extended
without any definite due date by the note holder, based on the cash flow of the
Company.
The BCAH note was classified as a current liability as "Note payable,
related party" since it was due. The bank note was classified as a current
liability as "Liabilities from discontinued operations" since the note secured
the land and building that was for sale. Pursuant to EITF Issue Number 87-24,
the Company has allocated all of the interest on the bank note to the
discontinued operations because the proceeds from the loan were used solely to
purchase the building and land, and, except for the remaining $35,000 owed to
the bank, the loan was paid off when the building and land were transferred to
the bank.
The operations of the Company related to its ownership of the building
and land have been accounted for as discontinued operations under generally
accepted accounting principles, and therefore, the results of operations related
to the building and land have been reflected separately from the Company's
results from continuing operations for all periods presented in the accompanying
financial statements. The discontinued operations were disposed of as May 14,
2008, pursuant to the bank's exercise of its right to file a deed in lieu of
foreclosure; subsequently, HGIO filed for bankruptcy liquidation under chapter 7
of the bankruptcy code on June 27, 2008. The Company wrote off all of its assets
associated with the discontinued operations, which were $1,229,058, and, except
for the remaining $35,000 owed to the bank, it wrote off all of its liabilities
associated with the discontinued operations, which amounted to writing off
$1,075,362. Thus, there was a loss on the disposal of the discontinued
operations of $153,696.
3. EARNINGS PER SHARE
------------------
Basic earnings per share are calculated on the weighted average number
of common shares outstanding during each period. Diluted earnings per share is
computed by dividing net income by the weighted average number of common shares
and common stock equivalents outstanding for the period. Common stock
equivalents are excluded from the computation if such inclusion would have an
anti-dilutive effect.
4. RELATED PARTY TRANSACTION
-------------------------
A shareholder of the Company paid expenses of $5,188 and $21,217 for
the three and six month periods ended June 30, 2009. These payments were treated
as capital contributions as this shareholder is the majority owner of the
Company. In the prior quarter this was classified as a liability, but was
reclassified in the current quarter.
5. SUBSEQUENT EVENTS
-----------------
Management has evaluated and disclosed subsequent events up to and
including July 29, 2009 which is the date the statements were available for
issuance.
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Item 2. Management's Discussion and Analysis of Financial Condition and Results
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of Operations
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS AND OTHER PORTIONS OF THIS REPORT CONTAIN FORWARD-LOOKING INFORMATION
THAT INVOLVES RISKS AND UNCERTAINTIES, OUR ACTUAL RESULTS COULD DIFFER
MATERIALLY FROM THOSE ANTICIPATED BY THE FORWARD-LOOKING INFORMATION. FACTORS
THAT MAY CAUSE SUCH DIFFERENCES INCLUDE, BUT ARE NOT LIMITED TO, AVAILABLILITY
OF FINANCIAL RESOURCES FOR LONG TERM NEEDS, PRODUCT DEMAND, MARKET ACCEPTANCE
AND OTHER FACTORS DISCUSSED ELSEWHERE IN THIS REPORT. THIS MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS SHOULD
BE READ IN CONJUNCTION WITH OUR FINANCIAL STATEMENTS AND THE RELATED NOTES
INCLUDED ELSEWHERE IN THIS REPORT.
Material changes in the consolidated financial condition of the Company and in
the results of their operations since the end of its last fiscal year and their
results from the comparable period in their last fiscal year including the
following:
The Company's current principal business activity is to seek a suitable reverse
acquisition candidate through acquisition, merger or other suitable business
combination method.
It is the intent of management and significant stockholders to provide
sufficient working capital necessary to support and preserve the integrity of
the corporate entity. However, there is no legal obligation for either
management or significant stockholders to provide additional future funding.
Should this pledge fail to provide financing, the Company has not identified any
alternative sources. Consequently, there is substantial doubt about the
Company's ability to continue as a going concern.
The Company's need for capital may change dramatically because of any business
acquisition or combination transaction. There can be no assurance that the
Company will identify any such business, product, technology or company suitable
for acquisition in the future. Further, there can be no assurance that the
Company would be successful in consummating any acquisition on favorable terms
or that it will be able to profitably manage the business, product, technology
or company it acquires.
Asset Purchase Agreement
The Company entered into an asset purchase agreement on August 11, 2008 with
Concept Franchising, LLC. Concept Franchising, LLC purchased all of the assets
($61,704) and assumed all of the liabilities ($258,427) of Hudson's Grill
International, Inc with the exception of the assets relating to the ability of
Hudson's Grill International, Inc to exist as a corporation. This resulted in an
increase in stockholders equity of $196,723. The Board of Directors of Hudson's
Grill International met on August 8, 2008 and appointed Mr. Joseph J. Meuse as
Director, President and Secretary of the Corporation. Following that appointment
all other board members resigned. On December 22, 2008 the Board of Directors of
the Company met and appointed Mr. David Roff as a Director. Following his
appointment Mr. Joseph J. Meuse resigned as an officer and director of the
Company. The Board of Directors appointed Mr. Roff as the President and CFO of
the Company.
Plan of Operation
The Company's current purpose is to seek, investigate and, if such investigation
warrants, merge or acquire an interest in business opportunities presented to it
by persons or companies who or which desire to seek the perceived advantages of
a Securities Exchange Act of 1934 registered corporation. As of the date of this
registration statement, the Company has no particular acquisitions in mind and
has not entered into any negotiations regarding such an acquisition, and neither
the Company's officer and director nor any promoter and affiliate has engaged in
any negotiations with any representatives of the owners of any business or
company regarding the possibility of a merger or acquisition between the Company
and such other company.
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Item 4T. Controls and Procedures.
The Company maintains "disclosure controls and procedures," as defined in Rules
13a-15(e) and 15d-15(e) under the Securities Act of 1934, as amended (the
"Exchange Act"), that are designed to ensure that information required to be
disclosed by the Company in reports it files or submits under the Exchange Act
is recorded, processed, summarized and reported within the time periods
specified in the SEC's rules and forms, and that such information is accumulated
and communicated to our management including the Company's principal executive
officer and principal financial officer, as appropriate, to allow timely
decisions regarding required disclosure.
The management of the Company has designed and evaluated the Company's
disclosure controls and procedures. Management recognizes that disclosure
controls and procedures, no matter how well conceived and operated, can provide
only reasonable assurance of achieving the desired control objectives, and the
Company necessarily is required to apply its judgment in evaluating the
cost-benefit relationship of possible disclosure controls and procedures.
The Company's management, including its principal executive officer and
principal financial officer, evaluated the effectiveness of the design and
operation of its disclosure controls and procedures as of June 30, 2009, and
concluded that the disclosure controls and procedures were not effective,
because certain deficiencies involving internal controls constituted a material
weakness as disclosed in the Company's 2008 Form 10K. The material weaknesses
identified did not result in the restatement of any previously reported
consolidated financial statements or any other related financial disclosure, nor
does management believe that it had any effect on the accuracy of the Company's
financial statements for the current reporting period.
CHANGE IN INTERNAL CONTROL OVER FINANCIAL REPORTING
None.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
We are currently not a party to any pending legal proceedings and no such
actions by, or to the best of our knowledge, against us have been threatened.
Item 1A. Risk Factors
IN ADDITION TO THE OTHER INFORMATION IN THIS REPORT, THE FOLLOWING FACTORS
SHOULD BE CONSIDERED CAREFULLY IN EVALUATING OUR BUSINESS AND PROSPECTS,
CONDITIONS EXIST WHICH CAUSE SUBSTANTIAL DOUBT ABOUT OUR ABILITY TO CONTINUE AS
A GOING CONCERN.
Pending negotiation and consummation of a combination, the Company anticipates
that it will have, aside from carrying on its search for a combination partner,
no business activities, and, thus, will have no source of revenue. Should the
Company incur any significant liabilities prior to a combination with a private
company, it may not be able to satisfy such liabilities as are incurred.
If the Company's management pursues one or more combination opportunities beyond
the preliminary negotiations stage and those negotiations are subsequently
terminated, it is foreseeable that such efforts will exhaust the Company's
ability to continue to seek such combination opportunities before any successful
combination can be consummated. In that event, the Company is common stock will
become worthless and holders of the Company's common stock will receive a
nominal distribution, if any, upon the Company's liquidation and dissolution.
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None
Item 3. Defaults Upon Senior Securities.
None
Item 4. Submission of Matters to a Vote of Security Holders.
None
Item 5. Other Information.
None
Item 6. Exhibits.
Exhibit Number Exhibit Title
31.1 Certification of CEO pursuant to 18 U.S.C. Section 1350 as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002.
32.1 Certification of CFO pursuant to 18 U.S.C. Section 1350 as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
SIGNATURES
In accordance with the requirements of Section Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Hudson's Grill International, Inc.
Date: July 29, 2009 By: /s/ David Roff
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David Roff
President and Chief Executive Officer
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