Item 1. Business.
Description of Business -----------------------
Overview - --------
Hudson's Grill International, Inc. (the "Company" or "Hudson's" or "Hudson's Grill"), was incorporated on October 30, 1997, in Texas, and certain assets were transferred to the Company on December 1, 1997, from its former parent, Hudson's Grill of America, Inc. ("HGA"). The Company franchised Hudson's Grill Restaurants. Hudson's Grill Restaurants are full service restaurants that serve lunch and dinner and a wide range of alcoholic beverages. In August 2008 the Company entered into an agreement with Concept Franchising LLC to transfer all its assets and liabilities. The Company is now considered a "shell company" as it has no or nominal operations.
The Company has been seeking, and will continue to seek, potential operating businesses and business opportunities with the intent to acquire or merge with such businesses. Its principal purpose is to locate and consummate a merger or acquisition with a private entity. Because of the Company's current status of having only nominal assets and no recent operating history, in the event the Company does successfully acquire or merge with an operating business opportunity, it is likely that the Company's current shareholders will experience substantial dilution and a resultant change in control of the Company.
Any target acquisition or merger candidate of the Company will become subject to the same reporting requirements as the Company upon consummation of any merger or acquisition. Thus, in the event the Company successfully completes the acquisition of, or merger with, an operating business opportunity, that business opportunity must provide Form 10 level disclosure in a Form 8-K including audited financial statements for at least the two most recent fiscal years or, in the event the business opportunity has been in business for less than two years, audited financial statements will be required from the period of inception. This could limit the Company's potential target business opportunities due to the fact that many private business opportunities either do not have audited financial statements or are unable to produce audited statements without substantial time and expense.
The Company has no recent operating history and no representation is made, nor is any intended, that the Company will in fact be able to carry on future business activities successfully. If the Company needs cash over the ensuing 12 months in order to carry out its business activities, the Company believes that it will be able to borrow sufficient cash from its stockholders in order to satisfy any such immediate requirements. For this reason, the Company does not presently anticipate having to raise any additional funds within the next 12 months or longer. In spite of being able to meet cash needs that are currently anticipated, there can be no assurance that the Company will have the ability to acquire or merge with an operating business, business opportunity or property at all, let alone one that will be of material value or benefit to the Company. There can also be no assurance that the Company's cash needs can be indefinitely met by cash advances from a stockholder or anyone else associated with the Company.
As stated elsewhere herein, management plans to investigate, research and, if justified, potentially acquire or merge with one or more businesses or business opportunities. Management will have broad discretion in its search for and negotiations with any potential business or business opportunity.
Use of Form S-8 and Form 8-K by Shell Companies
Effective August 22, 2005, the Commission adopted a series of rules and rule amendments designed to deter fraud and abuse through the use of reporting shell companies. The most significant rule changes were as follows: (i) shell companies are prohibited from using Form S-8 to register offerings of securities during the period a company is defined as a shell company and for 60 days thereafter; and (ii) upon completion of a transaction whereby a company ceases to be a shell company, the company must file Form 10 level disclosure in a Form 8-K within four business days after completing the transaction. The changes to the Form 8-K rules may limit the number of business opportunities that would be interested in completing a transaction with the Company.
Sources of Business Opportunities and Risks Associated Therewith
Management of the Company intends to use various resources in the search for potential business opportunities including, but not limited to, the Company's officer and director, consultants, special advisors, securities broker-dealers, venture capitalists, members of the financial community and others who may present management with unsolicited proposals. Because of the Company's lack of capital, it may not be able to retain on a fee basis professional firms specializing in business acquisitions and reorganizations. Rather, the Company will most likely have to rely on outside sources, not otherwise associated with the Company, persons that will accept their compensation only after the Company has finalized a successful acquisition or merger.
If the Company elects to engage an independent consultant, it intends to look only to consultants that have experience in working with small public companies in search of an appropriate business opportunity. Also, the consultant will more than likely have experience in locating viable merger and/or acquisition candidates and have a proven track record of finalizing such business combinations. Further, the Company would prefer to engage a consultant that will provide services for only nominal up-front consideration and who would be willing to be fully compensated at the close of a business combination or acquisition.
The Company does not intend to limit its search to any specific kind of industry or business. The Company may investigate and ultimately acquire a venture that is in its preliminary or development stage, is already in operation, or in various stages of existence and development. A potential venture might need additional capital or merely desire to have its shares publicly traded. Management believes that the Company could provide a potential public vehicle for a private entity interested in becoming a publicly held corporation.
Evaluation and Risks Associated Therewith
Once the Company has identified a particular entity as a potential acquisition or merger candidate, management will seek to determine whether acquisition or merger is warranted or whether further investigation is necessary. Such determination will generally be based on management's knowledge and experience, or with the assistance of outside advisors and consultants evaluating the preliminary information available to them. As stated in the previous section, management may elect to engage outside independent consultants to perform preliminary analysis of potential business opportunities. However, because of the Company's lack of capital it may not have the necessary funds for a complete an exhaustive investigation of any particular opportunity.
In evaluating such potential business opportunities, the Company will consider, to the extent relevant to the specific opportunity, several factors including potential benefits to the Company and its shareholders; working capital, financial requirements and availability of additional financing; history of operation, if any; nature of present and expected competition; quality and experience of management; need for further research, development or exploration; potential for growth and expansion; potential for profits; and other factors deemed relevant to the specific opportunity.
No assurance can be made following consummation of any acquisition or merger that the business venture acquired or targeted will develop into a going concern or, if the business is already operating, that it will continue to operate successfully. Many of the potential business opportunities made available to the Company may involve, among other things, new and untested products, processes or market strategies which may not ultimately prove successful.
Form of Potential Acquisition or Merger and Risks Associated Therewith
The particular manner in which the Company participates in a specific business opportunity will depend upon the nature of that opportunity, the respective needs and desires of the Company, on the one hand, and the respective needs and desires of those in control of the opportunity, on the other, and, the relative negotiating strength of the parties involved. Actual participation in a business venture may take the form of an asset purchase, lease, joint venture, license, partnership, stock purchase, reorganization, merger or consolidation. The Company may act directly or indirectly through an interest in a partnership, corporation, or other form of organization. Whatever form any business transaction ultimately takes, the Company does not intend to participate in opportunities through the purchase of minority stock positions.
Because of the Company's current situation, having only nominal assets and no recent operating history, in the event the Company does successfully acquire or merge with an operating business opportunity, it is likely that the Company's present shareholders will experience substantial dilution and there will be a probable change in control of the Company. Most likely, the owners of the business opportunity will acquire control of the Company following such transaction. Management has not established any guidelines as to the amount of control it will offer to prospective business opportunities, rather management will attempt to negotiate the best possible agreement for the benefit of the Company's shareholders.
Need for Additional Capital or Financing and Risks Associated Therewith
Management does not presently intend to borrow funds to compensate any persons, consultants, promoters or affiliates in relation to the consummation of a potential merger or acquisition. However, if the Company engages outside advisors or consultants in its search for business opportunities, it may be necessary for the Company to attempt to raise additional funds. As of the date hereof, the Company has not made any arrangements or definitive agreements to use outside advisors or consultants or to raise any capital. In the event the Company does need to raise capital, most likely the only method available to the Company would be the private sale of its securities. These possible private sales would more than likely have to be to persons known by the director or other shareholders of the Company or to venture capitalists that would be willing to accept the substantial risks associated with investing in a company with limited history, no current operations and nominal capital.
It is unlikely that the Company could make a public offering of securities or be able to borrow any significant sum from either a commercial or private lender. Management will attempt to acquire funds or financing, if necessary, on the best available terms. However, there can be no assurance that the Company will be able to obtain additional funding or financing when and if needed, or that such funding, if available, can be obtained on terms reasonable or acceptable to the Company. Although not presently anticipated, a possibility exists that the Company would offer and sell additional securities to its existing shareholders or their affiliates or possibly even "accredited investors."
Possible Sales of Shares by Certain Shareholders or Insiders
In the case of a future acquisition or merger, there exists a possibility that a condition of such transaction might include the sale of shares presently held by officers, directors, their affiliates, if any, or other insiders of the Company to parties affiliated with or designated by the potential business opportunity. If any such situation does arise, management is obligated to follow the Company's Certificate of Incorporation and all applicable corporate laws in negotiating such an arrangement. Under this scenario of a possible sale by officers, directors and other insiders, if any, of their shares, it is unlikely that similar terms and conditions would be offered to all other shareholders of the Company or that the shareholders would be given the opportunity to approve such a transaction.
Finder's, Agent's or Broker's Fees
In the event of a successful acquisition or merger, a finder's, agent's or broker's fee, in the form of cash or securities, may be paid to persons instrumental in facilitating the transaction. The Company has not established any criteria or limits for the determination of any such fee, although it is likely that an appropriate fee will be based upon negotiations by and among the Company, the appropriate business opportunity, and the finder or broker. Though possible, it is unlikely that a finder's or agent's fee will be paid to an affiliate of the Company because of the potential conflict of interest that might result. If such a fee were paid to an affiliate, it would have to be in such a manner so as not to compromise an affiliate's possible fiduciary duty to the Company or to violate the doctrine of usurpation of a corporate opportunity. Further, in the unlikely event that a finder's or agent's fee was paid to an affiliate, the Company would likely, though not necessarily, have such an arrangement ratified by the shareholders in an appropriate manner. It should also be noted that finder's, agent's or broker's fees in the types of situations involved here are frequently substantial and no assurance can be made that any such fee would not be substantial or not entail the issuance of several million common capital shares.
Potential Conflicts of Interest
Presently, it is believed to be highly unlikely that the Company will acquire or merge with a business opportunity in which the Company's management, affiliates or promoters, if any, have an ownership interest. Any possible related party transaction of this type would likely have to be ratified by a disinterested Board of Directors and possibly, by the shareholders. Whatever would happen, the Company intends do whatever it believes is necessary to fully and completely comply with Delaware corporate law. Management does not anticipate that the Company will acquire or merge with any related entity or person.
Rights and Participation of Shareholders
It is presently anticipated by management that prior to consummating a possible acquisition or merger, the Company, if required by relevant state laws and regulations, will seek to have the transaction ratified by shareholders in the appropriate manner.
The Board of Directors will have the discretion to consummate an acquisition or merger by written consent if it is determined to be in the best interests of the Company to do so. Regardless of whether an action to acquire or merge is ratified by calling and holding a formal shareholders' meeting or by written consent, the Company intends to provide its shareholders with complete disclosure documentation concerning a potential target business opportunity, including appropriate audited financial statements of the target to the extent the same can be made available at the time. It is anticipated that all of such information will be disseminated to the shareholders either by a proxy statement prepared in accordance with Schedule 14A promulgated under the Exchange Act in the event that a shareholders' meeting is called and held, or by subsequent information statement prepared in accordance with Schedule 14C promulgated under the Exchange Act in the event the corporate action is approved by the written consent of a majority.
Within four business days after completing a merger or acquisition transaction where the Company ceases to be a shell company, the Company must file a Form 8-K that provides Form 10 level disclosure.
Competition
The Company is unable to evaluate the type and extent of its likely competition. The Company is aware that there are several other public companies with only nominal assets that are also searching for operating businesses and other business opportunities as potential acquisition or merger candidates. The Company will be in direct competition with these other public companies in its search for business opportunities and, due to the Company's current lack of funds and capital resources, it may be difficult to successfully compete with these other companies.
Employees
As of the date hereof, the Company does not have any full time employees and has no plans for retaining full time employees until such time as the Company's business warrants the expense, or until the Company successfully acquires or merges with an operating business. The Company may find it necessary to periodically hire part-time clerical help on an as-needed basis.
Facilities
The Company is currently using as its principal place of business the business office of its principal shareholder, David Roff, located in Toronto, Ontario. Although the Company has no written agreement and pays no rent for the use of this facility, it is contemplated that at such future time as the Company acquires or merges with an operating business, the Company will secure commercial office space from which it will conduct its business. However, until such time as the Company completes an acquisition or merger, the type of business in which the Company will be engaged and the type of office and other facilities that will be required is unknown. The Company has no current plans to secure such commercial office space.
Industry Segments
No information is presented regarding industry segments. The Company is presently seeking a potential acquisition of or merger with a yet known and yet-to-be-identified business opportunity.
Item 2.
Item 2. Description of Property
Administrative operations are conducted from the offices of David Roff, President, at 27 Chicora Ave, Toronto, Ontario, M5R 1T7. We expect to operate for as long as possible from these offices to minimize operating expenses. We do not currently pay rent for these offices and do not anticipate paying rent to Mr. Roff for any such offices in the future. Our operations do not currently require office to meet our objectives, and therefore administration from these offices is sufficient. At some point in the future, as may be necessary to implement and carry out our plans, we may require additional office space requiring rental expense, but we do not anticipate any such need during the next six to twelve months. We will however, incur common office operating expenses such as telephone, office supplies, postage, etc.
Item 3.
Item 3. Legal Proceedings
We know of no material, active or pending legal proceedings against our company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.
Item 4.
Item 4. Submissions of Matters to a Vote of Security Holders
None
PART II
Item 5.
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters and Issuer Purchases of Equity Securities
Overview
The common shares of Hudson's are quoted on the Pink Sheets under the symbol HGII. As of January 20, 2010, there were approximately 300 registered holders of record of the Company's Common Stock (this excludes shareholders whose stock is held by a nominee or in "street name," because a nominee or street name holder is counted as one registered shareholder even if a nominee is holding stock for many shareholders). The Company believes that it has approximately 700 shareholders when including those whose shares are held in street name.
On December 31, 2009, there were 10,388,986 shares outstanding.
We have not declared any dividends since incorporation and do not anticipate that we will do so in the foreseeable future. Although there are no restrictions that limit the ability to pay dividends on our common shares, our intention is to retain future earnings for use in our operations and the expansion of our business
High Low
Fiscal 2009
First Quarter $0.03 $0.006 Second Quarter $0.021 $0.006 Third Quarter $0.10 $0.02 Fourth Quarter $0.10 $0.025
Fiscal 2008
First Quarter $0.03 $0.03 Second Quarter $0.03 $0.001 Third Quarter $0.015 $0.003 Fourth Quarter $0.04 $0.003
Equity Compensation Plan Information
None
Recent Sales of Unregistered Securities
None
Item 7.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
THE FOLLOWING ANALYSIS OF THE RESULTS OF OPERATIONS AND FINANCIAL CONDITION OF THE COMPANY FOR THE YEAR ENDED DECEMBER 31, 2008 SHOULD BE READ IN CONJUNCTION WITH THE COMPANY'S FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO CONTAINED ELSEWHERE IN THIS FORM 10-K
Overview
Hudson's Grill International, Inc. (the "Company" or "Hudson's" or "Hudson's Grill"), was incorporated on October 30, 1997, in Texas, and certain assets were transferred to the Company on December 1, 1997, from its former parent, Hudson's Grill of America, Inc. ("HGA"). The Company franchised Hudson's Grill Restaurants. Hudson's Grill Restaurants are full service restaurants that serve lunch and dinner and a wide range of alcoholic beverages. In August 2008 the Company entered into an agreement with Concept Franchising LLC to transfer all its assets and liabilities. The Company is now considered a "shell company" as it has no or nominal operations.
The Company has been seeking, and will continue to seek, potential operating businesses and business opportunities with the intent to acquire or merge with such businesses. The Company principal purpose is to locate and consummate a merger or acquisition with a private entity. Because of the Company's current status of having only nominal assets in the event the Company does successfully acquire or merge with an operating business opportunity, it is likely that the Company's current shareholders will experience substantial dilution and a resultant change in control of the Company.
Any target acquisition or merger candidate of the Company will become subject to the same reporting requirements as the Company upon consummation of any merger or acquisition. Thus, in the event the Company successfully completes the acquisition of, or merger with, an operating business opportunity, that business opportunity must provide Form 10 level disclosure in a Form 8-K including audited financial statements for at least the two most recent fiscal years or, in the event the business opportunity has been in business for less than two years, audited financial statements will be required from the period of inception. This could limit the Company's potential target business opportunities due to the fact that many private business opportunities either do not have audited financial statements or are unable to produce audited statements without substantial time and expense.
The Company has no recent operating history and no representation is made, nor is any intended, that the Company will in fact be able to carry on future business activities successfully. If the Company needs cash over the ensuing 12 months in order to carry out its business activities, the Company believes that it will be able to borrow sufficient cash from its stockholders in order to satisfy any such immediate requirements. For this reason, the Company does not presently anticipate having to raise any additional funds within the next 12 months or longer. In spite of being able to meet cash needs that are currently anticipated, there can be no assurance that the Company will have the ability to acquire or merge with an operating business, business opportunity or property at all, let alone one that will be of material value or benefit to the Company. There can also be no assurance that the Company's cash needs can be indefinitely met by cash advances from a stockholder or anyone else associated with the Company.
As stated elsewhere herein, management plans to investigate, research and, if justified, potentially acquire or merge with one or more businesses or business opportunities. Management will have broad discretion in its search for and negotiations with any potential business or business opportunity.
Results of Operations
In August 2008 Hudson's Grill sold its remaining operations and had its liabilities assumed by Concept Franchising, LLC. The Results of Operations should be read in conjunction with the financial statements which disclose the discontinued operations. The financial statements for the Company are presented as if the operations were sold at the beginning of the year.
REVENUE: We have generated no revenues from our continuing operations for the years ended December 31, 2009 and 2008.
COMMON SHARES: During the year end December 31, 2009 we did not issue any common shares, warrants or options.
EXPENSES
GENERAL AND ADMINISTRATIVE: Hudson's spent $35,435 general and administrative costs in the year ended December 31, 2009 while $1,696 in such costs were incurred in the year ended December 31, 2008. The costs relate to audit, transfer agent and general and administrative costs.
The Company incurred a net loss of $0 in 2009 and $230,035 in 2008 from discontinued operations.
Liquidity and Capital Resources - -------------------------------
As of end of the fiscal year on December 31, 2009, we did not generate any revenues from our continuing business operations as all our operations were sold in August 2008.
As of December 31, 2009, we have no assets and an accounts payable liability of $36,458. Working capital stood at ($36458).
For the year ended December 31, 2009, our net loss from continuing operations was $(35,435), ($0.00 per share). The loss per share was based on a weighted average of 10,338,986 common shares outstanding. For the previous fiscal year the comparative numbers were a net loss of $1,696 and a loss per share of $0.00 per share based on a weighted average of 8,800,507shares outstanding. The loss from discontinued operations was $0 ($0.00) per share in 2009 and $292,012 ($0.03) per share in 2008.
During the next twelve months, the Company will actively seek out and investigate possible business opportunities with the intent to acquire or merge with one or more business ventures. Because the Company lacks cash and other capital resources, it may be necessary for the officers and directors to either advance funds to the Company or to accrue expenses until such time as a successful business consolidation can be made. There is no assurance that the Company will be able to obtain funds from these persons and has no agreements for such funding.
Management intends to hold expenses to a minimum and to obtain services on a contingency basis when possible. Further, the Company's directors will defer any compensation until such time as an acquisition or merger can be accomplished and will strive to have the business opportunity provide their remuneration, if any. However, if the Company engages outside advisors or consultants in its search for business opportunities, it may be necessary for the Company to attempt to raise additional funds.
As of the date hereof, the Company has not made any definitive agreements to use outside advisors or consultants or to raise any capital. In the event the Company does need to raise capital most likely the only method available to the Company would be the private sale of its securities, it is unlikely that it could make a public sale of securities or be able to borrow any significant sum from either a commercial or private lender. There can be no assurance that the Company will be able to obtain additional funding when and if needed, or that such funding, if available, can be obtained on terms acceptable to the Company.
The Company does not intend to use any employees, with the possible exception of part-time clerical assistance on an as-needed basis. Outside advisors or consultants will be used only if they can be obtained for minimal cost or on a deferred payment basis. Management is confident that it will be able to operate in this manner and to continue its search for business opportunities during the next twelve months.
APPLICATION OF SIGNIFICANT ACCOUNTING POLICIES.
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires the use of management's judgment in making estimates and assumptions that affect amounts reported in the financial statements and the accompanying notes. Summarized below are the accounting policies management believes are most critical to the preparation of the Company's consolidated financial statements.
Initial franchise fees are recognized as revenue only after the Company has substantially performed or satisfied all material services or conditions relating to the sale of a new franchise. Continuing franchise fees are recognized as revenue as the fees are earned and collection from the franchisee is reasonably assured. The Company uses the installment method of accounting in those cases when revenue is collectible over an extended period. An allowance for doubtful accounts, if deemed necessary, is recorded based upon management's assessment of a franchisee's inability to make payment.
Income taxes are accounted for under the provisions of Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes". Under this accounting method, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities using the enacted tax rates in effect for the year in which the differences are expected to affect taxable income. A valuation allowance is established when necessary to reduce deferred tax assets to the amounts expected to be realized. Except for this last two years, the Company had experienced consistent net income in its prior years, and it had also experienced a stable level of royalty fees. In the past, the Company believed that it was probable that it would utilize its deferred tax assets. Based on forecasts that indicate that Company's income flow is greatly impaired, the Company now believes that it will not be able to utilize its deferred tax assets.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS.
The Financial Accounting Standards Board ("FASB") issued authoritative guidance on the FASB Accounting Standards Codification ("ASC") and the hierarchy of generally accepted accounting principles, codified in ASC 105, Generally Accepted Accounting Principles. The codification was effective for interim or annual periods ending after September 15, 2009, and impacted the Company's financial statement disclosures beginning with the year ending December 31, 2009 as all future references to authoritative accounting literature will be referenced in accordance with the Codification.
The FASB has issued authoritative guidance on Non-controlling Interests in Consolidated Financial Statements. The new codification code is ASC 810, Consolidation. This statement changes the way the consolidated income statement is presented when non-controlling interests are present. It requires consolidated net income to be reported at amounts that include the amounts attributable to both the parent and the non-controlling interest. The implementation of this pronouncement did not have a significant impact on the financial statements of the Company.
The FASB has issued authoritative guidance on Business Combinations. The new codification code is ASC 805, Business Combinations. This statement retains the fundamental requirements that the acquisition method of accounting be used, and applies to all business entities, including mutual entities that previously used the pooling of interest method of accounting for some business combinations. The implementation of this pronouncement did not have a significant impact on the financial statements the Company.
The FASB has issued authoritative guidance on subsequent events, which was primarily codified into Topic 855, Subsequent Events, in the ASC. The guidance established general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. The adoption of ASC 855 did not have a material effect on the Company's financial statements and related disclosures.
Going Concern
These consolidated financial statements have been prepared on the going concern basis which assumes that adequate sources of financing will be obtained as required and that our assets will be realized and liabilities settled in the ordinary course of business. These consolidated financial statements do not include any adjustments related to the recoverability of assets and classification of assets and liabilities that might be necessary if we are unable to continue as a going concern.
In order to continue as a going concern, we require additional financing. There can be no assurance that additional financing will be available to us when needed or, if available, that it can be obtained on commercially reasonable terms. If we are not able to continue as a going concern, we would likely be unable to realize the carrying value of our assets reflected in the balances set out in the preparation of the consolidated financial statements.
The Report of our independent registered public accounting firm with respect to our financial statements as of December 31, 2009 and for the year then ended contains a qualification with respect to our ability to continue as a going concern.
Item 8.
Item 8. Financial Statements.
Page -----------
Report of Independent Registered Public Accounting Firm.............
Balance Sheet at December 31, 2009 and 2008.........................
Statements of Operations for the years ended December 31, 2009 and 2008, and from August 11, 2008 (development stage) through December 31, 2009......................................
Statement of Comprehensive Income (Loss)............................
Statement of Changes in Stockholders' Equity (Deficit) for the period from January 1, 2008 through December 31, 2009..........
Statements of Cash Flows for the years ended December 31, 2009 and 2008, and from August 11, 2008 (development stage) through December 31, 2009.....................................
Notes to Financial Statements.......................................
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Stan J.H. Lee, CPA 2160 North Central Rd, Suite 203, Fort Lee, NJ, 07024
P.O. Box 436402, San Ysidro, CA, 92143-9402
619-623-7799, Fax 619-564-3408, stan2u@gmail.com
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of HUDSON'S GRILL INTERNATIONAL,INC.
We have audited the accompanying balance sheet of HUDSON'S GRILL INTERNATIONAL,INC. ( a Development Stage Enterprise) as of December 31, 2009 and the related statements of operation, changes in shareholders' equity and cash flows for the fiscal year then ended and period from August 11, 2008 (development stage) to December 31, 2009. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. The financial statements of HUDSON'S GRILL INTERNATIONAL,INC. as of December 31, 2008, were audited by other auditors whose report dated March 23, 2009, expressed an unqualified opinion on those statements. Their report included an explanatory paragraph regarding going concern.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of HUDSON'S GRILL INTERNATIONAL,INC. as of December 31, 2009 and the results of its operation and its cash flows for the fiscal year then ended and for the period from August 11, 2008 (development stage) to December 31, 2009 in conformity with U.S. generally accepted accounting principles.
The financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company's losses from operations and lack of liquidity raise substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ Stan J.H. Lee, CPA
Stan J.H. Lee, CPA Fort Lee, NJ 07024 March 29, 2010
HUDSON'S GRILL INTERNATIONAL,INC. Consolidated Balance Sheets
December 31 December 31 2009 2008 ------------ ------------ Assets:
Total assets $ -- $ -- ------------ ------------
Liabilities and Stockholders' Deficit: Current liabilities: Accounts payable and accrued liabilities $ 11,021 $ 1,023 Note payable related party 25,437 ------------ ------------ Total current liabilities 36,458 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 December 31, 2009 and December 31, 2008 $ 402,678 $ 402,678 Common stock, Class B, no par value, 15,000,000 shares authorized, no shares issued and outstanding -- -- Accumulated deficit (439,136) (403,701) ------------ ------------
Total stockholders' deficit (36,458) (1,023) ------------ ------------
Total liabilities and stockholders' deficit $ -- $ -- ============ ============
The accompanying notes are an integral part of these financial statements.
HUDSON'S GRILL INTERNATIONAL,INC. Consolidated Statements of Operations
August 11, (Development Stage) Years Ended Through December 31, December 31, 2009 2008 2009 ------------- ------------ ------------
Operating costs: General and administrative $ (35,435) $ (1,023) $ (35,435) ------------- ------------ ------------ Total (35,435) (1,023) (35,435) ------------- ------------ ------------ Loss from continuing operations (35,435) (1,023) (35,435) ------------- ------------ ------------
Discontinued operations Loss on discontinued operations -- (75,316) -- Loss on disposal of operations (153,696) ------------- ------------ ------------ Total loss on discontinued operations -- (229,012) -- ------------- ------------ ------------ Net loss $ (35,435) $ (230,035) $ (35,435) ------------- ------------ ------------
Net loss per share - basic and diluted Continuing operations $ 0.00 $ 0.00 ------------- ------------ Discontinued operations $ 0.00 $ (0.03) ------------- ------------ Net loss per share $ 0.00 $ (0.03) ------------- ------------ Weighted average outstanding shares Basic and diluted 10,388,986 8,800,507 ============= ============
The accompanying notes are an integral part of these financial statements.
HUDSON'S GRILL INTERNATIONAL,INC. Consolidated Statement of Changes in Stockholders' Equity (Deficit)
Accumulated Common Stock Equity Shares Amount (Deficit) Total ------------- ------------- ------------ ------------
Balance at January 1, 2008 7,643,986 179,955 (173,666) 6,289
Stock issuance for professional services 770,000 26,000 26,000 Shares issued on sale of assets 1,975,000 196,723 196,723 Net loss, year ended December 31, 2008 -- -- (230,035) (230,035) ------------- ------------- ------------ ------------
Balance at December 31, 2008 10,388,986 $ 402,678 $ (403,701) $ (1,023)
Net loss, year ended December 31, 2009 (35,435) (35,435) ------------- ------------- ------------ ------------
Balance at December 31, 2009 10,388,986 $ 402,678 $ (439,136) $ (36,458) ============= ============= ============ ============
The accompanying notes are an integral part of these financial statements.
HUDSON'S GRILL INTERNATIONAL,INC. Consolidated Statements of Cash Flows
August 11, (Development Stage) Years Ended Through December 31, December 31, 2009 2008 2009 ------------- ------------ ------------
Cash flows from operating activities: Net loss $ (35,435) $ (230,035) $ (35,435) Items not involving cash: Amortization of loan costs -- 5,386 -- Depreciation -- 526 -- Loss on disposal of operations -- 153,696 -- Professional fees paid with stock -- 26,000 -- Changes in operating assets and liabilities Other current assets -- (982) -- Accounts receivable -- 1,883 -- Accounts payable and accrued expenses 9,998 1,489 9,998 Accounts payable to related parties -- 56,758 -- ------------- ------------ ------------ Net cash provided by (used in) operating activities (25,437) 14,721 (25,437) ------------- ------------ ------------
Cash flows from investing activities: Cash divested in sale transaction -- (20,000) -- ------------- ------------ ------------ Net cash used in investing activities -- (20,000) -- ------------- ------------ ------------
Cash flows from financing activities: Note payable related party 25,437 -- 25,437 ------------- ------------ ------------ Net cash provided by financing activities 25,437 -- 25,437 ------------- ------------ ------------
Net change in cash -- (5,279) --
Cash, beginning of period -- 5,279 -- ------------- ------------ ------------
Cash, end of period $ -- $ -- $ -- ============= ============ ============
Supplemental disclosure of cash flow information: Non-cash transaction Cancellation of debt through building foreclosure and new $35,000 note payable $ -- $ 1,110,362 $ -- ============= ============ ============ Income taxes paid $ -- $ -- $ -- ============= ============ ============ Interest paid $ $ 3,986 $ ============= ============ ============
The accompanying notes are an integral part of these financial statements.
HUDSON'S GRILL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1- ORGANIZATION AND BASIS OF PRESENTATION
Hudson's Grill International, Inc. (the "Company") was incorporated in the state of Texas on October 30,1997. On December 1, 1997, the Company became a wholly-owned subsidiary of Hudson's Grill of America, Inc. ("HGAI" or the "Parent"), a public company, and at that time HGAI transferred certain franchise rights and agreements to the Company. On August 15, 2000, HGAI registered the Company's common stock and distributed 100% of the Company's shares to the stockholders of HGAI.
The Company entered into an asset purchase agreement on August 11, 2008 with Concept Franchising, LLC. Concept Franchising, LLC purchased all of the assets and assumed all of the liabilities 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. Since August 11, 2008, we have not conducted any business operations. In conjunction with the transaction, the Company issued to Concept Franchising, LLC. 1,975,000 shares of the Company's common stock.
The Company will need working capital for its future planned activity, which raises substantial doubt about its ability to continue as a going concern. Continuation of the Company as a going concern is dependent upon obtaining sufficient working capital to be successful in that effort. The management of the Company has developed a strategy, which it believes will accomplish this objective, through short term loans, and equity funding, which will enable the Company to operate for the coming year. In order to continue as a going concern, we require additional financing. There can be no assurance that additional financing will be available to us when needed or, if available, that it can be obtained on commercially reasonable terms. If we are not able to continue as a going concern, we would likely be unable to realize the carrying value of our assets reflected in the balances set out in the preparation of the consolidated financial statements. The Report of our independent registered public accounting firm with respect to our financial statements as of December 31, 2009 and for the year then ended contains a qualification with respect to our ability to continue as a going concern.
The Company sold all its operating assets and liabilities in August 2008. All revenues and expenses up to the point of the sale and assets and liabilities associated with the sale have been reclassified as discontinued operations for all periods presented. The consolidated financial data should be read in conjunction with the related notes included in this Form 10-K. The Company disposed of a building (see note 3) in May 2008. 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.
Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting - -------------------
The accounts are maintained and the financial statements have been prepared using the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America.
Principles of Consolidation - ---------------------------
The consolidated financial statements include the accounts of Hudson's Grill International, Inc., and its subsidiary. Significant intercompany accounts and transactions have been eliminated in consolidation.
Development Stage Company
The Company has not earned any revenue from operations since inception. Accordingly, the Company's activities have been accounted for as those of a "Development Stage Company" as set forth in Financial Accounting Standards Board Statement No. 7 ("SFAS 7"). Among the disclosures required by SFAS 7, are that the Company's financial statements be identified as those of a development stage company, and that the statements of operations, stockholders' equity and cash flows disclose activity since the date of the Company's inception. The Company has elected a fiscal year ending on December 31.
Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Use of Estimates - ----------------
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from those estimates. Significant estimates made by the Company's management include the allowance for doubtful accounts and the recording of deferred tax assets.
Cash and Cash Equivalents - -------------------------
The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. At December 31, 2009 and 2008, the Company had no such investments. The Company maintains deposits primarily in one financial institution, which may at times exceed amounts covered by insurance provided by the U.S. Federal Deposit Insurance Corporation ("FDIC"). At December 31, 2009 and 2008, the uninsured portion of these deposits was zero. The Company has not incurred any losses related to its cash on deposit with financial institutions.
Property and Equipment - ----------------------
Property and equipment are stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets (generally five to seven years, but 39 years for buildings).
Revenue Recognition - -------------------
Initial franchise fees are recognized as revenue when all material services or conditions relating to the sale have been substantially performed or satisfied and collection is certain. Continuing franchise fees are recognized as revenue as the fees are earned and become receivable from the franchisee. Rent income is recognized as received for the amount received, without amortization of any future increases in rent because the Company is not certain it will receive future rent.
Fair Value of Financial Instruments - -----------------------------------
In accordance with the reporting requirements of Statement of Financial Accounting Standard ("SFAS") No. 107, Disclosures About Fair Value of Financial Instruments, the Company calculates the fair value of its assets and liabilities which qualify as financial instruments under this statement and includes this additional information in the notes to consolidated financial statements when the fair value is different than the carrying value of these financial instruments. The estimated fair value of accounts receivable, accounts payable, loan payable and accrued liabilities approximate their carrying amounts due to the relatively short maturity of these instruments. None of these instruments are held for trading purposes.
Income Taxes - ------------
The Company accounts for income taxes using the asset and liability method which recognizes deferred tax assets and liabilities for the future tax impact attributable to differences in the basis of assets and liabilities reported for financial statement and income tax purposes. Valuation allowances are established when necessary to reduce deferred tax assets to amounts expected to be realized.
Earnings Per Share - ------------------
Basic earnings per share is computed by dividing net income by the weighted average number of common shares outstanding for the 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 antidilutive effect. Since the Company incurred losses for 2009 and 2008, common stock equivalents are not included because they would be anti-dilutive.
At December 31, 2009 and 2008, the Company had 1,756,000 and 2,435,000 stock options that were not included in the dilutive earnings per share calculation because the effect would have been anti-dilutive.
Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Concentrations of Credit Risk - -----------------------------
In the normal course of business, the Company extends unsecured credit to franchisees, which are reflected on the Company's consolidated balance sheets as accounts receivable. The Company's accounts receivable are subject to potential credit risk. The maximum exposure assuming non-performance by the debtors is the amount shown on the balance sheet at the date of non-performance. The Company believes that an adequate allowance for uncollectible accounts has been established. The allowance for uncollectible accounts is continually monitored, and adjustments are made as necessary. For the years ended December 31, 2009 and 2008, the Company had bad debt expenses of $0 and $0 respectively. Accounts receivable are included in assets of discontinued operations shown net of allowance of $0 and $0 at December 31, 2009 and 2008, respectively.
Recently Issued Accounting Pronouncements - -----------------------------------------
The Financial Accounting Standards Board ("FASB") issued authoritative guidance on the FASB Accounting Standards Codification ("ASC") and the hierarchy of generally accepted accounting principles, codified in ASC 105, Generally Accepted Accounting Principles. The codification was effective for interim or annual periods ending after September 15, 2009, and impacted the Company's financial statement disclosures beginning with the year ending December 31, 2009 as all future references to authoritative accounting literature will be referenced in accordance with the Codification.
The FASB has issued authoritative guidance on Non-controlling Interests in Consolidated Financial Statements. The new codification code is ASC 810, Consolidation. This statement changes the way the consolidated income statement is presented when non-controlling interests are present. It requires consolidated net income to be reported at amounts that include the amounts attributable to both the parent and the non-controlling interest. The implementation of this pronouncement did not have a significant impact on the financial statements of the Company.
The FASB has issued authoritative guidance on Business Combinations. The new codification code is ASC 805, Business Combinations. This statement retains the fundamental requirements that the acquisition method of accounting be used, and applies to all business entities, including mutual entities that previously used the pooling of interest method of accounting for some business combinations. The implementation of this pronouncement did not have a significant impact on the financial statements the Company.
The FASB has issued authoritative guidance on subsequent events, which was primarily codified into Topic 855, Subsequent Events, in the ASC. The guidance established general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. The adoption of ASC 855 did not have a material effect on the Company's financial statements and related disclosures.
Note 3 - DISCONTINUED OPERATIONS
The results of discontinued operations as previously reported are as follows:
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.
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.
Note 3 - DISCONTINUED OPERATIONS (CONTINUED)
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.
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 asset purchase by Concept Franchising LLC. had no financial statement impact as the stock issued was valued at the difference of the assets and liabilities assumed as this was determined to be the most reliable measure of fair value.
The results of discontinued operations as previously reported for the years ending December 31, 2009 and 2008 are as follows:
Dec 31, Dec 31, 2009 2008 ------------ ------------ Revenues: Franchise fees $ 0 126,467 ------------ ------------ Total revenues 0 126,467 Expenses: Expenses 0 201,783 ------------ ------------ Total expenses 0 201,783 ------------ ------------
Loss from discontinued operations $ 0 (75,316) ------------ ------------
Note 4 - RELATED PARTY TRANSACTIONS
During the third quarter of 2008 the Company issued 500,000 shares of common stock to Robert W. Fischer ("Fischer"), Fischer shares were issued to pay professional fees. The value of shares was determined using the price per share of $ .028 per share which Belmont Partners, LLC was paying to purchase control of the Company. Additionally, 270,000 shares of common stock were issued to Roy Millender, in satisfaction of a $12,000 liability.
The Company leased its corporate office space in 2008 on a monthly basis from a firm in which the president of the Company is a partner. Rental and utility costs for the office space was approximately $10,900 for the year ended December 31, 2008. For the year ended 2008 the amount is included with the discontinued operations.
A shareholder of the Company has loaned the Company $25,437. There are no terms of repayment and the loan is currently interest free.
Note 5 - INCOME TAX 2009 2008 ------------ ------------ Deferred tax assets: Bad debt allowance $ -- $ -- Net operating loss 317,700 305,076 ------------ ------------ Total deferred tax assets $ 317,700 $ 305,076 Deferred tax liabilities: Depreciation $ -- $ -- Other -- -- Valuation allowance (317,700) (305,076) ------------ ------------ Net deferred taxes $ -- $ --
In August 2008 the Company sold its assets and its prospects for future profitability and ability to use NOL's has worsened significantly, the Company has decided to take a valuation allowance equal to its total deferred assets in 2008.
The Company had no income taxes payable for the years ended December 31, 2009 and 2008. Thus, it did not need to use any of its NOL carry forwards in those years. At December 31, 2009, NOL carry forwards of approximately $934,413 were available to offset future taxable income and expire through 2028.
The Company was deemed to have undergone an ownership change for purposes of the Internal Revenue Code as a result of its change in control in September 2008 and again in December 2008. Accordingly, the Company may have limitations on the yearly utilization of its U.S. tax carry-forwards in accordance with Section 382 of the Internal Revenue Code.
2009 2008 ------------ ------------
Federal Income Tax at Statutory Rate 34% 34% Adjustment to valuation allowance (34%) (34%) ------------ ------------ Total effective income tax rate 0% 0%
Note 6 - SHAREHOLDER'S EQUITY
In 2008 the Company issued 770,000 common shares to related parties in satisfaction of monies owed and to pay professional fees.
In 2008 the Company issued 1,975,000 common shares shares in conjunction with the sale of its assets and the assumption of its liabilities.
The Company currently has 100,000,000 shares authorized and 10,388,986 common shares issued and outstanding as of December 31, 2009
Note 7 - STOCK OPTIONS
Effective January 1, 2006, the Company discontinued the granting of stock options. The following is a summary of stock option activity:
Weighted Average Exercise Options Price ------------ ------------
Outstanding at December 31, 2006 4,645,000 $ 0.07 Cancelled/expired 1,440,000 0.10 ------------ ------------
Outstanding at December 31, 2007 3,205,000 $ 0.05 Cancelled/expired 770,000 $ 0.10 ------------ ------------
Outstanding at December 31, 2008 2,435,000 $ 0.04 Cancelled/expired 679,000 $ 0.10 ------------ ------------
Outstanding at December 31, 2009 1,756,000 $ 0.07
Note 7 - STOCK OPTIONS (CONTINUED)
The following table summarizes information about stock options outstanding at December 31, 2009:
Options Outstanding Options Exercisable Weighted Average Weighted Weighted Remaining Range of Average Average Contractual Number Exercise Exercise Number Exercise Life Outstanding Prices Price Exercisable Price - ----------- ----------- -------- --------- ----------- ---------
.5 years 388,000 $0.013-0.02 $0.02 388,000 $0.015 1 years 646,000 $0.005-0.095 $0.05 646,000 $0.05 2 years 491,000 $0.045-0.105 $0.07 491,000 $0.07 - ----------- ----------- -------- --------- ----------- --------- 1,756,000 $0.04 1,756,000 $0.04
The intrinsic value of exercisable and outstanding options at December 31, 2009, was $34,940.
Note 8 - SUBSEQUENT EVENTS
Management has evaluated subsequent events up to and including March 29, 2010 which is the date the statements were available for issuance and determined there is no disclosable subsequent events.
Item 9.
Item 9. Changes In & Disagreements With Accountants on Accounting & Financial Disclosure
None
Item 9A(T).
Item 9A(T). Controls and Procedures
a) Evaluation of Disclosure Controls and Procedures
The Company's management, including its President and Chief Executive Officer, who is its principal executive officer, completed an evaluation of the effectiveness of the design and operation of the Company's disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act") as of the end of the period covered by this Form 10-K. Disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the SEC rules and forms, and that such information is accumulated and communicated to management, including the President and Chief Executive Officer, as appropriate, to allow timely decisions regarding required disclosures. Based on that evaluation, the Company's President and Chief Executive Officer concluded that the Company's disclosure controls and procedures, as of the end of the fiscal year covered by this Form 10-K, were effective.
Our management, including our principal executive officer and principal financial officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2009 and concluded that the disclosure controls and procedures were not effective, because certain deficiencies involving internal controls constituted a material weakness as discussed below. The material weakness 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.
(b) Management's Annual Report on Internal Control over Financial Reporting
The Company's management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act and for assessing the effectiveness of internal control over financial reporting. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. In addition, projections of any evaluation of effectiveness of internal control over financial reporting to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Our management, including our principal executive officer and principal accounting officer, conducted an evaluation of the effectiveness of our internal control over financial reporting using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control--Integrated Framework.
Based on its evaluation, our management concluded that there is a material weakness in our internal control over financial reporting. A material weakness is a deficiency, or a combination of control deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company's annual or interim financial statements will not be prevented or detected on a timely basis.
The material weakness relates to the monitoring and review of work performed by our sole accounting employee in the preparation of audit and financial statements, footnotes and financial data provided to the Company's registered public accounting firm in connection with the annual audit. All of our financial reporting is carried out by our one accounting employee, and although we have an audit committee, the committee has only one member and no financial resources to hire others. This lack of accounting staff results in a lack of segregation of duties and accounting technical expertise necessary for an effective system of internal control.
In order to mitigate this material weakness to the fullest extent possible, the company has few transactions as it has no operating business. At any time, if it appears that any control can be implemented to continue to mitigate such weaknesses, it is immediately implemented. If our finances allow, we will hire sufficient accounting staff and implement appropriate procedures for monitoring and review of work performed by our sole accounting employee, but at the current time, that seems very unlikely.
This report shall not be deemed to be filed for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liabilities of that section, and is not incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.
This Annual Report on Form 10-K does not include an attestation report of the Company's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company's registered public accounting firm pursuant to rules of the SEC that permit the Company to provide only management's report in this Annual Report on Form 10-K.
(c) Changes in Internal Control over Financial Reporting
There were no changes in the Company's internal control over financial reporting that occurred during the fourth quarter of the year ended December 31, 2009 that have materially affected, or that are reasonably likely to materially affect, the Company's internal control over financial reporting.
Item 9B.
Item 9B. Other Information
None
PART III
Item 10.
Item 10. Directors, Executive Officers, Promoters and Control Persons
All directors of our company hold office until the next annual general meeting of the shareholders or until their successors are elected and qualified. The officers of our company are appointed by our board of directors and hold office until their earlier death, retirement, resignation or removal.
Our directors, executive officers and other significant employees, their ages, positions held and duration each person has held that position, are as follows:
============== ======================= ======= ========================= Name Position Held Age Date First Elected with the / Appointed Corporation ============== ======================= ======= ========================= David Roff President, Secretary, 38 December 22, 2008 Treasurer and Director
Business Experience
The following is a brief account of the education and business experience of each director, executive officer and key employee during at least the past five years, indicating each person's principal occupation during the period, and the name and principal business of the organization by which he was employed.
Mr. David Roff is the co-president of, Brave Consulting, a private consulting and investment corporation and has held this position since 2001. Mr. Roff has extensive experience working with small cap public companies for more than ten years. Prior to that, Mr. Roff was a management consultant for Coopers & Lybrand Consulting where he advised large financial institutions, investment fund complexes and other organizations on technology and internal control strategies. He was the former President and Sole Director of Deep Well from September 10, 2003 until February 6, 2004. Mr. Roff is a Director of Deep Well Oil & Gas, (DWOG-PK). Mr. Roff is a Director of Arkson Nutraceuticals, (AKSN-BB) Mr. Roff is a Chartered Accountant with a B.A. degree from the University of Western Ontario.
Our directors, executive officers and control persons have not been involved in any of the following events during the past five years:
1. any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;
2. any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offences);
3. being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; or
4. being found by a court of competent jurisdiction (in a civil action), the Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated.
Hudson's Grill does not have any committees of the board of directors at this time. The board of directors does not have a nominations committee because there is one director and shareholder suggestions would be known to the entire board. As such, the board of directors believes there will be sufficient communication by shareholders with the board about matters and nominees to be brought to its attention.
Audit Committee
Hudson's Grill's sole director functions as an audit committee and performs some of the same functions as an audit committee including: (1) selection and oversight of the Company's independent accountant; and (2) establishing procedures for the receipt, retention and treatment of complaints regarding accounting, internal controls and auditing matters. Accordingly, the board of directors believes that its director has the sufficient knowledge and experience necessary to fulfill the duties and obligations that an audit committee would have. David Roff has been designated as our qualified financial expert
Corporate Governance
There have been no material changes to the procedures by which security holders may recommend nominees to our board of directors.
Code of Ethics
We have not adopted a Code of Business Conduct and Ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions because we are not a member of any exchange that would require such a code.
Compliance With Section 16(a) of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our executive officers and directors and persons who own more than 10% of a registered class of our equity securities to file with the Securities and Exchange Commission initial statements of beneficial ownership, reports of changes in ownership and annual reports concerning their ownership of our common stock and other equity securities, on Forms 3, 4 and 5 respectively. Executive officers, directors and greater than 10% shareholders are required by the Securities and Exchange Commission regulations to furnish our company with copies of all Section 16(a) reports they file.
To the best of our knowledge, all executive officers, directors and greater than 10% shareholders filed the required reports in a timely manner, with the exception of the following: (n/a).
Item 11.
Item 11. Executive Compensation.
Summary Compensation Table
The following table sets forth information concerning all compensation paid or accrued by us to our President and Chief Executive Officer, during the fiscal year ended December 31, 2009. None of the officer receives compensation in excess of $100,000 per year.
Long-Term Annual Compensation Compensation Awards Name and Fiscal Stock Options All Other Principal Position Year Salary Bonus Granted Compensation - -------------------------------------------------------------------------------- David Roff 2009 $0 -- -- -- President 2008 $0 -- -- -- Joseph Meuse 2008 $0 -- -- -- President
Stock Option Grants
No stock options were granted during the fiscal year ended December 31, 2009 or December 31, 2008. Effective January 1, 2006, the Company discontinued the grant of stock options.
Options Exercised and Year-End Option Values
The following table sets forth certain information regarding the value of unexercised options held by the named executive officer as of December 31, 2009.
Fiscal Year-End Option Values(1)
Stock Option Plan
Effective January 1, 2006 the Company discontinued the granting of options to officers, directors and employees.
Compensation of Directors
The Company does not pay any compensation to directors.
Director Compensation
Employment Agreements
We have no employment agreements.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The following table sets forth, as of January 20, 2010, certain information with respect to the beneficial ownership of our common shares by each shareholder known to us to be the beneficial owner of 5% of our common shares, and by each of our officers and directors. Each person has sole voting power with respect to the common shares, except as otherwise indicated. Beneficial ownership consists of a direct interest in the common shares, except as otherwise indicated.
Name and Address Amount and Nature Percentage of of Beneficial Owner of Beneficial Ownership Class(1) ================================================================================ David Roff 4,830,770 Direct 46.50% ================================================================================ Directors and Officers 4,830,770 Direct 46.50% (as a group) ================================================================================
(1) Based on 10,388,986 shares outstanding as of January 20, 2010 and, as to a specific person, shares issuable pursuant to the conversion or exercise, as the case may be, of currently exercisable or convertible debentures, share purchase warrants and stock options within 60 days.
Item 13.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
David Roff is the sole officer and director of the Company. David Roff is not an independent director.
Item 14.
Item 14. Principal Accounting Fees and Services
The following table presents fees for professional services rendered by Whitley Penn LLP for the audit of the Company's financial statements as of the year end December 31, 2008 and for professional services rendered by Stan J. H. Lee, CPA for the audit of the Company's financial statements as of the year end December 31, 2008 and fees billed for other services rendered by Whitley Penn LLP during those periods.
Years Ended 2009 2008 ------------- ------------
Audit Fees $ 26,198 $ 28,953 Audit Related Fees $ $ 1,200 Tax Fees $ 5,000 $ 5,000 All other Fees $ - $ -
PART IV.
Item 15.
Item 15. Exhibits, Financial Statement Schedules
The following are filed as part of this Annual Report on Form 10-K:
(1)
Consolidated Financial Statements
See Index to Consolidated Financial Statements on page of this Form 10-K.
(2)
Financial Statement Schedules
See Index to Consolidated Financial Statements on page of this Form 10-K.
(3)
Exhibits
An index identifying the exhibits to be filed with this Form 10-K is provided below.
Exhibit No.
2.1 Entry into a material agreement to sell all assets and assumption of liabilities with Concept Franchising LLC, resignation of David Osborn, Robert Fischer, Barbara Amstutz andAnthony Duncan and the appointment of Joeseph Meuse as President and Director. Current report on Form 8-K filed on September 23, 2008.
2.2 Resignation of Joeseph Meuse and appointment of David Roff as President and Director effective Decemember 22, 2008. Current report on Form 8-K filed on January 6, 2009.
31.1 Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith
32.1 Certification of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of Sarbanes-Oxley Act of 2002. Filed herewith
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: March 29, 2010 By: /s/ David Roff ------------------------------------- David Roff President and Chief Executive Officer
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