**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

Washington, D.C. 20549

**FORM 10-Q**

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2008

Commission File Number: 333-94797

**HUDSON'S GRILL INTERNATIONAL, INC.**

(Exact name of registrant as specified in its charter)

Texas

(State or other jurisdiction of incorporation)

75-2738727

(I.R.S. Employer Identification No.)

16970 Dallas Parkway, Suite 402, Dallas, Texas  75248

(Address of principal executive offices)

(972) 931-9237



Indicate by checkmark 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 days.

Yes   X 		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 (Do not check if a smaller reporting company)

Smaller reporting company		X



Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2
of the Exchange Act).

Yes        No  X

APPLICABLE ONLY TO CORPORATE REGISTRANTS

State the number of shares outstanding of each of the issuer's classes of common equity, as
of the latest practicable date.

7,643,986 shares of Class A Common Stock outstanding as of May 4, 2008.

____________________________________________

PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements.



See the attached statements at the end of this Form 10-Q.

Item 2.  Management's Discussion and Analysis of Financial Condition and Results of
Operations.

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,
AVAILABILITY 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 its
subsidiary 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 include the following:

**Consolidated Balances as of March 31, 2008, Compared to December 31, 2007**

The Company's cash and cash equivalents balance at March 31, 2008 ("Q1") was
$2,545, which is $2,734 less than it was at December 31, 2007 ("FYE"), when it was $5,279.
Accounts receivable increased $4,319 because the Company's franchisees have been paying
their fees slower.  The Company feels, nevertheless, that all of these will be collected, and
thus, no allowance for reserves is currently deemed necessary.  The Company has offered
for sale its Oshkosh building and land; it is now classified as discontinued operations.  A
former franchisee operated from this location, but ceased operations on July 31, 2007.  The
Company put the property up for sale in August 2007. The assets associated with the
discontinued operations are now classified as current assets.  These assets remained
consistent at Q1 compared to FYE.  Other current assets remained the same; thus, current
assets increased by $1,280.

Net property and equipment decreased from FYE because of depreciation.
Consequently, net property and equipment decreased by $263, which is the amount
accumulated depreciation increased since FYE. As a result, total assets at Q1 increased by
$1,017 to $1,281,886 from $1,280,869 at FYE.

Current liabilities increased by $26,347 to $1,300,927 at Q1 from $1,274,580 at FYE.
 Accounts payable and accrued expenses increased by $15,645.  At the same time, accounts
payable to related parties has increased to $120,129 from $96,374 at FYE.  This reflects the
Company's current policy of paying its third party vendors instead of paying related parties.
The notes and liabilities related to the original purchase of the land for the franchisee at
Oshkosh are now classified as current liabilities of discontinued operations since the building
and property are for sale.   The liabilities of discontinued operations have decreased by
$13,053 since FYE.  As a result of current assets that remained about the same FYE and an
increase in current liabilities, the Company's working capital decreased from $4,859 at FYE
to negative working capital of ($20,208) at Q1.

**The Three Months Ended March 31, 2008, Compared to March 31, 2007**

Significant changes in the results of operations for the three months ended March 31,
2008 ("Q1") compared to the first quarter of 2007 ("Q07") include the following: revenues
from continuing operations decreased from $69,274 in Q07 to $56,706 in Q1. This was a
result of significant decreases in franchise fees from Plover, Wisconsin (a decrease of
$3,950), and a system wide decrease at all of the other franchisees. No franchisee improved
from its prior year fees, and no new franchises opened during Q1.

Operating costs decreased by $9,798 during Q1 to $56,744 from $66,542 during Q07.
General and administrative costs decreased by $9,537.  This was largely the result of
decreases in salaries ($10,406) and consulting expenses to the Company's West Coast
consultant ($3,600), which were offset by an increase in legal and accounting costs ($5,157),
which had been higher in Q07 because of the additional compliance work necessitated by
new requirements from the Sarbanes Oxley Act.

As a result, income(loss) from operations decreased $2,770 during Q1, when
compared to Q07.  The net loss from continuing operations was ($38) in Q1.  The loss on
discontinued operations at the Oshkosh location was ($25,292) in Q1, which was an increase
in loss of $12,261, when compared to a loss in Q07 of ($13,031).  Thus, net loss for Q1 was
($25,330) compared to a net loss in Q07 of ($10,298).

Loss per basic and diluted common share for continuing operations, discontinued
operations and all operations was $.00 per share for Q1 and $.00 for Q07.

**Liquidity and Capital Resources**

Normally, changes in the Company's liquidity and capital will depend primarily on
continuing royalty fees received from franchisees using the Company's trademark and
restaurant concept.  This in turn will be reflective of the general economies in the areas
where Hudson's Grill restaurants are located.  The Company does not currently plan to raise
any capital or borrow funds to meet liquidity needs, and thus, will rely solely on cash flows
from operations or from funds or services provided by its directors.  The Company's
subsidiary HGIO, however, borrowed money to buy real property in Oshkosh, Wisconsin,
that was modified to be a Hudson's Grill and had been leased to a new franchisee.  This has
affected the Company's liquidity since then, including  Q1, since the Company paid and has
been paying for major expenses and interest related to the restaurant facilities that HGIO was
leasing out in Oshkosh, which has since closed, and is classified as discontinued operations.
Currently, the Company's shortfall in cash flow has been covered by increased payables to
related parties.

The Company has scheduled payments with its creditors, including the related party
creditors, to fit within its cash flow constraints, but as of August 1, 2007, the Company has
suspended the mortgage payments on the Oshkosh property because the most recent Oshkosh
franchisee closed down its operations there on July 31, 2007, due to poor sales and has
ceased making any rent payments.

The mortgagee of the Oshkosh property is currently working with the Company and
is waiting for the Company to sell or lease the property.  The Company has listed the
property for sale, but no meaningful offers have been received to date.  In the mean time, the
Company has agreed on a forbearance agreement with the mortgagee to pay a reduced
interest rate of 5.25% and to pay interest only each month.  This became effective November
2007 and gives the Company until July 1, 2008, to sell the property, provided it stays current
with its reduced monthly payments.  If the Company is not able to find a buyer by the end
of the forbearance period and it cannot get an extension from the mortgagee, it will risk
losing the property to foreclosure.It may not have sufficient cash flow to make mortgage
payments without borrowing from related parties.

The franchises that have closed the last two years have significantly decreased the
Company's royalty streams; these losses have not been offset.  The Company's cash balance
of $2,545 at March 31, 2008, was $2,734 less than at the year ended December 31, 2007.
The lack of cash flow is a significant problem, and the Company's ability to stay in business
has been compromised by it.

The Company does not sustain much seasonal volatility in revenues since its
franchisees are dispersed geographically and climactically.  Additionally, it does not have
any material commitments for capital expenditures and doesn't plan any in the foreseeable
future.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk.

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.

The Report of our independent registered public accounting firm with respect to our financial
statements as of December 31, 2007 and for the year then ended contains a qualification with
respect to our ability to continue as a going concern.

The Company believes that available cash resources, together with anticipated revenues from
operations may not be sufficient to satisfy our capital requirements through December 31,
2008. If sufficient capital cannot be maintained or obtained, the Company may be forced to
significantly reduce operating expenses to a point which would be detrimental to business
operations, sell certain business assets or discontinue some or all of our business operations,
take other actions which could be detrimental to business prospects and result in charges
which could be material to its operations and financial position, or cease operations
altogether. In the event of a cessation of operations, there may not be sufficient assets to
fully satisfy all creditors, in which case the holders of equity securities will be unable to
recoup any of their investment.

Item 4T.  Controls and Procedures.

DISCLOSURE CONTROLS AND PROCEDURES

The Company maintains "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"), 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. In designing and evaluating the Company's
disclosure controls and procedures, management recognized 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 March 31, 2008, 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.

MANAGEMENT'S QUARTERLY REPORT ON INTERNAL CONTROL OVER
FINANCIAL REPORTING.

The Company's management is responsible for establishing and maintaining adequate
internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. Its internal control system was designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes, in accordance with generally accepted accounting
principles. Because of inherent limitations, a system of internal control over financial
reporting may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become inadequate
due to change in conditions, or that the degree of compliance with the policies or procedures
may deteriorate.

The Company's management, including its 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 Securities and Exchange Commission.
Based on its evaluation, the Company's management concluded that there is a material
weakness in its 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 the
Company's 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 and the quarterly reviews. All of the Company's
financial reporting is carried out by its one accounting employee, and although the Company
has 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, all financial reports
are reviewed by the sole audit committee member and the President for reasonableness. All
unexpected results are investigated. At any time, if it appears that any control can be
implemented to continue to mitigate such weaknesses, it is immediately implemented. If the
Company's finances allow, it 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 quarterly report 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 temporary rules of the SEC that permit the Company to provide only
management's report in this quarterly report.

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.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

There were no changes in the Company's internal control over financial reporting that
occurred during the quarter ended March 31, 2008, that have materially affected, or are
reasonable likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1.  Legal Proceedings.

In March 2008 the Company was sued in Wisconsin by a sign company that provided
signage to the Company's Oshkosh subsidiary and to its original Oshkosh franchisee.  The
Company has denied any liability.  The franchisee is bankrupt.  The Plaintiff is seeking
approximately $30,000 in damages from the Company.  The Company is not involved in any
other legal proceedings and knows of no other matters that have been threatened against the
Company.

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds.

There were no unregistered sales of equity securities during the quarter.

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.

(a) The following exhibits are filed herewith:

|Exhibit No. | Description                                           | Page Number
|----------- | ----------------------------------------------------- | -----------
|            |                                                       |            
|            |                                                       |            
|(31.1)      | Certification Pursuant toSarbanes-Oxley Act Sec.
302  | attached   
|(32.1)      | Certification Pursuant to Sarbanes-Oxley Act Sec.
906 | attached   

SIGNATURES

I, David L. Osborn, the President of Hudson's Grill International, Inc., certify that:
(i) this report fully complies with the requirements of Section 13(a) or 15(d) of the Securities
Exchange Act of 1934, and (ii) the information contained in this report fairly presents, in all
material respects, the financial condition and results of operations of Hudson's Grill
International, Inc.

| | (Registrant)

HUDSON'S GRILL INTERNATIONAL,
INC.

By: s/s David L. Osborn

David L. Osborn, President

Date:     May 20, 2008
| | -----------------------------------------------------------------------------------------------------------------------------

| |                                  |                                                                   | HUDSON'S GRILL INTERNATIONAL, INC.                  |  
| | -------------------------------- | ----------------------------------------------------------------- | --------------------------------------------------- | -
| |                                  |                                                                   |                                                     |  
| |                                  |                                                                   | CONSOLIDATED BALANCE SHEETS                         |  
| |                                  |                                                                   |                                                     |  
| |                                  |                                                                   | ASSETS                                             
| |                                  |                                                                   |                                                     |  
| |                                  |                                                                   |                                                     |  
| | Current
assets:                  |                                                                   |                                                     |  
| |                                  | Cash
and
cash
equivalents                                         |                                                     | $
| |                                  | Accounts
receivable, net                                          |                                                     |  
| |                                  | Other
current
assets                                              |                                                     |  
| |                                  | Assets
of
discontinued
operations                                 |                                                     |  
| |                                  |                                                                   | Total
current
assets                                |  
| |                                  |                                                                   |                                                     |  
| | Property and
equipment, at
cost: |                                                                   |                                                     |  
| |                                  | Office
furniture and
equipment                                    |                                                     |  
| |                                  | Accumulated
depreciation                                          |                                                     |  
| |                                  |                                                                   | Property and
equipment, net                         |  
| |                                  |                                                                   |                                                     |  
| |                                  |                                                                   |                                                     |  
| |                                  |                                                                   | TOTAL
ASSETS                                        | $
| |                                  |                                                                   |                                                     |  
| |                                  |                                                                   | LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT)     
| | Current
liabilities:             |                                                                   |                                                     |  
| |                                  | Accounts
payable
and
accrued
expenses                             |                                                     | $
| |                                  | Accounts
payable
to
related
parties                               |                                                     |  
| |                                  | Liabilities of
discontinued
operations (see
note 5)               |                                                     |  
| |                                  | Liabilities of
discontinued
operations-related party
(see
note 5) |                                                     |  
| |                                  |                                                                   | Total
current
liabilities                           |  
| |                                  |                                                                   |                                                     |  
| | Commitments
and
contingencies    |                                                                   |                                                     |  
| |                                  |                                                                   |                                                     |  
| | Stockholders'
equity
(deficit):  |                                                                   |                                                     |  
| |                                  | Common stock,
Class
A, no
par
value,
100,000,000
shares           |                                                     |  
| |                                  |                                                                   | authorized,
7,643,986
shares
issued
and
outstanding |  
| |                                  |                                                                   | at
March
31,
2008
and
December 31,
2007             |  
| |                                  | Common stock,
Class
B, no
par
value,
15,000,000
shares            |                                                     |  
| |                                  |                                                                   | authorized, no
shares
issued
and
outstanding        |  
| |                                  | Accumulated
deficit                                               |                                                     |  
| |                                  |                                                                   | Total
stockholders'
equity
(deficit)                |  
| |                                  |                                                                   |                                                     |  
| |                                  |                                                                   | TOTAL
LIABILITIES
AND
STOCKHOLDERS'                 | $
| |                                  |                                                                   | EQUITY
(DEFICIT)                                    |  

| |                                      |                                 |                                          | HUDSON'S GRILL INTERNATIONAL, INC.   
| | ------------------------------------ | ------------------------------- | ---------------------------------------- | -------------------------------------
| |                                      |                                 |                                          |                                      
| |                                      |                                 |                                          | CONSOLIDATED STATEMENTS OF OPERATIONS
| |                                      |                                 |                                          |                                      
| |                                      |                                 |                                          |                                      
| |                                      |                                 |                                          |                                      
| |                                      |                                 |                                          |                                      
| |                                      |                                 |                                          |                                      
| | Revenues                             |                                 |                                          |                                      
| |                                      | Franchise
fees                  |                                          |                                      
| |                                      |                                 | Total
revenues                           |                                      
| |                                      |                                 |                                          |                                      
| | Operating
costs:                     |                                 |                                          |                                      
| |                                      | General and
administrative      |                                          |                                      
| |                                      | Depreciation                    |                                          |                                      
| |                                      |                                 | Total
operating
costs                    |                                      
| |                                      |                                 |                                          |                                      
| |                                      |                                 | Income
(loss)
from
operations            |                                      
| |                                      |                                 |                                          |                                      
| |                                      |                                 |                                          |                                      
| |                                      |                                 | Income
(loss)
from
continuing
operations |                                      
| |                                      |                                 |                                          |                                      
| | Discontinued
operations
(see
note
5) |                                 |                                          |                                      
| |                                      | Loss
on
discontinued
operations |                                          |                                      
| |                                      |                                 |                                          |                                      
| | Net
loss                             |                                 |                                          |                                      
| |                                      |                                 |                                          |                                      
| | Net
income
(loss)
per
share-         |                                 |                                          |                                      
| |                                      | basic
and
diluted               |                                          |                                      
| |                                      | Continuing
operations           |                                          |                                      
| |                                      | Discontinued
operations         |                                          |                                      
| | Net
loss
per
share-                  |                                 |                                          |                                      
| |                                      |                                 |                                          |                                      
| | Weighted
average                     |                                 |                                          |                                      
| |                                      | outstanding
shares-             |                                          |                                      
| |                                      | basic
and
diluted               |                                          |                                      

| |                                       |                                               | HUDSON'S GRILL INTERNATIONAL, INC.         
| | ------------------------------------- | --------------------------------------------- | -------------------------------------------
| |                                       |                                               |                                            
| |                                       |                                               | CONSOLIDATED STATEMENTS OF CASH FLOWS      
| |                                       |                                               |                                            
| |                                       |                                               |                                            
| |                                       |                                               |                                            
| |                                       |                                               |                                            
| |                                       |                                               |                                            
| |                                       |                                               |                                            
| | Cash
Flows
From
Operating
Activities: |                                               |                                            
| |                                       | Net
loss                                      |                                            
| |                                       | Adjustments to
reconcile
net
loss
to net
cash |                                            
| |                                       |                                               | provided
by
(used
in)
operating
activities:
| |                                       |                                               |                                            
| |                                       |                                               |                                            
| |                                       |                                               |                                            
| |                                       |                                               |                                            
| |                                       |                                               |                                            
| |                                       |                                               |                                            
| |                                       |                                               |                                            
| |                                       |                                               |                                            
| |                                       |                                               |                                            
| |                                       |                                               |                                            
| |                                       |                                               |                                            
| | Cash
Flows
From
Financing
Activities: |                                               |                                            
| |                                       |                                               |                                            
| |                                       | Repayment of
notes
payable                    |                                            
| |                                       |                                               |                                            
| |                                       |                                               |                                            
| |                                       |                                               |                                            
| | Net
Increase
(Decrease)
In
Cash       |                                               |                                            
| |                                       |                                               |                                            
| | Cash,
beginning
of
period             |                                               |                                            
| |                                       |                                               |                                            
| | Cash,
end
of
period                   |                                               |                                            
| |                                       |                                               |                                            
| | Supplemental
Disclosures:             |                                               |                                            
| |                                       | Income
taxes
paid                             |                                            
| |                                       | Interest
paid                                 |                                            
| | Non-cash
Transaction:                 |                                               |                                            
| |                                       | Accrued
compensation
paid
with
stock          |                                            
| |                                       | Accrued
interest
converted
to
debt            |                                            

**1.	UNAUDITED INFORMATION**



The consolidated balance sheet of Hudson's Grill International, Inc. (the "Company") as of
March 31, 2008, and the consolidated statements of operations for the three month period
ended March 31, 2008 and 2007, 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 March 31, 2008, and the results of operations for the three months ended March 31,
2008 and 2007.



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, 2007.

As noted in the Company's consolidated financial statements as filed on Form 10-K, one of
the Company's directors owns one franchise that does not pay any franchise fees.  This is
the result of a previous agreement with the Company prior to the director's involvement with
the Company; the Company is not required to perform any services for the franchise owned
by the director.

**2. 		ACCOUNTING CHANGES**

In June 2006, the FASB issued Interpretation No. 48, *Accounting for Uncertainty in Income
Taxes, an Interpretation of FASB Statement No. 109, Accounting for Income Taxes*(FIN48),
to create a single model to address accounting for uncertainty in tax positions. FIN 48
clarifies the accounting for income taxes by prescribing a minimum recognition threshold
that a tax position is required to meet before being recognized in the financial statements.
FIN 48 also provides guidance on derecognition, measurement, classification, interest, and
penalties, accounting in interim periods, disclosure and transition. The Company adopted
FIN 48 as of January 1, 2007, and the adoption did not have a material impact to the
Company's consolidated financial statements or effective tax rate and did not result in any
unrecognized tax benefits. Interest costs and penalties related to income taxes are classified
as interest expense and general and administrative costs, respectively, in the Company's
consolidated financial statements. For the three months ended March 31, 2008 and 2007, the
Company did not recognize any interest or penalty expense related to income taxes. The
Company believes that is not reasonably possible for the amounts of unrecognized tax
benefits to significantly increase or decrease within the next 12 months. The Company is
currently subject to a three year statue of limitations by major tax jurisdictions. The
Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction.

In September 2006, the FASB issued Statement of Financial Accounting Standard ("SFAS")
No. 157, "Fair Value Measurements" ("SFAS 157"). SFAS 157 defines fair value,
establishes a market-based framework or hierarchy for measuring fair value, and expands
disclosures about fair value measurements. SFAS 157 is applicable whenever another
accounting pronouncement requires or permits assets and liabilities to be measured at fair
value. SFAS 157 does not expand or require any new fair value measures; however the
application of this statement may change current practice. The requirements of SFAS 157
are first effective for the Company's fiscal year beginning January 1, 2008. However, in
February 2008 the FASB decided that an entity need not apply this standard to nonfinancial
assets and liabilities that are recognized or disclosed at fair value in the financial statements
on a nonrecurring basis until the subsequent year. Accordingly, the Company's adoption of
this standard on January 1, 2008, is limited to financial assets and liabilities. The adoption
of SFAS 157 has not had a material effect on the Company's financial condition or results
of operations. However, the Company is still in the process of evaluating this standard with
respect to its effect on nonfinancial assets and liabilities and therefore has not yet determined
the impact that it will have on its financial statements upon full adoption.

In February 2007, FASB issued SFAS No. 159, *The Fair Value Option for Financial Assets
and Financial Liabilities ---- Including an Amendment of FASB Statement No. 115.*The fair
value option permits entities to choose to measure eligible financial instruments at fair value
at specified election dates. The entity will report unrealized gains and losses on the items on
which it has elected the fair value option in earnings. SFAS 159 is effective beginning in
fiscal year 2008 and became effective with the Company on January 1, 2008. It has not had
a material impact on the Company's consolidated results of operations or financial condition.

**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.	DISCONTINUED OPERATIONS**



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.  The Upper
Peninsula State Bank note had a variable interest rate of 1.5% over the prime rate as quoted
by the *Wall Street Journal*; the monthly payments were $10,178.   HGIO originally leased
the building, land, furniture and equipment to Service Solutions of Oshkosh, Inc., a former
franchisee of the Company.  On May 1, 2007, it leased the property to Are We There Yet,
LLC, a new franchisee of the Company, which has subsequently ceased operations at the
Oshkosh location on July 31, 2007.  The property is currently vacant and had been for sale
since August 2007.  Effective November 1, 2007, pursuant to a forbearance agreement, the
interest rate on the State Bank note was adjusted to 5.25%, and the monthly payments were
interest only until July 1, 2008, when the forbearance agreement was set to expire; the
mortgagee 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 15, 2008.  The bank now has title to the property.  The BCAH note has a variable
interest rate of 1.0% over the prime rate as quoted by the *Wall Street Journal*.  The Company
is currently paying interest only on the BCAH note.  The unpaid balance of the BCAH note
is due on May 23, 2008, if the building is sold by then, but if not, it has been extended until
the building is sold.

The BCAH note has been classified as a current liability as "Liabilities from discontinued
operations - related party" since it must be paid off as part of the sale of the land and
building.  The bank note is classified as a current liability as "Liabilities from discontinued
operations" since the note secures the land and building that is for sale, and it must be paid
off when the land and building are sold. Pursuant to EITF Issue Number 87-24, the Company
has allocated all of the interest on the bank note and the BCAH note to the discontinued
operations because the proceeds from these notes were used solely to  purchase the building
and land, and the notes must be paid off when the building and land are sold.

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.



**5.	SUBSEQUENT EVENTS**



The franchisee of the Marshfield, Wausau and Plover, Wisconsin Hudson's Grills has
unilaterally reduced the amount of fees it has been paying the Company.  The Company has
not yet filed suit to enforce its franchise agreement.  This franchisee comprises the largest
part of the Company's remaining franchisees, and the reduction in fees will have a
significant effect on the Company's cash flow in the future until it resolves the payments
owed to it by its franchisee.

On May 14, 2008, the mortgagee of the Company's Oshkosh property sent a notice of
election to file a deed in lieu of foreclosure, which deed was provided to it as part of the
forbearance agreement signed November 1, 2007.  Title to the Oshkosh property was
transferred to the mortgagee on May 15, 2008, pursuant to the forbearance agreement.