SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-QSB

QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2004

Commission file number 333-94797

HUDSON'S GRILL INTERNATIONAL, INC.

(Name of small business issuer in its charter)

Texas

(State or other jurisdiction of incorporation)

75-2738727

(IRS Employer Identification Number)

16970 Dallas Parkway, Suite 402, Dallas, Texas  75248

(Address of Principal Executive Offices)

Issuer's telephone number, including area code:

(972) 931-9237

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of
the Exchange Act during the past 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing requirements for the
past 90 days.

Yes   X    No



APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS



Check whether the registrant filed all documents and reports required to be filed by Section
12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan
confirmed by a court.

Yes        No

APPLICABLE ONLY TO CORPORATE REGISTRANTS

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

7,256,986 shares of Class A Common Stock

PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements.



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

Item 2.  Management Discussion and Analysis.

Material changes in the financial condition of the issuer and in the results of its
operations since the end of its last fiscal year and its results from the comparable period in
its last fiscal year include the following.

**Balances as of June 30, 2004, Compared to December 31, 2003**

The issuer's cash at June 30, 2004 ("Q2") was $116,118, which is $25,447 more than
it was at December 31, 2003 ("FYE"), when it was $90,671.This mostly reflects the receipt
of the fee for a new franchise in Iowa ($35,000), which is slightly offset by the continued
reduction of accounts payable.Due to the increase in cash and some smaller changes in
accounts receivable, the current assets at Q2 increased $29,258 to $147,388 from $118,130
at FYE.  Net property and equipment increased slightly from FYE partly because of software
purchases; long term receivable has decreased $5,721 because of payments received since
FYE in connection with the sale of a restaurant in 1995.  Thus, total assets at Q2 increased
by $25,392 to $236,529 from $211,137 at FYE.

Current liabilities increased slightly by $2,816 to $88,557 at Q2 from $85,741 at
FYE.   This reflects the booking of the $35,000 franchise fee received from the Company's
new Iowa franchisee as unearned deferred income (which will not be recognized as income
until the franchisee opens its restaurant); the increase in deferred income was offset by a
reduction in the Company's loan payable and accounts payable of $32,184.  The reduction
in accounts payable reflects the continued progress the Company has made in paying off its
line of credit, loan payable and accounts payable from the profits it has made during the
period.   Deferred revenue decreased slightly from $92,841 at FYE to $85,555 at Q2,
reflecting the continued amortization of income deferred from the advance payment of
royalties from certain franchisees and the gain deferred from the 1995 sale of a restaurant.

**The Three Months Ended June 30, 2004, Compared to June 30, 2003**

Material changes in the results of operations for the three months ended Q2 compared
to the second quarter of 2003 ("Q03") include the following: Revenue increased slightly from
$66,401 in Q03 to $69,000 in Q2.  Actual franchise fees received by the Company remained
roughly the same, too, from Q03 to Q2.  Fee revenue decreased at Ventura, California,
because it was closed down; it also decreased at Marshfield, Wisconsin, because of slightly
decreased sales combined with a reduction in the royalty percentage charged to the
franchisee.  These decreases were offset by increased franchise fees from Jackson, Michigan,
because of increased sales, and the combined effects of the other locations.  Operating
expenses decreased by $9,615 during Q2 to $50,995 from $60,610 during Q03, mostly as a
result of lower travel expense (in Q03 the Company held a franchisee meeting in Las Vegas,
which was not repeated in 2004), lower accounting and legal expenses and a reduction in
miscellaneous expenses of $7,599, which resulted from the write off of a debt that is no
longer owed.   As a result, income from operations increased $12,214 during Q2, when
compared to Q03.  Other income decreased $10,604 compared to Q03, mostly because the
Company does not receive settlement payments any longer.   Consequently, net income
increased slightly by $1,610 when compared to Q03.

Income per common share (both basic and diluted) was less than $.01 per share for
Q2 and Q03.

**The Six Months Ended June 30, 2004, Compared to June 30, 2003**

Material changes in the results of operations for the six months ended June 30, 2004
("YTD04"), compared to the same period in 2003 ("YTD03") include the following: There
was a decrease of $2,732 in YTD04 revenue mostly attributable to a decrease in
miscellaneous income.  YTD04 operating expenses increased slightly by $4,732 in YTD04
to $115,758, mostly as a result of an increase in salaries that began in June 2003.  As a result,
income from operations decreased by $7,464 to $21,557 in YTD04.  Other income decreased
by $14,273 because settlement income decreased by $15,000 when compared to YTD03.
Thus, because of these decreases, net income in YTD04 decreased by $21,737 to $29,862 in
YTD04.

Income per common share (both basic and diluted) was less than $.01 per share for
YTD04 and was $.01 per share for YTD03.

**Liquidity and Capital Resources**

Changes in the issuer's liquidity and capital will depend mostly on continuing royalty
fees received from franchisees using the issuer'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 issuer 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.

The issuer is currently allocating a major part of its cash flow to pay off accounts
payable; it plans to continue to do so until all of its past due debts are paid off.  This may
take the next several years to accomplish. The Company's cash balance of $116,118 at June
30, 2004, was $25,447 more than at the year ended December 31, 2003.

The issuer 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.  Disclosures; Controls and Procedures.

With the participation of management, the Company's President evaluated the
Company's disclosure controls and procedures as of the end of the quarterly period covered
by this report.  Based on this evaluation, the President concluded that the disclosure controls
and procedures are effective in connection with the Company's filing of its quarterly report
on Form 10-QSB for this quarterly period.

Subsequent to the date of the president's evaluation, through the date of this filing
of Form 10-QSB for this quarterly period, there have been no significant changes in the
Company's internal controls or in other factors that could significantly affect these controls,
including any significant deficiencies or material weaknesses of internal controls that would
require corrective action.

PART II - OTHER INFORMATION

Item 1.  Legal Proceedings.

The Company is not involved in any legal proceedings and knows of no matters that
have been threatened against the Company.

Item 2.  Changes in Securities.

There was no change in securities during the quarter ending June 30, 2004.

Item 3.  Defaults Upon Senior Securities.

The registrant does not currently have any senior securities outstanding.
Consequently, there are no defaults on senior securities.

Item 4.  Submission of Matters to a Vote of Security Holders.

There were two matters submitted to a vote of security holders during Q2.  The
shareholders voted for three directors of the Company (David L. Osborn, Robert W. Fischer,
and Anthony B. Duncan were elected) and voted for the appointment of Hein & Associates
to be the Company's auditors.

Item 5.  Other Information.

The registrant does not have any material new information that has not already been
disclosed in Forms 8-K, 10-QSB and 10-KSB.

Item 6.  Exhibits and Reports on Form 8-K.

(a)  Exhibit Index.  Following are the exhibits required under Item 601 of Regulation
S-B for Form 10-QSB:

|Exhibit No. | Description                                                                  | Page Number
|----------- | ---------------------------------------------------------------------------- | -----------
|            |                                                                              |            
|(2)         | Plan of Acquisition, Reorganization, Arrangement,
Liquidation, or Succession | n/a        
|(4)         | Instruments Defining the Rights of Holders
Including Indentures              | n/a        
|(6)         | No Exhibit Required                                                          | n/a        
|(11)        | Statement Re: Computation of  Per Share Earnings                             | n/a1       
|(12)        | No Exhibit Required                                                          | n/a        
|(15)        | Letter on Unaudited Interim Financial Information                            | n/a2       
|(18)        | Letter on Change in Accounting Principles                                    | n/a        
|(19)        | Previously Unfiled Documents                                                 | n/a        
|(20)        | Reports Furnished to Security Holders                                        | n/a        
|(23)        | Published Report Regarding Matters Submitted to
Vote                         | n/a        
|(24)        | Consent of Experts and Counsel                                               | n/a        
|(25)        | Power of Attorney                                                            | n/a        
|(27)        | Financial Data Schedule                                                      | n/a        
|(28)        | Additional Exhibits                                                          | n/a        
|(32.1)      | Certification Pursuant to Sarbanes-Oxley Act Sec.
906                        | attached   

1    No explanation of the computation of per share earnings on both the primary and
fully diluted basis is necessary because the  computation can be clearly determined from the
financial statements and  the notes to the financial statements.

2    No reports on unaudited interim financial information have been prepared by the
Company's independent accountants, and therefore, no letter is required from the Company's
independent accountants.

(b)  Reports on Form 8-K.  No reports on Form 8-K were filed during the quarter
ending June 30, 2004, or shortly thereafter.

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:     August 24, 2004
| | --------------------------------------------------------------------------------------------------------------------------------

I, David L. Osborn, certify that:

1.	I have reviewed this quarterly report on Form 10-QSB of Hudson's Grill
International, Inc.;

2.	Based on my knowledge, this quarterly report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the statements made, in
light of the circumstances under which such statements were made, not misleading with
respect to the period covered by this quarterly report;

3.	Based on my knowledge, the financial statements, and other financial information
included in this quarterly report, fairly present in all material respects the financial condition,
results of operations and cash flows of the registrant as of, and for, the periods presented in
this quarterly report;

4.	The registrant's other certifying officers and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14
and 15d-14) for the registrant and have:

a)	designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries, is made known
to us by others within those entities, particularly during the period in which this quarterly
report is being prepared;

b)	evaluated the effectiveness of the registrant's disclosure controls and
procedures as of the end of the quarter presented in this quarterly report (the "Evaluation
Date"); and

c)	presented in this quarterly report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.	The registrant's other certifying officers and I have disclosed, based on our most
recent evaluation, to the registrant's auditors and the audit committee of registrant's board
of directors (or persons performing the equivalent functions):

a)	all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's auditors any material weaknesses in
internal controls; and

b)	any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and

6.	The registrant's other certifying officers and I have indicated in this quarterly report
whether or not there were significant changes in internal controls or in other factors that
could significantly affect internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to significant deficiencies and
material weaknesses.

|Date:	August 24, 2004 | /s/David L. Osborn

[Signature]

President
|--------------------- | ------------------------------------------

f\sec\o01.040630

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT
OF 2002

In connection with the Quarterly Report of Hudson's Grill International, Inc., (the
"Company") on Form 10-QSB for the period ending June 30, 2004, as filed with the
Securities and Exchange Commission on the date hereof (the "Report"),  I, David L. Osborn,
the President of Hudson's Grill International, Inc., certify that:

(i) The 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 the Report fairly presents, in all material respects,
the financial condition and results of operations of the Company.

| | (Registrant)

HUDSON'S GRILL INTERNATIONAL,
INC.

By: s/s David L. Osborn

David L. Osborn, President

Date:     August 24, 2004
| | --------------------------------------------------------------------------------------------------------------------------------

A signed original of this written statement required by Section 906 has been provided
to the Company and will be retained by the Company and furnished to the Securities and
Exchange Commission or its staff upon request.

f\sec\o01.040630

**BALANCE SHEETS**

****ASSETS

|                                     | JUNE 30,    |  | DECEMBER 31,
|------------------------------------ | ----------- |  | ------------
|                                     | 2004        |  | 2003        
|                                     | (Unaudited) |  |             
|**CURRENT ASSETS:**                  |             |  |             
|Cash                                 | $	116,118   |  | $	90,671    
|Accounts receivable                  | 23,323      |  | 19,470      
|Other current assets                 | 7,947       |  | 7,989       
|Total current assets                 | 147,388     |  | 118,130     
|                                     |             |  |             
|**PROPERTY AND EQUIPMENT**, at cost: |             |  |             
|Furniture and office equipment       | 20,067      |  | 17,869      
|Less accumulated depreciation        | (17,185)    |  | (16,842)    
|Property and equipment, net          | 2,882       |  | 1,027       
|                                     |             |  |             
|**LONG-TERM RECEIVABLE**             | 86,259      |  | 91,980      
|                                     |             |  |             
|Total assets                         | $	236,529   |  | $	211,137   
|                                     |             |  |             

|LIABILITIES AND STOCKHOLDERS' EQUITY
|------------------------------------

|                                                                                                                                                                 |           |  |          
|---------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------- |  | ---------
|**CURRENT LIABILITIES:**                                                                                                                                         |           |  |          
|Loan payable                                                                                                                                                     | $	23,000  |  | $	35,000 
|Accounts payable and accrued expenses                                                                                                                            | 2,572     |  | 7,756    
|Accounts payable to related parties                                                                                                                              | 27,985    |  | 42,985   
|Deferred franchise fee                                                                                                                                           | 35,000    |  | -        
|Total current liabilities                                                                                                                                        | 88,557    |  | 85,741   
|                                                                                                                                                                 |           |  |          
|**DEFERRED REVENUE**                                                                                                                                             | 85,555    |  | 92,841   
|                                                                                                                                                                 |           |  |          
|**CONTINGENCIES**(Note 3)                                                                                                                                        |           |  |          
|                                                                                                                                                                 |           |  |          
|**STOCKHOLDERS' EQUITY:**                                                                                                                                        |           |  |          
|Common stock, Class A, no par value, 100,000,000 shares
authorized, 7,256,986 shares issued and outstanding at June 30,
2004 and December 31, 2003, respectively | 142,545   |  | 142,545  
|Common stock, Class B, no par value, 15,000,000 shares
authorized, no shares issued and outstanding                                                              | -         |  | -        
|Accumulated deficit                                                                                                                                              | (80,128)  |  | (109,990)
|Total stockholders' equity                                                                                                                                       | 62,417    |  | 32,555   
|                                                                                                                                                                 |           |  |          
|Total liabilities and stockholders' equity                                                                                                                       | $	236,529 |  | $	211,137
|                                                                                                                                                                 |           |  |          
|                                                                                                                                                                 |           |  |          

**STATEMENTS OF OPERATIONS**

| | THREE MONTHS ENDED

JUNE 30, |  | SIX MONTHS ENDED

JUNE 30,
| | ---------------------------- |  | --------------------------

|                                                                    | 2004         |  | 2003        |  | 2004        |  | 2003       
|------------------------------------------------------------------- | ------------ |  | ----------- |  | ----------- |  | -----------
|                                                                    | (Unaudited)  |  | (Unaudited) |  | (Unaudited) |  | (Unaudited)
|                                                                    |              |  |             |  |             |  |            
|**REVENUE******                                                     | ****$	69,000 |  | $	66,401    |  | $	137,315   |  | $	140,047  
|                                                                    |              |  |             |  |             |  |            
|**OPERATING COSTS:**                                                |              |  |             |  |             |  |            
|General and administrative                                          | 50,824       |  | 60,439      |  | 115,416     |  | 110,684    
|Depreciation and amortization                                       | 171          |  | 171         |  | 342         |  | 342        
|Total operating costs                                               | 50,995       |  | 60,610      |  | 115,758     |  | 111,026    
|                                                                    |              |  |             |  |             |  |            
|Income from operations                                              | 18,005       |  | 5,791       |  | 21,557      |  | 29,021     
|                                                                    |              |  |             |  |             |  |            
|**OTHER INCOME (EXPENSE):**                                         |              |  |             |  |             |  |            
|Settlement income                                                   | -            |  | 9,000       |  | 3,000       |  | 18,000     
|Income from sale of assets                                          | 1,569        |  | 2,233       |  | 3,892       |  | 3,703      
|Gain from assets disposed                                           | -            |  | -           |  | -           |  | -          
|Interest income                                                     | 1,076        |  | 1,563       |  | 2,613       |  | 2,649      
|Interest expense                                                    | (600)        |  | (147)       |  | (1,200)     |  | (1,774)    
|Total other income                                                  | 2,045        |  | 12,649      |  | 8,305       |  | 22,578     
|                                                                    |              |  |             |  |             |  |            
|**NET INCOME**                                                      | $	20,050     |  | $	18,440    |  | $	29,862    |  | $	51,599   
|                                                                    |              |  |             |  |             |  |            
|**NET INCOME PER SHARE -**                                          |              |  |             |  |             |  |            
|basic and diluted                                                   | *            |  | *           |  | *           |  | $	.01      
|                                                                    |              |  |             |  |             |  |            
|**WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING -**

basic and diluted | 7,256,986    |  | 7,256,986   |  | 7,256,986   |  | 7,256,986  
|                                                                    |              |  |             |  |             |  |            
|                                                                    |              |  |             |  |             |  |            

*************Less than $.01 per share

**STATEMENTS OF CASH FLOWS**

| | SIX MONTHS ENDED
| | ----------------
| | JUNE 30,        

|                                                                                   | 2004              |          | 2003         
|---------------------------------------------------------------------------------- | ----------------- | -------- | -------------
|                                                                                   | (Unaudited)       |          | (Unaudited)  
|**CASH FLOWS FROM OPERATING ACTIVITIES:**                                          |                   |          |              
|Net income                                                                         | $	29,862          |          | $	51,599     
|Adjustments to reconcile net income to net cash provided by

operating activities: |                   |          |              
|Depreciation                                                                       | 343               |          | 343          
|Amortization of deferred revenue                                                   | (7,286)           |          | (7,306)      
|Deferred franchise fee                                                             | 35,000            |          | -            
|Changes in operating assets and liabilities:                                       |                   |          |              
|Accounts receivable                                                                | (3,853)           |          | 995          
|Prepaid expenses and other                                                         | 42                |          | 321          
|Accounts payable and accrued expenses                                              | (5,184)           |          | (338)        
|Accounts payable to related parties                                                | (15,000)          |          | (15,000)     
|                                                                                   |                   |          |              
|Net cash provided by operating activities                                          | 33,924            |          | 30,614       
|                                                                                   |                   |          |              
|**CASH FLOWS FROM INVESTING ACTIVITIES:**                                          |                   |          |              
|Repayment of note receivable                                                       | 5,721             |          | 5,443        
|Purchase of property and equipment                                                 | (2,198)           |          | -            
|                                                                                   |                   |          |              
|Net cash provided by investing activities****                                      | ****3,523******** | ******** | 5,443********
|****                                                                               |                   |          |              
|**************CASH FLOWS FROM FINANCING ACTIVITIES:**                              |                   |          |              
|Repayments of advances from related parties                                        | -                 |          | (290)        
|Repayment of line of credit and notes payable                                      | (12,000)          |          | (9,037)      
|                                                                                   |                   |          |              
|Net cash used in financing activities                                              | (12,000)          |          | (9,327)      
|                                                                                   |                   |          |              
|**NET CHANGE IN CASH**                                                             | 25,447            |          | 26,730       
|                                                                                   |                   |          |              
|**CASH**, beginning of period                                                      | 90,671            |          | 46,167       
|                                                                                   |                   |          |              
|**CASH**, end of period                                                            | $	116,118         |          | $	72,897     
|                                                                                   |                   |          |              
|**SUPPLEMENTAL DISCLOSURES:**                                                      |                   |          |              
|Income taxes paid                                                                  | $	-               |          | $	-          
|Interest paid                                                                      | $	-               |          | $	1,800      

**1.	UNAUDITED INFORMATION**



The balance sheet of Hudson's Grill International, Inc. (the "Company") as of June 30, 2004 and the statements
of operations for the three- and six-month periods ended June 30, 2004 and 2003 were taken from the
Company's books and records without audit.  However, in the opinion of management, such information
includes all adjustments (consisting only of normal recurring accruals) which are necessary to properly reflect
the financial position of the Company as of June 30, 2004 and the results of operations for the three and six
months ended June 30, 2004 and 2003.



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 financial statements as filed on Form 10-KSB for the year ended
December 31, 2003.

**2.	STOCK OPTIONS**



The Company president's compensation includes the granting of stock options.  Currently, the president is
granted 18,000 stock options per month.  The Company also grants 10,000 stock options per month to each of
the two directors of the Company, as compensation for services as directors.  All options are fully vested when
granted and expire in seven years.



The Company accounts for stock options granted to its directors and employees using the intrinsic value method
prescribed by APB No. 25 which requires compensation expense be recognized for stock options when the
quoted market price of the Company's common stock on the date of grant exceeds the option's exercise price.
No compensation cost has been reflected in net income for the granting of director and employee stock options
as all options granted had an exercise price greater than the quoted market price of the Company's common
stock on the date the options were granted.

Had compensation cost for the Company's stock options been determined consistent with the SFAS 123 fair
value approach, the Company's net income and net income per common share for the three and six month
periods ended June 30, 2004 and 2003, on a pro forma basis, would have been as follows:



| | THREE MONTHS ENDED

JUNE 30, |  | SIX MONTHS ENDED

JUNE 30,
| | ---------------------------- |  | --------------------------

|                                                                            | 2004        |  | 2003        |  | 2004        |  | 2003    
|--------------------------------------------------------------------------- | ----------- |  | ----------- |  | ----------- |  | --------
|                                                                            |             |  |             |  |             |  |         
|Net income: as reported                                                     | $	20,050    |  | $	18,440    |  | $	29,862    |  | $	51,599
|Add: Stock-based compensation
expense included in reported
net income       | -           |  | -           |  | -           |  | -       
|Deduct: Stock-based
compensation expense
determined under fair value
method | (6,886)     |  | (1,063)     |  | (13,772)    |  | (2,023) 
|Net income: pro forma                                                       | $	13,164    |  | $	17,377    |  | $	16,090    |  | $	49,576
|                                                                            |             |  |             |  |             |  |         
|Net income per share:                                                       |             |  |             |  |             |  |         
|as reported - basic and diluted                                             | $         * |  | $         * |  | $         * |  | $	.01   
|Pro forma - basic and diluted                                               | $         * |  | $         * |  | $         * |  | $	.01   



*  Less than $.01 per share



The fair values of stock options granted during fiscal years 2004 and 2003 were estimated on the dates of grant
using the Black-Scholes option pricing model with the following weighted average assumptions:



|               |  | 2004    |  | 2003   
|-------------- |  | ------- |  | -------
|Volatility     |  | 200%    |  | 50%    
|Interest rate  |  | 4.62%   |  | 3.75%  
|Dividend yield |  | - %     |  | - %    
|Expected life  |  | 7 years |  | 7 years



**3.	CONTINGENCY**



The Company's former parent, Hudson's Grill of America, Inc. ("HGAI") was involved in litigation arising
from a lease associated with a franchised restaurant location that has ceased operations.  In addition, HGAI is
secondarily liable under other leases for restaurants it sold in prior years.  None of these restaurants, lease
agreements or obligations were transferred to or assumed by the Company.  The Company, based upon
consultation with its legal counsel, is of the opinion that the former parent's actual and contingent obligations
with respect to these leases can no longer be attributable to the Company because of the statute of limitations,
but if counsel is wrong in its assessment and if a creditor obtained a judgment against the former parent, stock
in the Company formerly held by HGAI could be subject to attachment or execution by the creditor under
certain limited circumstances.  Accordingly, the Company believes these matters will not have a material
adverse effect on the Company's financial condition or results of operations, and no provision for any estimated
loss is reflected in the accompanying financial statements.

**4.	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.



The following table sets forth the computation of basic and diluted earnings per share:



| |  | THREE MONTHS ENDED
JUNE 30,
| |  | ---------------------------

|                                           |  | 2004        |  | 2003       
|------------------------------------------ |  | ----------- |  | -----------
|Numerator:                                 |  |             |  |            
|Net income                                 |  | $	20,050    |  | $	18,440   
|                                           |  |             |  |            
|Denominator:                               |  |             |  |            
|Weighted average common shares outstanding |  | 7,256,986   |  | 7,256,986  
|Effect of dilutive stock options           |  | 1,564,000   |  | -          
|                                           |  |             |  |            
|Dilutive weighted average common shares    |  | 8,820,986   |  | 7,256,986  
|                                           |  |             |  |            
|Basic earnings per share                   |  | $         * |  | $         *
|Diluted earnings per share                 |  | $         * |  | $         *



*Less than $.01 per share



At June 30, 2004 and 2003, the Company had 2,402,000 and 3,710,000 stock options that were not included in
the dilutive earnings per share calculation because the effect would have been anti-dilutive.  Such stock options
were excluded because the exercise price of the stock options was greater than the average market price of the
Company's common stock in the applicable period

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