SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-KSB

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

SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2003

For the transition period from                 to



Commission file number 333-94797

HUDSON'S GRILL INTERNATIONAL, INC.

(Name of small business issuer in its charter)

Texas                                           75-2738727

(State or other jurisdiction of incorporation) (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

Securities registered under Section 12(b) of the Exchange Act:

None                                                     None

(Title of each class)   (Name of each exchange on which registered)

Securities registered under Section 12(g) of the Exchange Act:

Common Stock

(Title of each class)



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

Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation
S-B not contained in this form, and no disclosure will be contained, to the best of
registrant's knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB.

[ ]

State issuer's revenues for its most recent fiscal year.

$274,901

State the aggregate market value of the voting stock held by non-affiliates computed by
reference to the price at which the stock was sold, or the average bid and asked prices of
such stock, as of a specified date within the past 60 days.  (See definition of affiliate in
Rule 12b-2 of the Exchange Act).

The last traded price as of March 16, 2004, was $.07 per share.  The issuer has 7,256,986
shares outstanding; thus, on that date the market value of the voting stock was $507,989.

Note:  If determining whether a person is an affiliate will involve an unreasonable effort
and expense, the issuer may calculate the aggregate market value of the common equity
held by non-affiliates on the basis of reasonable assumptions, if the assumptions are
stated.

(ISSUERS INVOLVED IN BANKRUPTCY PROCEEDING DURING THE PAST FIVE
YEARS)

Check whether the issuer has 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

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Proxy Statement for the Annual Meeting of Shareholders to be held on
May 25, 2004, are incorporated by reference into Parts II and III.

PART I

ITEM 1. BUSINESS

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"). Currently, the Company franchises Hudson's Grill Restaurants.

Hudson's Grill Restaurants are full service restaurants that serve lunch and dinner and
a wide range of alcoholic beverages.  On December 31, 2003, there were ten Hudson's
Grill restaurants; all ten were franchised. The most recent franchise was opened in
September 2003, in Marshfield, Wisconsin.  The company's major focus is to expand the
Hudson's Grill operations through franchising instead of through ownership.  The
Hudson's Grill restaurants are currently operating in California, Michigan, Wisconsin
and Texas.  The Company is still accepting franchises, but the franchise market and the
restaurant market are very competitive.  Many other franchisers have substantially more
capital, thereby making it much more difficult to compete against them.

BRIEF SUMMARY OF MAJOR EVENTS OVER THE PAST THREE YEARS.

In January 2004, the Company signed a franchise agreement for a new Hudson's Grill
to be built in Iowa.  This will be the Company's first franchise in that state.  The
franchisee plans to open for business in the latter part of 2004 or the early part of 2005.

In April 2003, the Company held a meeting of its franchisees; the Company had not held
such meeting for several years.  This was held in Las Vegas.  About half of the
franchisees attended, as well as some interested prospective franchisees.  Common
advertising and specialized advertising was shown to the franchisees.

On December 28, 2002, the franchisee of the Santa Barbara, California franchise, sold
his lease, and the Hudson's Grill at that location was closed. On April 30, 2002, the
Oxnard, California franchisee  lost his lease, and the Hudson's Grill at that location was
also closed.

On September 9, 2002, Acceleration, LLC, a company associated with William W. Hall,
formerly a Burger King franchisee, opened a Hudson's Grill in Marshfield, Wisconsin.
It is a free standing building that uses the new prototype developed over the past several
years.

On December 18, 2000, Acceleration, LLC, opened a Hudson's Grill in Wausau,
Wisconsin.  It, too, is a free standing building that uses the new prototype developed over
the past several years.

OPERATIONS AND RESTAURANT STYLE OF HUDSON'S.

Hudson's Grill is a full service, limited menu concept with alcoholic beverage service.
The management teams work with the philosophy that the customer should be viewed
as their "Guest."  They stress quality of product and service, efficient flow of
communications, integrity in job performance and strong employee morale.  These
restaurants range in size from 2,500 to 5,500 square feet.  The decor package has the
theme of a "Classic Grill of the 50's and 60's", with the front end of a Hudson's
automobile coming through the wall as a main feature.  Some restaurants are in free
standing buildings, and some are located within in-line shopping centers.  The average
Hudson's Grill employs approximately forty employees, seventy percent of whom are
part-time employees.

The restaurants have similar operations and offer similar food.  Since the restaurant
industry is very competitive, the Company plans to attract loyal patrons by higher levels
of service and more exacting specifications for its products.

The Company plans to expand solely by adding franchises.

HUDSON'S MENU.

Most Hudson's Grill Restaurants open at 11 a.m. and remain open until midnight, seven
days a week, utilizing the same menu throughout all parts of the day.  They specialize in
1/3 pound hamburgers with the beef patties produced to very exacting specifications.
The menu also features an expanded chicken sandwich section using top quality chicken
breasts and whole wheat buns.  Also on the menu are salads, sandwiches, a variety of
appetizers, fajitas, tacos, and handmade milkshakes and malts.  Cocktails, beer and wine
are also available with food.  The full service restaurant concept utilizes booths and
tables with waiters and waitresses serving the guests.

HUDSON'S RESTAURANT DEVELOPMENT.

The Company currently plans to expand only after paying off its current debts.  Once the
debts are paid, the Company plans to increase efforts to add franchisees, and only if the
Company's cash flow will permit, it may entertain directly operating a Hudson's Grill.
Once the debts are paid, the Company also intends to hire a full time president to run the
Company.

HUDSON'S FRANCHISE AGREEMENTS.

The Company owns the trademark registrations for two "Hudson's Grill" logos and for
the "Hudson's" name.  It has also received registration of its "Burgers*Shakes*Rock'n
Roll" mark.   The Company has secured a permit from the California Department of
Corporations to issue Hudson's Grill franchises in California and uses a Uniform
Franchise Offering Circular where permitted.  As of December 31, 2003, the Company
had ten franchised restaurants that were in operation.  The current standard terms to
franchise a restaurant are an initial fee of Thirty Five Thousand Dollars and a royalty of
four percent of sales, and require that three percent of sales be used for advertising, of
which one percent is to be paid to the Company for collective advertising.  For these
payments, the Company is obligated to do the following: screen and train potential
franchisees, review and approve sites, and provide an operations manual and assistance.
The Company is not currently collecting the one percent advertising fees since collective
advertising does not make sense with the current franchisees because they are too far
from each other.

EMPLOYEES.

At December 31, 2003, the Company employed one person, who is the
receptionist/administrative assistant/bookkeeper for the Company.  The President works
only part time, and is paid $2,500 a month; each month he also is granted seven year
options to purchase 18,000 shares of the Company's stock for anywhere from $.005 to
$.05 above the market price on the last day of the preceding month; the exact exercise
price within the range depends on how much the options impact the financial statements
of the Company.

The Company is not a party to any collective bargaining agreements.

ITEM 2. PROPERTIES

At December 31, 2003, the Company was the primary lessee for its headquarters in
Dallas, Texas. The headquarters lease is month-to-month. The Company shares office
space with its largest shareholder, who is a part owner of the lessor. The office space is
sufficient to meet the Company's current needs, and it expects that its needs will be
satisfied with this space for the foreseeable future.

All of the Company's restaurant equipment that it still owns is owned free and clear by
the Company.  The Company's restaurant  equipment is currently stored in a warehouse
and is for sale.  Currently, the Company has no real property and has no real estate
related investments.

ITEM 3. LEGAL PROCEEDINGS

The Company is not involved in any legal proceedings at the current time.  The Company
knows of no threatened legal actions.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matter was submitted during the fourth quarter of the fiscal year covered by this
report to a vote of security holders of the Company through the solicitation of proxies
or otherwise.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS

MARKET INFORMATION.

In early 2001, the Company's Common Stock, no par value, began trading
over-the-counter on the NASD OTC Bulletin Board under the National Association of
Security Dealers ("NASD") symbol "HGII."  As of March 16, 2004, 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 following table sets forth the reported high
and low bid prices of the Common Stock for the periods indicated as regularly quoted
by the NASD OTC Bulletin Board, based on the infrequent transactions in the
Company's stock reported on Yahoo and the recollection of its officers.  The table does
not reflect offer prices, and the prices that are shown, are in U.S. Dollars.  The
over-the-counter market quotations reflect inter-dealer prices, without retail mark-up,
mark-down or commissions and may not necessarily represent actual transactions.

|FISCAL YEAR ENDED DECEMBER 31, 2002    | High | Low 
|-------------------------------------- | ---- | ----
|First Quarter ended March 31, 2002     | .01  | .01 
|Second Quarter ended June 30, 2002     | .15  | .01 
|Third Quarter ended September 30, 2002 | .015 | .005
|Fourth Quarter ended December 31, 2002 | .015 | .005

|FISCAL YEAR ENDED DECEMBER 31, 2003    | High | Low
|-------------------------------------- | ---- | ---
|First Quarter ended March 31, 2003     | .01  | .01
|Second Quarter ended June 30, 2003     | .02  | .01
|Third Quarter ended September 30, 2003 | .01  | .00
|Fourth Quarter ended December 31, 2003 | .07  | .00

As of March 16, 2004, the closing bid price of the Common Stock was $.07.  Historical
information about the price of the Company's common stock can be obtained from the
Internet by visiting the following site operated by Yahoo.com:
http://finance.yahoo.com/q?s=HGIIA.OB&d=t

DIVIDENDS.

Common Stock

The Company has not paid cash dividends on its common stock, and the present policy
of the Company's Board of Directors (the "Board") is to retain earnings attributable to
common stock, pay off the Company's debts, and if and when earned, to provide funds
for the operation and expansion of the Company's business.  The Company does not
expect to pay cash dividends on its common stock in the foreseeable future.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS

For the year ended December 31, 2003, the Company had a net income of $97,567.  This
compares to net income of $139,502 for the year ended December 31, 2002.  Net income
decreased by $41,935.  This was mostly due to a drop in Revenue of $40,423.  The drop
in Revenue, in turn, was mostly due to decreases in the current amount of deferred
income for the prepayment of royalty fees from three California franchises (a decrease
of $16,235); the repurchase of formerly exclusive territories in Wisconsin treated as a
refund ($10,000); the closing of the Santa Barbara franchise (a decrease of $5,334); and
a drop in miscellaneous income of $5,542.

In 1993, a franchisee who owned four franchises agreed to pay a higher initial franchise
fee in return for a reduced royalty fee.  The Company defers its recognition of the
additional fee amount, and is amortizing it into income through 2014.The Santa Barbara
franchise was one of the franchises involved in this transaction.  When it closed at the
end of 2002, one time additional income of $13,065 was recognized in 2002.  This
accounts for the largest part of $16,235 decrease in deferred income in 2003.  The
combined effect of the closing of Santa Barbara accounts for a decrease in Revenue of
$18,399.

REVENUES.

Franchise revenues decreased by $40,423 mostly due to the closing of Santa Barbara and
the purchase of the Wisconsin territory.  These two events account for $28,399 of the
drop in Revenues.  The current franchisees' performance in 2003, however, only dropped
slightly compared to their performance in 2002, reflecting flat demand nationwide.

COSTS AND EXPENSES.

Operating costs in 2003 were $222,468; this is a decrease from 2002, when operating
costs were $233,619.  The decrease is mostly due to lower legal and accounting expenses
as a result of fewer legal issues in 2003; the legal and accounting expenses declined by
$32,440.  This large decrease, however, was offset to some extent by several material
increases, which include: (1) salaries increased by $12,450 because of an increase in the
salary of the Company's president; and (2) travel, meals, entertainment and
miscellaneous expenses increased by $9,593, mostly due to a company sponsored
meeting of franchisees.

Other income dropped by $12,663 in 2003.  This was mostly due to a one time gain on
disposal of assets that occurred in 2002.

LIQUIDITY AND CAPITAL RESOURCES.

At December 31, 2003, the Company had working capital of $32,389 as compared to
December 31, 2002, when the Company had negative working capital of $62,174.  This
is largely the result of increasing cash balances at the same time as current liabilities are
being paid off from net income.

Changes in its liquidity and capital will depend mostly 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.  Unfortunately, at the present time, most of the U.S. is stagnant
or slowly growing at best.  As long as this continues, the year to year sales at the
Company's franchisees will likely be mixed, too.

The Company is currently allocating a significant 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
essentially paid off.  This may take several more years to accomplish. The Company's
cash balance of $90,671 at December 31, 2003, was $44,504 more than at the year ended
December 31, 2002.  The Company will continue to increase its cash reserves in order
to withstand any more substantial, future downturn in the U.S. economy.

The effects of inflation on the Company are minimal.  To the extent that the franchisees
need to raise prices to offset extra costs (and are able to pass the increased costs onto
customers), then the Company will have increased royalty fees.  Any increase in royalty
fees will probably be offset in increased operating costs of the Company.  Thus, the
Company expects that increases from inflation will be minimal now and in the future.

The Company does not sustain much seasonal volatility in royalty 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.

CRITICAL 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
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 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.

The Company is subject to various claims and contingencies arising out of the normal
course of business.  Liabilities related to commitments and contingencies are recognized
when a loss is probable and reasonably estimable.

The Company's significant accounting policies are more fully described in Note 2 to the
financial statements that are attached following Item 13.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS.

Recently issued accounting pronouncements did not have a material effect on the
Company's financial position or results of its operations.

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 period covered by this
annual 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
annual report on Form 10-KSB for the annual period ended December 31, 2003.
Through the date of this filing of Form 10-KSB for the annual period ended December
31, 2003, there have been no significant changes in the Company's internal controls or
in other factors that could significantly affect these controls subsequent to the date of the
President's evaluation, including any significant deficiencies or material weaknesses of
internal controls that would require corrective action.

ITEM 7. FINANCIAL STATEMENTS

Attached following Item 13.

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS AND
ACCOUNTING AND FINANCIAL DISCLOSURE

Incorporated by reference from the Proxy Statement (the "Proxy Statement") to
shareholders relating to the annual meeting to be held May 25, 2004. No changes or
disagreements are known.

PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

Incorporated by reference from the Proxy Statement.

ITEM 10. EXECUTIVE COMPENSATION

Incorporated by reference from the Proxy Statement.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT

Incorporated by reference from the Proxy Statement.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Incorporated by reference from the Proxy Statement.

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

(a)  Financial Statements; Exhibits

Financial statements are incorporated by reference from Item 7, and are attached
following this Item.

See the Index to the Financial Statements in the beginning of the Independent Auditor's
Report for a list of the statements and items contained in the Independent Auditor's
Report.

There are no exhibits.

(b)  Reports on Form 8-K

The Company filed no Forms 8-K during the last quarter of the fiscal year ending
December 31, 2003.

January 15, 2004.  The Company announced the signing of a franchise agreement withSYH Asbury, LLC, an Iowan company, for the operation of a Hudson's Grill franchise
in Des Moines, Iowa.

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.

|(Registrant) | HUDSON'S GRILL
INTERNATIONAL, INC.

By:

David Osborn, President
|------------ | ----------------------------------------------------------------



Date: March 29, 2004

In accordance with the Exchange Act, this report has been signed below by the following
persons on behalf of the registrant and the capacities and on the dates indicated.

|Signature         | Title     | Date          
|----------------- | --------- | --------------
|DAVID L. OSBORN   | President | March 29, 2004
|ROBERT W. FISCHER | Director  | March 29, 2004
|ANTHONY B. DUNCAN | Director  | March 29, 2004

I, David L. Osborn, certify that:

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

2.	Based on my knowledge, this annual 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 annual report;

3.	Based on my knowledge, the financial statements, and other financial information
included in this annual 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 annual 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
annual report is being prepared;

b)	evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this annual report (the
"Evaluation Date"); and

c)	presented in this annual 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 annual 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:	March 29, 2004 | /s/David L. Osborn

[Signature]

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

f\sec\040331.o01

INDEPENDENT AUDITOR'S REPORT

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

**INDEX TO FINANCIAL STATEMENTS**

**PAGE**

**INDEPENDENT AUDITOR'S REPORT**	F-1

**FINANCIAL STATEMENTS**



****Balance Sheets at December 31, 2003 and 2002	F-2



****Statements of Income for the Years Ended December 31, 2003 and 2002	F-3



Statements of Stockholders' Equity (Deficit) for the Years Ended December 31, 2003 and
2002	F-4



Statements of Cash Flows for the Years Ended December 31, 2003 and 2002	F-5



**NOTES TO FINANCIAL STATEMENTS**	F-6



******INDEPENDENT AUDITOR'S REPORT**

Board of Directors

Hudson's Grill International, Inc.

Dallas, Texas

We have audited the accompanying balance sheets of Hudson's Grill International, Inc. as of
December 31, 2003 and 2002, and the related statements of income, stockholders' equity
(deficit), and cash flows for the years then ended.  These financial statements are the
responsibility of the Company's management.  Our responsibility is to express an opinion on the
financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United
States of America.  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 audits provide 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, 2003 and 2002,
and the results of its operations and its cash flows for the years then ended in conformity with
accounting principles generally accepted in the United States of America.

Hein & Associates LLP

February 24, 2004

Dallas, Texas

******BALANCE SHEETS**

ASSETS

| |  | December 31,
| |  | ------------

|                                                        |  | 2003      |  | 2002     
|------------------------------------------------------- |  | --------- |  | ---------
|**CURRENT ASSETS:**                                     |  |           |  |          
|Cash                                                    |  | $	90,671  |  | $	46,167 
|Accounts receivable, no allowance for doubtful accounts |  | 19,470    |  | 22,371   
|Other current assets                                    |  | 7,989     |  | 10,135   
|Total current assets                                    |  | 118,130   |  | 78,673   
|                                                        |  |           |  |          
|**PROPERTY AND EQUIPMENT:**                             |  |           |  |          
|Furniture and office equipment                          |  | 17,869    |  | 17,869   
|Accumulated depreciation                                |  | (16,842)  |  | (16,157) 
|Net property and equipment                              |  | 1,027     |  | 1,712    
|                                                        |  |           |  |          
|**LONG-TERM RECEIVABLE**                                |  | 91,980    |  | 103,002  
|                                                        |  |           |  |          
|Total assets                                            |  | $	211,137 |  | $	183,387
|                                                        |  |           |  |          

|LIABILITIES AND STOCKHOLDERS'EQUITY (DEFICIT)
|---------------------------------------------

|                                                                                                            |  |                 |  |          
|----------------------------------------------------------------------------------------------------------- |  | --------------- |  | ---------
|**CURRENT LIABILITIES:**                                                                                    |  |                 |  |          
|Line of credit                                                                                              |  | $             - |  | $	9,037  
|Loan payable                                                                                                |  | 35,000          |  | 45,000   
|Accounts payable and accrued expenses                                                                       |  | 7,756           |  | 10,068   
|Accounts payable to related parties                                                                         |  | 42,985          |  | 76,452   
|Advances from related party                                                                                 |  | -               |  | 290      
|Total current liabilities                                                                                   |  | 85,741          |  | 140,847  
|                                                                                                            |  |                 |  |          
|******DEFERRED REVENUE**                                                                                    |  | 92,841          |  | 107,552  
|                                                                                                            |  |                 |  |          
|Total liabilities                                                                                           |  | 178,582         |  | 248,399  
|                                                                                                            |  |                 |  |          
|**COMMITMENTS AND CONTINGENCIES** (Note 6)                                                                  |  |                 |  |          
|                                                                                                            |  |                 |  |          
|STOCKHOLDERS' EQUITY (DEFICIT):                                                                             |  |                 |  |          
|Common stock, Class A, no par value; 100,000,000 shares
authorized, 7,256,986 shares issued and outstanding |  | 142,545         |  | 142,545  
|Common stock, Class B, no par value; 15,000,000 shares

authorized, no shares issued and outstanding        |  | -               |  | -        
|Accumulated deficit                                                                                         |  | (109,990)       |  | (207,557)
|Total stockholders' equity (deficit)                                                                        |  | 32,555          |  | (65,012) 
|                                                                                                            |  |                 |  |          
|Total liabilities and stockholders' equity (deficit)                                                        |  | $	211,137       |  | $	183,387

**STATEMENTS OF INCOME**

| |  | Years Ended December 31,
| |  | ------------------------

|                                                       |  | 2003      |  | 2002         
|------------------------------------------------------ |  | --------- |  | -------------
|                                                       |  |           |  |              
|**REVENUE**                                            |  | $	274,901 |  | $	315,324****
|****                                                   |  |           |  |              
|******OPERATING COSTS**                                |  | 222,468   |  | 233,619      
|                                                       |  |           |  |              
|Income from operations                                 |  | 52,433    |  | 81,705       
|                                                       |  |           |  |              
|**OTHER INCOME (EXPENSE):**                            |  |           |  |              
|Settlement income                                      |  | 36,000    |  | 36,000       
|Gain on disposal of assets                             |  | -         |  | 18,000       
|Income from sale of assets                             |  | 7,500     |  | 3,187        
|Interest income                                        |  | 5,161     |  | 6,844        
|Interest expense                                       |  | (3,527)   |  | (6,234)      
|Total other income (expense), net                      |  | 45,134    |  | 57,797       
|                                                       |  |           |  |              
|**NET INCOME**                                         |  | $	97,567  |  | $	139,502    
|                                                       |  |           |  |              
|**NET INCOME PER COMMON SHARE** -                      |  |           |  |              
|Basic                                                  |  | $	0.01    |  | $	0.02       
|Diluted                                                |  | $	0.01    |  | $	0.02       
|                                                       |  |           |  |              
|**WEIGHTED AVERAGE COMMON SHARES OUTSTANDING** -
Basic |  | 7,256,986 |  | 7,256,986    
|Diluted                                                |  | 7,373,438 |  | 7,256,986    
|                                                       |  |           |  |              
|                                                       |  |           |  |              
|                                                       |  |           |  |              
|                                                       |  |           |  |              

STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

Years Ended December 31, 2003 and 2002

| |  | Common Stock |  | Accumulated |  | 
| |  | ------------ |  | ----------- |  | 

|                           |  | Shares    |  | Amount    |  | Deficit     |  | Total      
|-------------------------- |  | --------- |  | --------- |  | ----------- |  | -----------
|                           |  |           |  |           |  |             |  |            
|BALANCE, December 31,
2001 |  | 7,256,986 |  | $	142,545 |  | $(347,059)  |  | $	(204,514)
|                           |  |           |  |           |  |             |  |            
|Net income                 |  | -         |  | -         |  | 139,502     |  | 139,502    
|                           |  |           |  |           |  |             |  |            
|BALANCE, December 31,
2002 |  | 7,256,986 |  | 142,545   |  | (207,557)   |  | (65,012)   
|                           |  |           |  |           |  |             |  |            
|Net income                 |  | -         |  | -         |  | 97,567      |  | 97,567     
|                           |  |           |  |           |  |             |  |            
|BALANCE, December 31,
2003 |  | 7,256,986 |  | $	142,545 |  | $	(109,990) |  | $	32,555   

**STATEMENTS OF CASH FLOWS**

| |  | Years Ended December 31,
| |  | ------------------------

|                                                                                  |  | 2003            |  | 2002           
|--------------------------------------------------------------------------------- |  | --------------- |  | ---------------
|                                                                                  |  |                 |  |                
|**CASH FLOWS FROM OPERATING ACTIVITIES:**                                         |  |                 |  |                
|Net income                                                                        |  | $	97,567        |  | $	139,502      
|Adjustments to reconcile net income to net cash provided by
operating activities: |  |                 |  |                
|Depreciation and amortization                                                     |  | 685             |  | 3,613          
|Gain on disposal of assets                                                        |  | -               |  | (18,000)       
|Amortization of deferred franchise fee                                            |  | (7,211)         |  | (23,446)       
|Amortization of deferred income from sale of assets                               |  | (7,500)         |  | (3,186)        
|Changes in operating assets and liabilities:                                      |  |                 |  |                
|Accounts receivable                                                               |  | 2,901           |  | (58)           
|Other current assets                                                              |  | 2,146           |  | (142)          
|Accounts payable and accrued expenses                                             |  | (2,312)         |  | (44,136)       
|Accounts payable to related parties                                               |  | (33,467)        |  | (23,160)       
|Net cash provided by operating activities                                         |  | 52,809          |  | 30,987         
|                                                                                  |  |                 |  |                
|**CASH FLOWS FROM INVESTING ACTIVITIES**:                                         |  |                 |  |                
|Repayment of note receivable                                                      |  | 11,022          |  | 3,801          
|Proceeds from disposal of assets                                                  |  | -               |  | 20,000         
|Purchases of property and equipment                                               |  | -               |  | (2,055)        
|Net cash provided by investing activities                                         |  | 11,022          |  | 21,746         
|                                                                                  |  |                 |  |                
|**CASH FLOWS FROM FINANCING ACTIVITIES:**                                         |  |                 |  |                
|Repayment of line of credit and loans payable                                     |  | (19,037)        |  | (18,460)       
|Repayment of advances from related parties                                        |  | (290)           |  | (12,000)       
|Net cash used in financing activities                                             |  | (19,327)        |  | (30,460)       
|                                                                                  |  |                 |  |                
|**NET CHANGE IN CASH**                                                            |  | 44,504          |  | 22,273         
|                                                                                  |  |                 |  |                
|**CASH,**beginning of year                                                        |  | 46,167          |  | 23,894         
|                                                                                  |  |                 |  |                
|**CASH**, end of year                                                             |  | $	90,671        |  | $	46,167       
|                                                                                  |  |                 |  |                
|**SUPPLEMENTAL DISCLOSURES:**                                                     |  |                 |  |                
|Income taxes paid                                                                 |  | $             - |  | $             -
|Interest paid                                                                     |  | $	3,500         |  | $	6,200        
|                                                                                  |  |                 |  |                

**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 owns the franchise rights to the *Hudson's Grill* restaurant concept*.*  The Company
currently provides management and support services to ten franchised restaurants located in
Texas, California, Michigan and Wisconsin.

******2.	Summary of Significant Accounting Policies**



*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.



*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).  Depreciation expense
was $685 and $3,613 for the years ended December 31, 2003 and 2002, respectively.  Maintenance
and repairs are expensed as incurred.



*Long-Term Receivable*

Long-term receivable represents a promissory note received in connection with the sale of a
restaurant (See Note 4).  The note receivable is reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of the note receivable may not be recoverable.
Recoverability of notes receivable is determined based upon the Company's assessment as to
whether the maker of the note has the ability to make the required payments.  If notes receivable are
considered to be impaired, the impairment to be recognized is measured by the amount by which the
carrying value exceeds management's estimated amount to be collected.

***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.



*Stock-Based Compensation*

The Company accounts for stock options granted to directors and employees using the intrinsic value
method prescribed by Accounting Principles Board Opinion No. 25, *Accounting for Stock Issued to
Employees*, ("APB No. 25") and related interpretations.  APB No. 25 requires compensation expense
be recognized for grants of stock options when the quoted market price of the Company's common
stock on the date the options were granted exceeds an option's exercise price.  The Company did not
grant any stock options with an exercise price that was less than the fair market value of the stock
at the date of grant during the years ended December 31, 2003 and 2002.  Accordingly, no
compensation cost has been recognized for its employee stock options in the accompanying financial
statements.  The Company has adopted the disclosure provisions of Statement of Financial
Accounting Standards ("SFAS") No. 123, *Accounting for Stock-Based Compensation*, ("SFAS 123")
and SFAS No. 148, *Accounting for Stock-Based Compensation - Transition and Disclosure - an
Amendment of FASB Statement No. 123*which require the Company to provide pro forma
information regarding net income and net income per share as if compensation cost for the
Company's stock options had been determined under the fair value method prescribed by SFAS No.
123.  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
years ended December 31, 2003 and 2002, on a pro forma basis, would have been as follows:



|                                                                            |  | 2003     |  | 2002     
|--------------------------------------------------------------------------- |  | -------- |  | ---------
|                                                                            |  |          |  |          
|Net income: as reported                                                     |  | $	97,567 |  | $	139,502
|Add: Stock-based compensation expense included in reported
net income       |  | -        |  | -        
|Deduct: Stock-based compensation expense determined under
fair value method |  | (4,012)  |  | (3,860)  
|Net income: pro forma                                                       |  | $	93,555 |  | $	135,642
|                                                                            |  |          |  |          
|Net income per share:                                                       |  |          |  |          
|as reported - basic and diluted                                             |  | $	0.01   |  | $	0.02   
|Pro forma - basic and diluted                                               |  | $	0.01   |  | $	0.02   



The fair values of stock options granted during fiscal years 2003 and 2002 were estimated on the
dates of grant using the Black-Scholes option pricing model with the following weighted average
assumptions:



|               |  | 2003    |  | 2002   
|-------------- |  | ------- |  | -------
|Volatility     |  | 50%     |  | 50%    
|Interest rate  |  | 4.00%   |  | 4.00%  
|Dividend yield |  | - %     |  | - %    
|Expected life  |  | 7 years |  | 7 years

***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 anti-dilutive effect.

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



| |  | Years Ended December 31,
| |  | ------------------------

|                                           |  | 2003      |  | 2002     
|------------------------------------------ |  | --------- |  | ---------
|Numerator:                                 |  |           |  |          
|Net income                                 |  | $	97,567  |  | $	139,502
|                                           |  |           |  |          
|Denominator:                               |  |           |  |          
|Weighted average common shares outstanding |  | 7,256,986 |  | 7,256,986
|Effect of dilutive stock options           |  | 116,452   |  | -        
|                                           |  |           |  |          
|Dilutive weighted average common shares    |  | 7,373,438 |  | 7,256,986
|                                           |  |           |  |          
|Basic earnings per share                   |  | $	0.01    |  | $	0.02   
|Diluted earnings per share                 |  | $	0.01    |  | $	0.02   



At December 31, 2003 and 2002, the Company had 2,330,000 and 3,170,000 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.



*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, carrying amount of a note
receivable and contingent lease liabilities.



**3.	Franchise Activities**



Under the terms of the Company's standard franchise agreement, franchisees are obligated
to pay the Company an initial franchise fee and a weekly continuing franchise fee ("royalty")
of generally 4% of gross restaurant revenues.  Each franchisee must spend 3% of gross sales
on approved advertising, including a weekly 1% marketing fee contributed to the Company's
marketing fund.  The Company is obligated to provide initial training, continuing
management assistance, administration of advertising and sales promotion programs and
establishment and monitoring of a marketing fund. During the years ended December 31,
2003 and 2002, the Company received no contribution toward the marketing fund nor has the
marketing fund been maintained.



One franchisee agreed to pay an additional fee in return for a reduced royalty fee.  The
Company deferred its recognition of the additional fee amount, and is amortizing it into
income through 2014.  In the fourth quarter of 2002, the Company recognized income of
$13,065 associated with the franchisee's closure of one of four restaurants covered by the
arrangement.  Unamortized additional fees at December 31, 2003 and 2002 of $31,983 and
$39,194, respectively, were included in deferred revenue.

During the year ended December 31, 2002 the Company added a new franchisee in
Wisconsin.  The franchisee paid an initial franchise fee of $15,000 in connection with a
restaurant, which opened in the third quarter of 2002.  In December 2002, two of the
Company's franchisees located in California closed their restaurants and terminated their
franchise agreements.



Franchising revenues consisted of the following for the years ended December 31,:



|                                       |  | 2003           |  | 2002     
|-------------------------------------- |  | -------------- |  | ---------
|                                       |  |                |  |          
|Initial franchise fee                  |  | $            - |  | $	15,000 
|Amortization of deferred franchise fee |  | 7,211          |  | 23,446   
|Royalty fees                           |  | 267,690        |  | 276,878  
|Total franchise revenue                |  | $	274,901      |  | $	315,324



**4.	Sale of Assets and Note Receivable**



Prior to the distribution transaction described in Note 1, the Company's Parent sold a restaurant and
agreed to receive a promissory note as consideration.  The note bears interest at 6%, requires
monthly principal and interest payments of $1,600 until fully repaid and is collateralized by certain
assets of the restaurant sold.  Unpaid balances under the note at December 31, 2003 and 2002 were
$91,980 and $103,002, respectively.  The gain on the sale was deferred and income is being
recognized on an installment basis.  At December 31, 2003 and 2002, the deferred gain on the sale
totaled $60,858 and $68,358, respectively.  The Company recognized income of $7,500 and $3,186
from the sale of these assets during the years ended December 31, 2003 and 2002, respectively.



**5.	Debt**



The Company had a revolving line of credit with a financial institution which provided for
borrowings of up to $30,000.  Balances outstanding at December 31, 2003 and 2002 under the line
of credit were $0 and $9,037, respectively.



Loan payable consisted of the following at December 31,:

|                                                                                                                     |  | 2003     |  | 2002  
|-------------------------------------------------------------------------------------------------------------------- |  | -------- |  | ------
|Loan payable to a financial institution; interest at 7%,
unsecured and principal and interest payments due on
demand |  | $	35,000 |  | 45,000



**6.	Commitments and Contingencies**



In January 2001, the Company received a judgment with respect to certain assets previously written-off.  The judgment and related settlement agreement provided for $118,000 to be paid to the
Company.  Terms of the settlement agreement provided for an initial payment of $10,000 and thirty-six monthly payments of $3,000 through January 2004.  The Company is recognizing income for this
settlement as payments are received.



The Company's former parent, HGAI, was involved in litigation arising from a lease
associated with a franchised restaurant location that ceased operations.  On June 17, 2002,
judgment in favor of the landlord was rendered in the amount of $37,042.  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 will not
ultimately be attributable to the Company, but that if a creditor obtained a judgment against
the former parent, stock in the Company formerly held by HGAI might 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.



**7.	Income Taxes**



There was no provision for income taxes in the years ended December 31, 2003 and 2002 due
to the carryforward of net losses ("NOL") incurred in prior years.  The Company had no
material deferred tax liabilities at December 31, 2003 and 2002.



Deferred taxes consisted of the following at December 31,:

|                          |  | 2003          |  | 2002          
|------------------------- |  | ------------- |  | --------------
|Deferred tax assets:      |  |               |  |               
|Deferred revenue          |  | $	32,000      |  | $	37,000      
|Net operating loss        |  | 170,000       |  | 199,000       
|Total deferred tax assets |  | 202,000       |  | 236,000       
|Valuation allowance       |  | (202,000)     |  | (236,000)     
|Net deferred taxes        |  | $           - |  | $            -



The net change in the valuation allowance for deferred tax assets was a decrease of $34,000
and $57,000 in 2003 and 2002, respectively.  The changes related primarily to changes in the
NOL.



Income taxes payable for the year ended December 31, 2003 and 2002 were reduced by
approximately $17,000 and $28,000, respectively, through the utilization of NOL
carryforwards in those years.  At December 31, 2003 NOL carryforwards of approximately
$500,000 were available to offset future taxable income and expire through 2018.



The Company's effective income tax rate varied from the federal statutory rate for the years
ended December 31, as follows:

|                                     |  | 2003  |  | 2002 
|------------------------------------ |  | ----- |  | -----
|                                     |  |       |  |      
|Federal income tax at statutory rate |  | 34%   |  | 34%  
|Net operating loss carryforward      |  | (34%) |  | (34%)
|Total effective income tax rate      |  | 0%    |  | 0%   



**8.	Stock Options**



The Company president's compensation is established at the sole discretion of the board of
directors and includes the granting of stock options.  The Company also grants stock options
to each of its two directors as compensation for their services as directors.  During the year
ended December 31, 2003, stock options were granted monthly and a total of 408,000 and
240,000 stock options were granted to the president and directors, respectively.



All options granted during 2003 vested immediately, were issued with an exercise price of
$0.005 above the market price of the Company's common stock on the date of grant, and
expire seven years from the date of grant.



In May 2002, the board of directors decided to cancel all stock options granted in January
through May 2002.  A total of 350,000 stock options that were already granted were
cancelled, and the monthly granting of stock options was discontinued.  On December 17,
2002, the Company granted options to purchase a total of 600,000 and 240,000 shares of the
Company's common stock to the president and the directors, respectively.



The options granted in December 2002 vested immediately, were issued with an exercise
price of $0.015, which exceeded the market value of the Company's common stock on the
date of grant, and expire seven years from the date of grant.



The following is a summary of stock option activity:

|                                 |  | Options   |  | Weighted

Average

Exercise

Price
|-------------------------------- |  | --------- |  | ----------------------------------
|                                 |  |           |  |                                   
|Outstanding at January 1, 2002   |  | 2,330,000 |  | $	0.10                            
|Granted                          |  | 1,190,000 |  | 0.04                              
|Cancelled                        |  | (350,000) |  | 0.10                              
|Outstanding at December 31, 2002 |  | 3,170,000 |  | $	0.08                            
|Granted                          |  | 648,000   |  | 0.02                              
|Cancelled                        |  | -         |  | 0.00                              
|Outstanding at December 31, 2003 |  | 3,818,000 |  | $	0.07                            



The weighted average fair value of stock options granted during 2003 and 2002 was $0.006
and $0.005, respectively, on the date of grant using the Black-Scholes option pricing model.



The following table summarizes information about stock options outstanding at December
31, 2003:



| |  | Options Outstanding |  |  |  | Options Exercisable
| |  | ------------------- |  |  |  | -------------------

|Range of

Exercise
Prices |  | Number

Outstanding |  | Weighted

Average

Remaining

Contractual

Life |  | Weighted

Average

Exercise

Price |  | Number

Exercisable |  | Weighted

Average

Exercisable

Price
|------------------------- |  | ------------------- |  | ----------------------------------------------- |  | ---------------------------------- |  | ------------------- |  | -------------------------------------
|                          |  |                     |  |                                                 |  |                                    |  |                     |  |                                      
|$   0.10                  |  | 2,330,000           |  | 4 years                                         |  | $   0.10                           |  | 2,330,000           |  | $   0.10                             
|$.01-.035                 |  | 1,488,000           |  | 6 years                                         |  | $ 0.02                             |  | 1,488,000           |  | $ 0.02                               
|                          |  | 3,818,000           |  |                                                 |  | $   0.07                           |  | 3,818,000           |  | $   0.07                             

**9.	Related Party Transactions**



A law firm associated with a director of the Company provides legal services to the Company.
During the years ended December 31, 2003 and 2002, the cost of these services to the Company were
approximately $23,500 and $40,100, respectively.  Related amounts included in accounts payable
to related parties at December 31, 2003 and 2002 were approximately $43,000 and $76,400,
respectively.



The Company assumed a loan of a former employee of the Parent with a financial institution (see
Note 5).  The balance outstanding on the loan was $35,000 and $45,000 at December 31, 2003 and
2002, respectively.  Principal and interest payments are due on demand.



The Company leases its corporate office space from a firm in which the president of the Company
is a partner.  Rental and utility costs for the office space was approximately $17,200 and $16,100
for the years ended December 31, 2003 and 2002, respectively.



One of the directors of the Company is also a franchisee of two restaurants.  As part of an agreement
with the Company, these restaurants pay no monthly franchise fee.



Advances from related party consisted of amounts due to an organization owned by the president of
the Company for expenses paid on the Company's behalf.



**10.	Concentrations of Credit Risk**



In the normal course of business, the Company extends unsecured credit to franchisees.  In addition,
the Company's former parent sold a restaurant and took a promissory note as consideration (see Note
4).  The income from the sale has been deferred and is recognized on an installment basis.  At
December 31, 2003, the balance outstanding under the note receivable and the related deferred
income were $91,980 and $103,002, respectively.  The Company's note receivable and 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.



****************