AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 14, 2002
REGISTRATION NO. 333-87328

U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________

AMENDMENT NO. 1 to
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
_____________________

CREATIVE HOST SERVICES, INC.
(Name of small business issuer in its charter)
_____________________

CALIFORNIA
(State or other jurisdiction of
incorporation or organization)

5812
(Primary Standard Industrial
Classification Code Number)

33-1069494
(I.R.S. Employer Identification No.)
_____________________

16955 Via Del Campo
Suite 100
San Diego, California 92127
(858) 675-7711
(Address and telephone number of Registrant's principal
executive offices and principal place of business)
_____________________

Sayed Ali
6335 Ferris Square
Suites G-H
San Diego, California 92126
(858) 675-7711
(Name, address and telephone number of agent for service)
_____________________

COPIES TO:

M. Richard Cutler, Esq.
Cutler Law Group
610 Newport Center Drive, Suite 800
Newport Beach, CA 92660
____________________

Approximate Date of Proposed Sale to the Public.
As soon as practicable after this Registration Statement becomes effective.

If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

If delivery of the prospectus is expected to be made pursuant to Rule 434, check
the following box. [ ]

CALCULATION OF REGISTRATION FEE

AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES . . BEING OFFERING PRICE AGGREGATE REGISTRATION
TO BE REGISTERED. . . . . . . . . . . REGISTERED PER SHARE OFFERING PRICE FEE
- ------------------------------------- ----------- ------------------ ----------------- -------------
Common Stock. . . . . . . . . . . . . 435,375 $ 1.78 (1) $ 774,967 $ 193.91
- ------------------------------------- ----------- ------------------ ----------------- -------------
Common Stock issuable
upon conversion of Convertible Notes. 891,018 $ 1.05 (2) $ 945,000 $ 236.25
- ------------------------------------- ----------- ------------------ ----------------- -------------
Common Stock issuable
upon exercise of Warrants . . . . . . 708,750 $ 2.00 (3) $ 1,417,500 $ 442.97
- ------------------------------------- ----------- ------------------ ----------------- -------------
Common Stock issuable
upon conversion of Convertible
Notes obtained upon exercise
of broker warrants (4). . . . . . . . 99,002 $ 1.05 (2) $ 94,500 $ 23.63
- ------------------------------------- ----------- ------------------ ----------------- -------------
Common Stock issuable
upon exercise of Warrants
obtained upon exercise of
broker warrants (4) . . . . . . . . . 70,875 $ 2.00 (3) $ 141,750 $ 44.30
- ------------------------------------- ----------- ------------------ ----------------- -------------
Total Registration Fee . . . . $ 941.01

1. The filing fee was estimated solely for the purpose of calculating the
registration fee pursuant to Rule 457, based on the closing price for the
referenced common stock on the Nasdaq Small Cap Market on August 25 2002

2. Reflects a total of 18.9 Units issued, each consisting of one $50,000
convertible note and 37,500 warrants to purchase common stock at $2.50 per
share. Price reflects the conversion price of the Convertible Notes.

3. Reflects the exercise price of the Warrants.

4. The broker-dealer which placed the Units is entitled to a warrant equal
to 10% of the Units sold exercisable at $50,000 per Unit.

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT SHALL
BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.

PROSPECTUS
- ----------

2,205,020 shares of common stock

CREATIVE HOST SERVICES, INC.

Creative Host Services, Inc. is registering:

* 410,375 shares for resale by an investor who received the shares upon
conversion of a convertible debenture;
* 990,020 shares issuable upon conversion of convertible debentures;
* 779,625 shares issuable upon exercise of warrants at $2.00 per share;
and
* 25,000 shares for our legal counsel. See "Selling Shareholders" on
page 36.

INVESTING IN THE COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON
PAGE 4.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY BODY
HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.

All of the common stock registered by this prospectus will be sold by the
selling shareholders on their own behalf at the prevailing market price when
they are sold. The Company's common stock is traded on the Nasdaq small cap
market under the symbol "CHST". On August 8, 2002 the last reported sale price
for the common stock on the Nasdaq small cap market was $1.60 per share. We do
not intend to rely on Rule 415 for this offering.

THE DATE OF THIS PROSPECTUS IS AUGUST ____, 2002

PROSPECTUS SUMMARY

CREATIVE HOST SERVICES, INC.

We acquire and operate food, beverage and other concessions at airports
throughout the United States. We currently operate approximately 95 operating
concession facilities at 24 airports, 93 of which we own and two of which we
have franchised, including concessions at Los Angeles International Airport,
Denver International Airport, Portland International Airport, and the airports
in Orange County and Ontario, California; Madison and Appleton, Wisconsin;
Lexington, Kentucky; Greensboro (Piedmont Triad), North Carolina; Pittsburgh and
Allentown, Pennsylvania; Roanoke, Virginia; Columbia, South Carolina; Sioux
Falls, South Dakota; Cedar Rapids and Des Moines, Iowa; Baton rouge and
Shreveport, Louisiana; Midland, Texas; Albany, New York; Boston, Massachusetts
and Saginaw (MBS), Michigan. The airport contracts include concessions that
range from a concession to operate single and multiple food and beverage outlets
to a master concession to operate all food and beverage, as well as news and
gift and merchandise, locations at an airport. Our airport concession business
is complemented by in flight catering contracts we obtain from major airlines at
certain airports.

Our offices are located at 16955 Via del Campo, Suite 100, San Diego,
California 92127. Our telephone number is (858) 675-7711. You can learn more
about our Company through our web site at www.creativehostservices.com.
-----------------------------

We are registering 410,375 shares for resale by selling shareholders, all
of which were obtained upon conversion of a convertible debenture. We sold 18.9
Units for $945,000, each of which consists of one $50,000 convertible note and
warrants to purchase 37,500 shares of common stock. We are registering 900,020
shares which may be obtained upon conversion of the convertible notes (which are
convertible at $1.05 per share) and 708,750 shares issuable upon exercise of the
warrants (which are exercisable at $2.00 per share). The brokers that placed
the Units obtained warrants to purchase 1.89 Units for a total of $50,000 per
Unit. We are consequently registering on behalf of the brokers 90,000 shares
issuable upon conversion of the convertible notes they would obtain if they
exercise the broker warrants and 70,875 shares they would obtain if they
exercise the warrants they would obtain if they exercise the broker warrants.
Finally, we are registering 25,000 shares issuable to our legal counsel for
legal services rendered in this registration statement and other corporate
services (which were issued and valued at $1.02 per share).

SUMMARY FINANCIAL DATA

The following table sets forth some of the information which appears in our
financial statements as of December 31, 2001 and for the two years then ended,
and our interim financial statements for the three months ended March 31, 2002.
This financial data does not provide all of the financial information contained
in our financial statements and related notes contained elsewhere in this
prospectus. Therefore, this financial data should be read in conjunction with
the "Management's Discussion and Analysis of Financial Condition and Results of
Operations" section of this prospectus and our financial statements and related
notes included elsewhere in this prospectus.

STATEMENT OF OPERATIONS

Year Ended Three Months Ended
December 31, March 31,
2001 2000 2002
(unaudited)

Total Revenue . . . . . . . . . . . $ 30,745,851 $ 23,725,859 $ 7,642,458
Total Operating Costs and Expenses. $ 29,517,249 $ 22,896,001 $ 7,308,901
Income from Operations. . . . . . . $ 1,228,602 $ 829,858 $ 333,557
Net Income (Loss) . . . . . . . . . $ 586,261 $ (68,328) $ 259,048
Net Income (Loss) Per Share . . . . $ 0.08 $ (0.01) $ 0.03

BALANCE SHEET DATA

At March 31, At December 31,
2002 2001
(unaudited)

Assets. . . . . . . . $ 23,741,888 $ 23,661,700
Liabilities . . . . . $ 6,970,813 $ 7,424,201
Accumulated Deficit . $ (1,510,461) $ (1,769,509)
Shareholders' Equity. $ 16,690,826 $ 16,022,502

RISK FACTORS

Purchasing shares of Common Stock in Creative Host Services, Inc. is
risky. You should be able to bear a complete loss of your investment.

NEED FOR ADDITIONAL CAPITAL. We may not have sufficient cash flow from our
current operations to enable us to acquire and build additional locations at our
historic growth rate. We may be required to raise additional capital in the
future to build out capital improvements for any newly awarded concession
locations. We had net income of $586,261 for the year ended December 31, 2001
(approximately 1.9% of revenues) and a net loss of $68,328 for the fiscal year
ended December 31, 2000 (approximately minus 0.3% of revenues). Our accumulated
deficit as of December 31, 2001 was $1,769,509. We currently have a debt to
equity ratio of approximately 1 to 2.4. Failure to secure adequate capital to
bid, win, retain or service concession contracts will hinder our growth or force
us to franchise valuable locations that we would otherwise prefer to operate
directly. In addition, we presently utilize equipment leasing to finance some of
our operations. Additional lease financing with rates acceptable to us may not
be available, in which case we will be required to raise additional capital or
cease our expansion program until such financing or capital is made available,
if ever.

DEPENDENCE ON AIRPORT CONCESSION BUSINESS. We are currently dependent on
the airport concession business for substantially all of our revenues. We expect
such dependence to continue for the foreseeable future. The concession business
is highly competitive and subject to the uncertainties of the bidding and
proposal process. Sophisticated bid packages and persuasive presentations are
required in order to have an opportunity to win concession contracts at airports
and other public venues. While there are thousands of airport concessions
nationwide, the majority of those concessions are located in the largest 125
airports. Like other concession business operators, we must maintain our
reputation with the various airport authorities and other government, quasi
government and public agencies in order to remain eligible to win contracts. The
terms and conditions of concession contracts must be carefully analyzed to
ensure that they can be profitable for us. Certain of our locations have
incurred and may in the future incur net operating losses. The Company operated
two locations in 2001 that sustained operating losses. The location in
Asheville, North Carolina had an operating loss of $49,300 on revenue of
$299,067 and one of the Denver, Colorado locations had an operating loss of
$43,654 on revenue of $112,450. Both of these locations were sold in the third
quarter of 2001. In addition, the failure of any single concession could have
a material adverse impact on our reputation with airport authorities generally,
and hinder our ability to renew existing concessions or secure new ones. We
cannot be certain that we will continue to be awarded concession contracts by
airports or by any other public venue, that the concession contracts will be
profitable, or that we will not lose contracts that we have been awarded.

CONCESSIONS SUBJECT TO SET ASIDES AND SPECIAL REQUIREMENTS. Prior to our
initial public offering in July 1997, we qualified as a Disadvantaged Business
Enterprise ("DBE") based on Mr. Ali's ownership of all of our common stock. Our
historical success in securing concession locations may have been partially
attributed to our DBE status. The impact of the initial public offering on our
status as a DBE and the impact of any such potential loss of DBE status on our
ability to secure new concession locations is unclear. To the extent that our
historic rate of success in securing new airport concessions was partially
attributable to our status as a DBE, that growth rate may decline if we are not
recognized as a DBE or if DBE programs are eliminated or curtailed.

POSSIBLE EARLY TERMINATION OF CONCESSIONS. Certain airport authorities or
airlines that operate concession locations provide in their concession
agreements for the right to reacquire the concession from the concessionaire
upon reimbursement of equipment and build out costs and, sometimes, a percentage
of anticipated profits during the balance of the concession term. Certain of our
significant concession contracts, including Los Angeles International, Des
Moines, Iowa, Columbia, South Carolina, Cedar Rapids, Iowa, and others, provide
for such early termination. To date, we have not had any of our concessions
terminated, and we have not received notice that any airport authority is
contemplating the early termination of any of our concessions. Nevertheless, we
cannot be certain that these airport authorities will not exercise their
contractual right to early termination of the concession contracts in the future
which could hurt our profitability.

POSSIBLE DELAY IN COMMENCEMENT OF CONCESSION OPERATIONS. The commencement
of our concession operations at any airport location is subject to a number of
factors which are outside our control, including construction delays and
decisions by airport authorities to delay the opening of concessions. We have,
in the past, experienced delays in commencing operations because of decisions by
airport authorities. One of our franchisees had completed capital improvements
for a facility at the Denver International Airport, only to have the airport
authority close the concourse when a major airline withdrew its operations from
that airport. Consequently, we bear the risk that after a concession has been
awarded, the completion of capital improvements or the commencement of
operations at completed facilities may be delayed. Any such delay or requirement
by an airport authority for us to construct facilities during peak travel
periods would adversely impact our cash flow.

DEPENDENCE ON KEY PERSONNEL AND NEED TO ATTRACT QUALIFIED MANAGEMENT. Our
success will depend largely upon our management team. Sayed Ali, our Chairman of
the Board, President and Chief Executive Officer, entered into a new five-year
employment agreement which commenced as of January 1, 2000. The employment
agreement provides for an annual salary for Mr. Ali of $225,000 in 2002,
$248,000 in 2003 and $275,000 in 2004. Mr. Ali is also entitled to be granted
60,000 additional stock options, all of which are now vested. The exercise
price is 110% of the fair market value of the stock on the date of grant, and
the exercise period is three years from the date of vesting. In the event of a
loss of the services of Mr. Ali, our business could be harmed because we may
not be able to obtain successor management of equivalent talent and experience.
We obtained a $1,000,000 key man life insurance policy on Mr. Ali which we own.
Given our stage of development, we are dependent upon our ability to identify,
hire, train, retain and motivate highly qualified personnel, especially
management personnel which will be required to supervise our expansion into
various geographic areas. The failure to attract, assimilate and train key
personnel could harm our business.

HIGHLY COMPETITIVE INDUSTRY DOMINATED BY LARGER COMPETITORS. We compete
with certain national and several regional companies to obtain the rights from
airport and other authorities to operate food, beverage, news, gift, merchandise
and inflight catering concessions. The airport concession market is principally
serviced by several companies which are significantly larger than us, including,
but not limited to, HMS Host, Inc., CA One Services, Concessions International,
and Ogden Food Services. Each of these well established competitors possesses
substantially greater financial, marketing, administrative and other resources
than we have. Many of our competitors have achieved significant brand name and
product recognition. They engage in extensive advertising and promotional
programs, both generally and in response to efforts by additional competitors to
enter new markets or introduce new products. We may not be able to successfully
compete for concessions with these businesses which may slow our profitability
and growth.

DEPENDENCE UPON CONTINUING APPROVALS FROM GOVERNMENT REGULATORY
AUTHORITIES. The food and beverage service industry is subject to various
federal, state and local government regulations, including those related to
health, safety, wages and working conditions. While we have not experienced
difficulties in obtaining necessary government approvals to date, the failure to
obtain and retain food licenses or any other governmental approvals could harm
our operating results. Moreover, our failure to meet government regulations
could result in the temporary closure of one or more of our concession
facilities, restaurants or the food preparation center, any of which would make
those closed facilities unprofitable. In addition, operating costs are affected
by increases in the minimum hourly wage, unemployment tax rates, sales taxes and
similar matters over which we have no control. We are also subject to federal
and state laws, rules and regulations that govern the offer and sale of
franchises.

NO ASSURANCE OF ENFORCEABILITY OF TRADEMARKS. We utilize trademarks in our
business and have registered our Creative Croissants(R) trademark. While we
intend to file federal trademark registrations for certain of our other
trademarks, we have not yet done so. We cannot be sure the trademark office
will grant registration for such trademarks or that our trademarks do not or
will not violate the proprietary rights of others, that our trademarks would be
upheld if challenged or that we will not be prevented from using our trademarks.
Should we believe that our trademarks are being infringed upon by competitors,
we may not have the financial resources necessary to enforce or defend our
trademarks and service marks.

SEASONALITY. Because our airport concession business is dependent on
pedestrian traffic at domestic airports, we experience some seasonality
consistent with enplanements and general air traffic patterns. Accordingly, our
revenues and income are generally expected to be lowest in the first quarter of
the year and become progressively stronger through the fourth quarter, which
includes the holiday travel periods.

RISKS OF DECLINE IN STOCK PRICE. Our stock price has been volatile. The
closing price of our stock has ranged from a low of $1.00 to a high of $1.91
during 2002. The stock market in general has been extremely vulnerable and we
cannot promise that the price of our common stock on the NASDAQ market will not
decline. We may register more shares of stock in the future, potentially
increasing the supply of free trading shares and possibly exerting downward
pressure on our stock price.

CONTROL BY PRINCIPAL SHAREHOLDER. The principal shareholder of the Company,
Mr. Sayed Ali, beneficially owns approximately 13.2% of the outstanding shares
of our capital stock. Accordingly, Mr. Ali has significant influence over the
outcome of all matters submitted to the shareholders for approval, including the
election of directors of the Company.

FORWARD-LOOKING STATEMENTS. The following cautionary statements are made
pursuant to the Private Securities Litigation Reform Act of 1995 in order for
CHST to avail itself of the "safe harbor" provisions of that Act. The
discussions and information in this Prospectus including the documents
incorporated by reference may contain both historical and forward-looking
statements. To the extent that the Prospectus contains forward-looking
statements regarding the financial condition, operating results, our business
prospects or any other aspect of our business, please be advised that our actual
financial condition, operating results and business performance may differ
materially from that projected or estimated by us in forward-looking statements.
We have attempted to identify, in context, certain of the factors that we
currently believe may cause actual future experience and results to differ from
our current expectations. The differences may be caused by a variety of factors,

including but not limited to adverse economic conditions, general decreases in
air travel, intense competition, including entry of new competitors, increased
or adverse federal, state and local government regulation, inadequate capital,
unexpected costs, lower revenues and net income than forecast, loss of airport
concession bids or existing locations, acts of terrorism, price increases for
supplies, inability to raise prices, failure to obtain new concessions, the risk
of litigation and administrative proceedings involving us and our employees,
higher than anticipated labor costs, the possible fluctuation and volatility of
operating results and financial condition, failure to make planned business
acquisitions, failure of new businesses, if acquired, to be economically
successful, decline in our stock price, adverse publicity and news coverage,
inability to carry out marketing and sales plans, loss of key executives,
changes in interest rates, inflationary factors, and other specific risks that
may be alluded to in this Prospectus or in other reports filed by us.

PRICE RANGE OF SECURITIES

The Company's Common Stock trades on the NASDAQ Market under the symbol
CHST. The Company completed its initial public offering on July 22, 1997 and its
stock began trading on the Exchange at that time. The number of recordholders of
the Common Stock was 100 on March 20, 2002. The Company believes that there are
a significant number of beneficial owners of its Common Stock whose shares are
held in "street name." The closing sales price of the Common Stock on July 23,
2002 was $1.39 per share. The following chart sets forth, for the fiscal period
indicated, the high and low closing sales prices for the Company's Common Stock.

YEAR . .PERIOD HIGH LOW
- ---- ------------- ---- -----

2002 First Quarter 1.34 0.97
Second Quarter 1.87 1.28
Third Quarter (through July 23) 1.51 1.36

2001 First Quarter 3.21 1.18
Second Quarter 1.69 0.82
Third Quarter 1.45 0.77
Fourth Quarter 1.31 0.90

2000 First Quarter 14.00 5.50
Second Quarter 28.15 10.37
Third Quarter 12.12 4.43
Fourth Quarter 8.73 1.81

DIVIDEND POLICY

We have never paid any cash dividends on our common stock and do not
anticipate paying any cash dividends on our common stock in the future.
Instead, we intend to retain future earnings, if any, to fund the development
and growth of our business.

DILUTION

The common stock offered for resale in this Prospectus has already been
issued by the Company. Consequently, no further dilution will result from the
resales.

USE OF PROCEEDS

We will not realize any proceeds from the sale of the shares by the selling
securityholders. We have already received and utilized the proceeds received
from the sale of the Convertible Debentures in our acquisition of Gladco
Enterprises, Inc. as described in the business section below. We are utilizing
the proceeds of the convertible notes, and proceeds from the exercise of any of
the warrants reflected in this prospectus, for working capital, build out of
locations and acquisitions.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

WITH THE EXCEPTION OF HISTORICAL MATTERS, THE MATTERS DISCUSSED IN THIS
COMMENTARY ARE FORWARD LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES.
FORWARD LOOKING STATEMENTS INCLUDE, BUT ARE NOT LIMITED TO, STATEMENTS
CONCERNING ANTICIPATED TRENDS IN REVENUES, THE FUTURE MIX OF COMPANY REVENUES,
THE ABILITY OF THE COMPANY TO REDUCE CERTAIN OPERATING EXPENSES AS A PERCENTAGE
OF TOTAL REVENUES, THE ABILITY OF THE COMPANY TO REDUCE GENERAL AND
ADMINISTRATIVE EXPENSES AS A PERCENTAGE OF TOTAL SALES, AND THE POTENTIAL
INCREASE IN NET INCOME AND CASH FLOW. THE COMPANY'S ACTUAL RESULTS COULD DIFFER
MATERIALLY FROM THE RESULTS DISCUSSED IN SUCH FORWARD LOOKING STATEMENTS.
FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES INCLUDE THE INABILITY
TO OBTAIN THE SUBSTANTIAL ADDITIONAL CAPITAL NECESSARY TO COMPLETE CONSTRUCTION
OF CAPITAL IMPROVEMENTS AWARDED UNDER EXISTING CONCESSION AGREEMENTS, POSSIBLE
EARLY TERMINATION OF EXISTING CONCESSION CONTRACTS, POSSIBLE DELAY IN THE
COMMENCEMENT OF CONCESSION OPERATIONS AT NEWLY AWARDED CONCESSION FACILITIES,
THE NEED AND ABILITY TO ATTRACT AND RETAIN QUALIFIED MANAGEMENT TO MANAGE
OPERATIONS, THE NEED TO OBTAIN CONTINUING APPROVALS FROM GOVERNMENT REGULATORY
AUTHORITIES, THE TERM AND CONDITIONS OF ANY POTENTIAL MERGER OR ACQUISITION OF
EXISTING AIRPORT CONCESSION OPERATIONS, AND THE PRIOR AND POTENTIAL VOLATILITY
OF THE COMPANY'S STOCK PRICE, OPERATING RESULTS AND FINANCIAL CONDITION.

OVERVIEW

We commenced business in 1987 as an owner, operator and franchisor of
French style cafes featuring hot meal croissants, fresh roasted gourmet coffee,
fresh salads and pastas, fruit filled pastries, muffins and other bakery
products. The restaurant franchise business has never been profitable. We have
not sold a new franchise since 1994.

In 1990, we entered the airport food and beverage concession market when we
were awarded a concession to operate a food and beverage location for John Wayne
Airport in Orange County, California, which is currently operated by one of our
franchisees. In 1994, we were awarded our first multiple concession contract for
the Denver International Airport, where we were awarded a second concession in
1994 and two subsequent concessions in 1995. The success of the franchisees
operating the Orange County and Denver International Airport concessions
prompted us to enter into the airport concession business. Since 1994, we have
opened 95 concession locations at 24 airports. In 1996, we were awarded our
first master concession contract for the airport in Cedar Rapids, Iowa, where we
have the right to install and manage all food, beverage, news, gift and other
services.

As a result of this transition in our business, our historical revenues
have been derived from three principal sources: airport concession revenues,
restaurant franchise royalties and wholesale sales from our food preparation
center. These revenue categories comprise a fluctuating percentage of total
revenues from year to year. Over the past six years, revenues from concession
operations have grown from 59% of total revenues in 1995 to nearly 100% of total
revenues in 2001.

During the fiscal year ended December 31, 2001, we sold our interest in the
assets and lease at our Asheville, North Carolina location and at one of our
Denver, Colorado locations. We also sold the assets associated with our bakery
operation in San Diego, California. These operations were under-performing.

We had a working capital deficit at December 31, 2001 of $360,062 compared
to a working capital deficit of $688,503 at December 31, 2000. Capital
improvement costs incurred to meet the requirements of new airport concession
contracts and the retirement of debt have placed demands on our working capital.
During the fiscal year ended December 31, 2001, we raised $364,362 in capital
through the sale of assets, borrowed $1,268,000 through a bank loan at an
average interest rate of approximately 9% per annum, and borrowed a net of
$1,779,888 against a line of credit at an average interest rate of approximately
6% per annum.

We may have capital requirements in 2002 to finance the acquisition or
construction of new airport concessions, restaurants and other concession
related businesses such as news & gifts, specialty, in-flight catering and other
services. In this regard, we will have additional capital requirements to the
extent that we win additional contracts from our current and future airport
concession bids, or enter into agreements to acquire existing airport concession
businesses.

CRITICAL ACCOUNTING POLICIES

Critical accounting policies are those that are most important to the
portrayal of a company's financial condition and results, and that require
management's most difficult, subjective or complex judgments, often as a result
of the need to make estimates about the effect of matters that are inherently
uncertain. Note 1 to the consolidated financial statements includes a summary
of the significant accounting policies and methods used in the preparation of
our consolidated financial statements. The following is a review of the more
critical accounting policies and methods used by us.

Revenue Recognition:

We record concession revenues as the sales are made; we record sales from
the food preparation center upon shipment and we record revenues from in-flight
catering upon delivery.

Goodwill:

In connection with our acquisition of GladCo Enterprises, Inc., which was
accounted for under the purchase method of accounting, we recorded goodwill. We
amortized (until January 1, 2002 when SFAS 142 was adopted) the goodwill using
the straight-line method over the estimated useful life of twenty years. The
Company periodically reviews the recoverability of the carrying value of
goodwill for impairment whenever events or changes in circumstances indicate
that the carrying amount of the asset may not be recoverable. Recoverability is

determined by comparing the forecasted future net cash flows from the operations
to which the goodwill relates, based on management's best estimates using the
appropriate assumptions and projections at the time, to the carrying amount of
the goodwill. If the carrying value was determined not to be recoverable from
future operating cash flows, the goodwill would be impaired and we would be
required to recognize an impairment loss. Impairment could result in a material
adverse impact on our operating results.

Income Taxes:

We report deferred income taxes using the liability method. We recognize
deferred tax assets for deductible temporary differences and we recognize
deferred tax liabilities for taxable temporary differences. Temporary
differences are the differences between the reported amounts of assets and
liabilities and their tax bases. We reduce deferred tax assets by a valuation
allowance when, in our opinion, it is more likely than not that some portion or
all of the deferred tax assets will not be realized. As a result of cumulative
losses in recent years, management evaluated its future prospects and considered
the future benefit of its deferred tax assets in light of the historical
operating results. Accordingly, the Company recorded a full valuation allowance
against its deferred tax assets of $670,800. Deferred tax assets and
liabilities are adjusted for the effects of changes in tax laws and rates on the
date of enactment.

These accounting policies are applied consistently for all years presented.
Our operating results would be affected if other alternatives were used.

NEW ACCOUNTING PRONOUNCEMENTS

In January 2001, the FASB Emerging Issues Task Force issued EITF 00-27
effective for convertible debt instruments issued after November 16, 2000. This
pronouncement requires the use of the intrinsic value method for recognition of
the detachable and imbedded equity features included with indebtedness, and
requires amortization of the amount associated with the convertibility feature
over the life of the debt instrument rather than the period for which the
instrument first becomes convertible. Inasmuch as all debt instruments were
entered into prior to November 16, 2000 and all of the debt discount relating to
the beneficial conversion feature was previously recognized in 2000 as expense
in accordance with EITF 98-5, there was no impact on our financial statements.
This EITF 00-27 could impact future financial statements, should we enter into
such agreements.

In July 2001, the FASB issued SFAS No. 141 "Business Combinations." SFAS
No. 141 supersedes Accounting Principles Boards ("APB") No. 16 and requires that
any business combinations initiated after June 30, 2001 be accounted for as a
purchase, therefore, eliminating the pooling-of-interest method defined in APB
16. The statement is effective for any business combination initiated after
June 30, 2001, and shall apply to all business combinations accounted for by the
purchase method for which the date of acquisition is July 1, 2001 or later. The
adoption of this pronouncement did not affect our financial position or results
of operations since we have not participated in such activities covered under
this pronouncement.

In July 2001, the FASB issued SFAS No. 142, "Goodwill and Other
Intangibles." SFAS No. 142 addresses the initial recognition, measurement and
amortization of intangible assets acquired individually or with a group of other
assets (but not those acquired in a business combination), and addresses the
amortization provisions for excess cost over fair value of net assets acquired
or intangibles acquired in a business combination. The statement is effective
for fiscal years beginning after December 15, 2001, and is effective July 1,
2001 for any intangibles acquired in a business combination initiated after June
30, 2001. After adoption of this pronouncement we will no longer amortize
goodwill (approximately $227,000 during the year ended December 31, 2001), but
instead will test goodwill for impairment at least annually.

In October 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations," which requires companies to record the fair value of a
liability for asset retirement obligations in the period in which they are
incurred. The statement applies to a company's legal obligations associated
with the retirement of a tangible long-lived asset that results from the
acquisition, construction, and development or through the normal operation of a
long-lived asset. When a liability is initially recorded, we would capitalize
the cost, thereby increasing the carrying amount of the related asset. We
depreciate the capitalized asset retirement cost over the life of the respective
asset while the liability is accreted to its present value. Upon settlement of
the liability, the obligation is settled at its recorded amount or the company
incurs a gain or loss. The statement is effective for fiscal years beginning
after June 30, 2002. We do not expect the adoption to have a material impact on
our financial position or results of operations.

In October 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." Statement 144 addresses the
accounting and reporting for the impairment or disposal of long-lived assets.
The statement provides a single accounting model for long-lived assets to be
disposed of. New criteria must be met to classify the asset as an asset
held-for-sale. This statement also focuses on reporting the effects of a
disposal of a segment of a business. This statement is effective for fiscal
years beginning after December 15, 2001. The adoption did not have a material
impact to our financial position or results of operations.

In April 2002, the FASB issued SFAS No. 145, "Recission of FASB Statements
No. 4, 44 and 64, Amendment of FAS No. 13 and Technical Corrections", which the
Company does not believe will materially affect its financial statements.

RESULTS OF OPERATIONS

The following table sets forth for the period indicated selected items of
the Company's statement of operations as a percentage of total revenues.

FISCAL YEAR ENDED DECEMBER 31,
------------------------------
2001 2000 1999
------------------------------- ----- -----
Revenues:
Concessions. . . . . . . . . . 100% 99% 98%
Food Preparation Center Sales. 0 1 1
Franchise Royalties. . . . . . 0 0 1
------------------------------- ----- -----
Total Revenues . . . . . . . . 100% 100% 100%

Operating Costs and Expenses:
Cost of Goods Sold . . . . . . 28 31 32
Payroll and Employee Benefits. 32 32 32
Occupancy. . . . . . . . . . . 15 15 16
Selling. . . . . . . . . . . . 9 8 9
General and Administrative . . 5 4 4
Depreciation and Amortization. 7 6 6
Interest Expense . . . . . . . 2 4 5
Provision for Income Taxes . . 0 0 0
Other (Income) Loss. . . . . . 0 0 0
------------------------------- ----- -----
Net Income (Loss). . . . . . . 2% 0% (3)%
===============================

THREE MONTHS ENDED MARCH 31, 2002 COMPARED TO THREE MONTHS ENDED MARCH 31, 2001

Revenues. The Company's gross revenues for the three months ended March
31, 2002 were $7,642,458 compared to $7,364,953 for the three months ended March
31, 2001, an increase of $277,505 or 3.8%. Revenues from concession activities
increased $275,323 ($7,609,715 as compared to $7,334,392). The increase in
concession revenues was principally attributable to the opening of new
locations.

Cost of Goods Sold. The cost of goods sold for the three months ended
March 31, 2002 were $2,040,724 compared to $2,080,605 for the three months ended
March 31, 2001. As a percentage of total revenue, the cost of goods sold
decreased to 26.7% from 28.3%.

Operating Costs and Expenses. Operating costs and expenses for the three
months ended March 31, 2002 were $5,268,177 compared to $5,074,337 for the three
months ended March 31, 2001. Payroll expenses decreased to $2,332,399 for the
three months ended March 31, 2002 from $2,421,347 for the three months ended
March 31, 2001. As a percentage of total revenue, payroll declined to 30.5% for
the three months ended March 31, 2002 from 32.9% for the three months ended
March 31, 2001. The decrease in the payroll dollar amount and ratio is due to
increased efficiency at the concession facilities. Occupancy expenses increased
to $1,210,745 for the three months ended March 31, 2002 from $1,161,208 for the
three months ended March 31, 2001. Selling expenses increased to $797,378 for
the three months ended March 31, 2002 from $625,742 for the three months ended
March 31, 2001. General and administrative expenses increased to $369,050 for
the three months ended March 31, 2002 from $356,645 for the three months ended
March 31, 2001. Depreciation and amortization expense were approximately the
same in both periods. As a percentage of total revenue, occupancy expenses
remained at 15.8% for the three months ended March 31, 2002 from the three
months ended March 31, 2001 and selling expenses increased to 10.4% for the
three months ended March 31, 2002 from 8.5% for the three months ended March 31,
2001. General and administrative expenses remained at 4.8% for the three months
ended March 31, 2002 from the three months ended March 31, 2001.

Interest Expense. Net interest expense decreased to $145,496 for the three
months ended March 31, 2002 from $200,823 for the three months ended March 31,
2001.

Other Income and Expense. Gain on sale of assets to related party in the
amount of $80,487 for the three months ended March 31, 2002 resulted from the
sale of assets at the Atlantic City location.

Net Income. Net income for the three months ended March 31, 2002 was
$259,048 compared to net income of $9,188 for the three months ended March 31,
2001. Management attributes this change to the increase in revenue and
increased operating efficiencies. The Company anticipates that net income from
existing operations will increase commensurate with the recovery of air travel
and with cost savings that result from economies of scale and efficiencies
obtained at the operating level.

FISCAL YEAR ENDED DECEMBER 31, 2001 COMPARED TO FISCAL YEAR ENDED DECEMBER 31,
2000.

Revenues. Our gross revenues for the fiscal year ended December 31, 2001
were $30,745,851 compared to $23,725,859, for the fiscal year ended December 31,
2000. Revenues from concession activities increased $7,139,983 ($30,646,435
compared to $23,506,452) and food preparation center sales decreased $165,843
(from $171,463 to $5,620) while franchise royalties declined $7,355 (from
$47,994 to $40,639), for the fiscal year ended December 31, 2001 as compared to
the fiscal year ended December 31, 2000. Concession revenue increased $822,430
from 2000 to 2001 due to a full year of operations in 2001 of two locations
opened in 2000 and increased $7,426,624 from 2000 to 2001 due to a full year of
operations in 2001 of the Gladco locations acquired in 2000.

Cost of goods sold. The cost of goods sold for the fiscal year ended
December 31, 2001 was $8,716,551 compared to $7,368,000 for the fiscal year
ended December 31, 2000. As a percentage of total revenues, the cost of goods
sold was 28% in 2001 and 31% in 2000. The improvement in cost of goods sold as
a percentage of revenue is due to efficiencies at existing locations such as the
consolidation of purchasing with Sysco (which has resulted in lower costs for
products purchased from Sysco).

Operating costs and expenses. Operating costs and expenses for the fiscal
year ended December 31, 2001 were $20,800,698, compared to $15,528,001 for the
fiscal year ended December 31, 2000. Payroll expenses increased from $7,575,967
in 2000 to $9,746,338 in 2001. As a percentage of total revenues, payroll
expense was 32% in both 2000 and 2001. We expect payroll expenses to increase
in total dollar amounts with the addition of new concession facilities, but to
decrease modestly as a percentage of revenues if existing facilities operate
more efficiently and we continue to reap increasing benefits from the cost
control measures implemented in 2000. The cost control measures implemented
include: improving the budget process; implementing a standardized training
program; and improving the efficiency of the management structure at the
individual airport locations. Occupancy expenses increased from $3,563,886 in
2000 to $4,768,824 in 2001. As a percentage of total revenues, occupancy
expenses were 15% in 2000 and increased to 16% in 2001. Selling expenses
increased from $1,867,614 in 2000 to $2,772,040 in 2001. As a percentage of
total revenues, selling expenses increased from 8% in 2000 to 9% in 2001.
General and administrative expenses increased from $1,193,264 in 2000 to
$1,428,234 in 2001. As a percentage of total revenues, general and
administrative expenses were 4% in both 2001 and 2000.

Interest expense. Interest expense for the fiscal year ended December 31,
2000 was $882,906 compared to $661,630 for the fiscal year ended December 31,
2001. As a percentage of total revenues, interest expense was 4% in 2000 and
decreased to 2% in 2001. For the fiscal year ended December 31, 2000, $352,941
of the interest expenses was a one-time charge due to the beneficial conversion
feature of the Global Capital note.

Other income and expense. Loss on sale of assets for the year ended
December 31, 2001 was $130,725. This loss represents the net effect of the sale
of assets at two under-performing locations as well as the sale of certain other
surplus bakery equipment. The aggregate operating loss from the two
under-performing locations was $92,954 for the year ended December 31, 2001 and
$57,601 for the year ended December 31, 2000. Gain on extinguishment of
convertible debt for the year ended December 31, 2001 was $128,261. On the date
of extinguishment of the convertible debt, the intrinsic value of shares into
which the debt was convertible was $1,619,163, of which $677,249 related to the
beneficial conversion feature. The extinguishment of this debt gave rise to a
gain of $419,163 which is presented net of $290,902 related interest and
discounting of the original note, resulting in the net gain on extinguishment of
$128,261.

Net income (loss). Net income for the fiscal year ended December 31, 2001
was $586,261 compared to a net loss of $(68,328) for the fiscal year ended
December 31, 2000. Increased efficiencies at existing stores contributed
approximately $67,000 to this increase in net income while a full year of
operations in 2001 of the Gladco locations acquired in 2000 contributed the
remainder of the increase.

Same store sales. We operated locations at seventeen airports during both
the full fiscal years ended December 31, 2000 and December 31, 2001. Sales for
those locations were $19,033,973 for the fiscal year ended December 31, 2000 and
$18,416,539 for the fiscal year ended December 31, 2001, representing a decrease
of $617,434, or 3.2%. This decrease was due to the effect of the September 11,
2001 terrorist attacks.

FISCAL YEAR ENDED DECEMBER 31, 2000 COMPARED TO FISCAL YEAR ENDED DECEMBER 31,
1999

Revenues. Our gross revenues for the fiscal year ended December 31, 2000
were $23,725,859 compared to $18,176,951, for the fiscal year ended December 31,
1999. Revenues from concession activities increased $5,588,594 ($23,506,452
compared to $17,917,858) and food preparation center sales decreased $17,220
(from $188,683 to $171,463) while franchise royalties declined $22,466 (from
$70,410 to $47,944), for the fiscal year ended December 31, 2000 as compared to
the fiscal year ended December 31, 1999. Concession revenue increased $346,985
from 1999 to 2000 due to a full year of operations in 2000 of a location opened
in 1999. Concession revenue increased $1,886,636 from 1999 to 2000 due to two
new locations opened in 2000 and increased $2,550,389 from 1999 to 2000 due to
the Gladco locations acquired in 2000.

Cost of goods sold. The cost of goods sold for the fiscal year ended
December 31, 2000 was $7,368,000 compared to $5,764,769 for the fiscal year
ended December 31, 1999. As a percentage of total revenues, the cost of goods
sold was 31% in 2000 and 32% in 1999. The improvement in cost of goods sold as
a percentage of revenue is due to efficiencies at existing locations such as the
consolidation of purchasing with Sysco (which has resulted in lower costs for
products purchased from Sysco).

Operating costs and expenses. Operating costs and expenses for the fiscal
year ended December 31, 2000 were $15,528,001, compared to $12,002,547 for the
fiscal year ended December 31, 1999. Payroll expenses increased from $5,913,200
in 1999 to $7,575,967 in 2000. As a percentage of total revenues, payroll
expense was 32% in both 1999 and 2000. We expect payroll expenses to increase in
total dollar amounts with the addition of new concession facilities, but to
decrease modestly as a percentage of revenues if existing facilities operate
more efficiently and we reap the benefits of recently implemented cost control
measures. The cost control measures implemented include: improving the budget
process; implementing a standardized training program; and improving the
efficiency of the management structure at the individual airport locations.
Occupancy expenses decreased from $3,889,437 in 1999 to $3,563,886 in 2000. As a
percentage of total revenue, occupancy expense was 16% in 1999 and decreased to
15% in 2000. General and administrative expenses decreased from $2,199,910 in
1999 to $1,193,264 in 2000, and remained the same as a percentage of total
revenues at 4% for 1999 and 2000. The increase was attributable primarily to
increases in administrative staff. We will continue to add additional
administrative staff commensurate with our growth but expect general and
administrative expenses to decline as a percentage of total revenues.

Interest expense. Interest expense for the fiscal year ended December 31,
1999 was $977,612 compared to $882,906 for the fiscal year ended December 31,
2000. As a percentage of total revenues, interest expense was 5% in 1999 and
decreased to 4% in 2000 due to the retirement of the Cap Ex debt in the last
quarter of 1999 and first quarter of 2000. $352,941 of the interest expenses for
the fiscal year ended December 31, 2000 was a one-time charge due to the
beneficial conversion feature of the Global Capital note. Without this one-time
charge, interest expense as a percentage of total revenue was 2% in 2000.

Net income (loss). Net loss for the fiscal year ended December 31, 2000 was
$(68,328) compared to a net loss of $(579,758) for the fiscal year ended
December 31, 1999. Increased efficiencies at existing stores contributed
approximately $399,000 to this decrease in net loss while the addition of the
Gladco locations acquired in 2000 contributed the remainder of the decrease in
net loss.

Same store sales. We operated locations at sixteen airports during both the
full fiscal years ended December 31, 1999 and 2000. Sales for those locations
were $17,029,060 for the fiscal year ended December 31, 1999 and $18,314,941 for
the fiscal year ended December 31, 2000, representing an increase of $1,285,881,
or 7.6%.

LIQUIDITY AND CAPITAL RESOURCES

the Company's common stock on the day immediately preceding closing or 85% of
the five lowest volume weighted average sales prices of our common stock
during the 25 days immediately preceding the date of a notice of
conversion. All of these debentures have either been converted or repurchased
by us. The proceeds were utilized in the acquisition of Gladco Enterprises,
Inc.

During the fiscal year ended December 31, 2001, we raised $364,362 in
capital through the sale of assets, borrowed an additional $1,268,000 through a
bank loan at an average interest rate of approximately 9% per annum, and
borrowed a net of $1,779,888 against a line of credit at an average interest
rate of approximately 6% per annum. As of December 31, 2001, $234,112 was
available to the Company from its line of credit. Financial covenants required
by this line of credit include the following: a minimum current ratio of 90%;
maximum debt to tangible net worth of .85 to 1; and minimum debt coverage of
1.70 to 1. The Company was in compliance with its covenants at December 31,
2001. As of December 31, 2001, we had a working capital deficit of $360,062.
It is management's belief that there is sufficient cash to fund operations for
the next twelve months. During the first two months of 2002, we raised
approximately $925,000 of capital in a private placement of convertible notes
and warrants through a broker-dealer registered with the National Association of
Securities Dealers, Inc. The convertible notes are convertible into a total of
900,020 shares of common stock, and the 708,750 warrants issued entitle the
warrant holders to purchase a total of 708,750 additional shares of our common
stock for an exercise price of $2.00 per share for a period of five years from
the date of issuance. We terminated the offering in early March 2002. According
to the terms of the notes and warrants, the common stock issuable upon the
conversion of the notes and exercise of the warrants must be registered by us
with the Securities and Exchange Commission. This registration statement is
intended to effectuate that registration. During May and June of 2002, we
financed equipment through capital lease obligations totaling $1,176,260. We
expect to meet the balance of our capital requirement for 2002 through
additional capital lease obligations, senior debt and cash provided by operating
activities.

Cash increased $88,233 for the year ended December 31, 2001 compared to
$1,523,032 for the year ended December 31, 2000. Net cash provided by operating
activities for the year ended December 31, 2001 was $1,913,554 compared to
$2,069,847 for the year ended December 31, 2000. Cash provided by financing
activities for the year ended December 31, 2001 included $1,268,000 borrowed
through a bank loan and $1,779,888 proceeds from a line of credit. Cash
provided by financing activities for the year ended December 31, 2000 included
$1,992,362 borrowed through notes and $6,387,332 proceeds from the issuance of
capital stock. Cash provided by investing activities for the year ended
December 31, 2001 included $364,362 proceeds from the sale of assets. Cash used
for investing activities for the year ended December 31, 2001 included
$2,143,486 for property and equipment and $528,460 for construction in progress.
Cash used for investing activities for the year ended December 31, 2000 included
$4,481,546 for property and equipment and $3,370,722 for the excess of the
purchase price for Gladco Enterprises over the fair market value of its assets.
Cash used for financing activities for the year ended December 31, 2001 included
$153,985 to redeem common stock; $677,249 to redeem the equity feature of
retired debt; $815,469 to retire debt; and, $918,922 for the principal portion
of capitalized lease obligations. Cash used for financing activities for the
year ended December 31, 2000 included $56,664 payments on a line of credit;
$143,847 to retire debt; and, $873,730 for the principal portion of capitalized
lease obligations.

When we are awarded a new concession facility, we are generally committed
to expend a negotiated amount for capital improvements to the facility. In
addition, we are responsible for acquiring equipment necessary to conduct its
operations. As a result, we incur substantial expenses for capital improvements
at the commencement of a concession term. Generally, however, the term of the
concession grant will be for a period of 10 years, providing us an opportunity
to recover our capital expenditures. Substantially all of our concession
locations have been obtained in the past four years, which has resulted in
significant capital needs. As a result, we have been required to seek capital,
and to apply capital from operations, for the construction of capital
improvements at newly awarded concession locations. We intend to continue to bid
for concession locations, including bidding on larger proposals. Anticipated
cash flows from operations will not be sufficient to finance new acquisitions at
the level of growth that we have experienced over the past two years.
Accordingly, to the extent we are successful in securing new concession
contracts, we will continue to need additional capital, in addition to cash flow
from operations, in order to finance the construction of capital improvements.

We anticipate capital requirements of approximately $3.5 million in fiscal
2002 to complete the construction of improvements at concession facilities that
we have already been awarded. This includes approximately $2.2 million for the
three concession locations the Company has been awarded at the Newark, New
Jersey International Airport and approximately $1.3 million at other existing
concession locations. Should the Company fail to raise the capital necessary to
complete the construction of these improvements, the Company would be at risk of
potentially losing the related contract.

We may have more capital requirements than anticipated during 2002 if we
win additional bids or acquire additional airport concession facilities. We are
continually evaluating other airport concession opportunities, including
submitting bid proposals and acquiring existing concession owners and operators.
The level of our capital requirements will depend upon the number of airport
concession facilities that are subject to bid, as well as the number and size of
any potential acquisition candidates that arise. We cannot be certain that we
will have sufficient capital to finance our growth and business operations or
that such capital will be available on terms that are favorable to us or at all.

The following table summarizes the Company's contractual obligations at
December 31, 2001.

Payments Due by Period
- ---------------------------------------------------------------------------------------------------------------------
Contractual Obligations Less than
Total one year 1 to 3 years 4 to 5 years After 5 years
- ---------------------------------- ----------------------- ------------- ------------- -------------- ----------
Long-term debt . . . . . . . . . . $ 1,360,999 $ 603,972 $ 749,266 $ 7,761 -
- ---------------------------------- ----------------------- ------------- ------------- -------------- ----------
Capital Lease Obligations. . . . . $ 2,750,568 $ 1,164,525 $ 1,583,007 $ 3,036 -
- ---------------------------------- ----------------------- ------------- ------------- -------------- ----------
Operating Leases . . . . . . . . . $ 31,871,757 $ 5,431,550 $ 15,659,535 $ 4,113,821 $6,666,851
- ---------------------------------- ----------------------- ------------- ------------- -------------- ----------

Total Contractual Cash Obligations $ 35,983,324 $ 7,200,047 $ 17,991,808 $ 4,124,618 $6,666,851
- ---------------------------------- ----------------------- ------------- ------------- -------------- ----------

BUSINESS

THE CONCESSION BUSINESS

We are primarily engaged in the business of acquiring and operating food,
beverage and other concessions at airports throughout the United States. We
currently have approximately 95 operating concession facilities at 24 airports,
93 of which we own and two of which are franchised to us, including concessions
at Los Angeles International Airport, Denver International Airport, Portland
International Airport, and the airports in Orange County and Ontario,
California; Madison and Appleton, Wisconsin; Lexington, Kentucky; Greensboro
(Piedmont Triad), North Carolina; Pittsburgh and Allentown, Pennsylvania;
Roanoke, Virginia; Columbia, South Carolina; Sioux Falls, South Dakota; Cedar
Rapids and Des Moines, Iowa; Baton rouge and Shreveport, Louisiana; Midland,
Texas; Albany, New York; Boston, Massachusetts and Saginaw (MBS), Michigan. The
airport contracts include concessions that range from a concession to operate
single and multiple food and beverage outlets to a master concession to operate
all food and beverage, as well as news and gift and merchandise, locations at an
airport. Our airport concession business is complemented by inflight catering
contracts awarded to us by major airlines at certain airports. In-flight
catering comprised approximately six percent of the Company's revenue in 2001.
The company has in-flight catering contracts with Delta Airlines, United
Airlines and numerous other smaller airline companies. Approximately 90 percent
of the Company's revenue in 2001 was derived from proprietary concepts such as
Creative Croissants.

Concessions to operate food and beverage and other retail operations at
domestic airports are generally granted by an airport authority pursuant to a
request for proposal process. Proposals generally contain schematic drawings for
the concession layout, a commitment to make capital improvements at the
concession location, and sample menus. Rent is paid to the airport authority on
the basis of a percentage of sales, with a minimum amount of rent guaranteed by
the concessionaire. For airport locations with a history of operations, we
evaluate information concerning historical revenues for the location to
determine the amount to bid for both percentage and minimum rent. For locations
that are newly constructed, we evaluate projections for the number of passengers
expected to use the airport and amounts to be spent per person at airport
concessions to form a revenues projection. Given the requirement to make capital
improvements, we make large capital outlays at the beginning of a concession
term, which we seek to recover during the remaining term. Concessions are
usually awarded for a ten-year term. Generally concessions are resubmitted for
proposals at the end of the term and we must resubmit a bid to secure an
additional ten-year term.

We have secured nearly all of our existing airport concessions through the
request for proposal process. We believe our success in securing concessions
through this process is attributable to tailoring our bids to each specific
airport's needs, offering a unique selection of quality food and beverages, and
a distinctive decor. In our proprietary menu items we strive to provide foods
that are healthy and higher quality than typical fast food or cafeteria-style
products, while maintaining value pricing. Our Bakery/Deli style restaurants
feature a selection of croissant sandwiches and a selection of vegetable, fruit
and pasta salads. At locations that are anticipated to have higher revenues, our
strategy is to secure franchise relationships with nationally recognized food
and beverage companies as part of our proposals. We have entered into agreements
with several such companies, including Carl's Jr., Schlotsky's Deli, Nathan's
Hotdogs and TCBY Yogurt. Under these arrangements, we own the concession rights
from the airport authority and our employees operate the location. We then pay

franchise fees under a franchise agreement. Our strategy is to continue to
develop relationships with a number of national and regional food and beverage
companies, which we expect will provide us with the flexibility to tailor
product offerings to meet a particular airport's desires.

While we have seriously pursued the submission of proposals only since
1989, we have been successful in a significant number of the proposals we have
submitted. Our management attributes this success in winning airport proposals
principally to our efforts to customize each bid, striving to make creative
proposals that address local preferences and distinguish us from our competitors
in our offering of decor as well as food products. We focus on small to medium
size airports and have found a niche market. The following are examples of our
approaches to the concession business:

Master concession: We will generally seek to become the master
concessionaire for all airport services, including food and beverage, lounge and
bar, specialty retail, news and gifts, and other services at airports with at
least 400,000 enplanements per year. We currently serve as the master
concessionaire at the Cedar Rapids, Iowa airport.

Caf and spirits: If the opportunity for a master concession is not
available, then we submit bids utilizing specific food and beverage concepts, or
other service concepts depending on the nature of the concession. One such
concept is "cafe and spirits" which features various branded and nonbranded food
and beverages, such as TCBY Yogurt and Creative Croissants, along with a bar,
lounge and mini library. We currently operate Cafe and Spirits formats at all
Creative Croissants locations that serve liquor.

Creative Croissants-Registered Trademark- Bakery Deli: We can implement our
bakery/deli concept, Creative Croissants, either as a stand alone concession or
as part of a food court, depending on the preference of the airport authority
and the available concession category. We currently operate Creative Croissants
at nearly every airport we currently service.

Attaining franchise rights: For larger concessions, where the airport
desires branded food products, we attempt to secure franchise rights from
nationally or regionally recognized food and beverage companies. We have entered
into Franchise Agreements with (i) TCBY Yogurt to operate TCBY franchises at our
Lexington, Roanoke, Columbia and Cedar Rapids concession facilities; (ii) Carl's
Jr./Green Burrito to operate franchises at our two Ontario, California
concession facilities; (iii) ICBY to operate ICBY franchises at our Greensboro,
Des Moines, Allentown and Sioux Falls concession facilities; (iv) Schlotsky's to
operate a Schlotsky's Deli at Pittsburgh; and (v) Nathan's Hot Dog to operate
franchises at various airports. We may in the future purchase and operate
franchises from other major food or beverage franchisors to include in our bid
proposals.

Acquisition of other concessionaires: We have also sought to expand our
physical presence at airports by acquiring existing concessionaires with one or
more airport locations. Generally, the airport authority overseeing the
operations at the airport will have the right under the existing concession
agreement to approve the change in control. The strengths we demonstrate in the
request for proposal process are used to secure the consent of an airport
authority to a transfer of concession rights in an acquisition of an existing
location. We have typically negotiated for an extension of the concession term

in exchange for additional capital improvements or additional facilities or menu
items to be offered at the concession location as part of securing the airport
authority's consent to the transfer.

In October 2000, we completed the acquisition of Gladco Enterprises, an
airport concessions company from Pittsburgh, Pennsylvania with annual revenues
of approximately $10 million. Our strategy is to expand our captive audience
business to more airports in the United States, and eventually to other public
venues. We also intend to seek to expand the types of concession services that
we provide, and to be awarded more multiple and master concession contracts such
as the one we have been awarded for the Cedar Rapids, Iowa airport. While we
have historically focused on the food and beverage segment, we intend to seek
concession awards to provide newsstands, gift shops, specialty stores and other
services to augment our food and beverage business at airports and other venues.

Prior to our initial public offering in July 1997, we qualified as a
Disadvantaged Business Enterprise ("DBE") based on Mr. Ali's ownership of all of
our common stock. Our historical success in securing concession locations may
have been partially attributed to our DBE status. The impact of the initial
public offering on our status as a DBE and the impact of any such potential loss
of DBE status on our ability to secure new concession locations is unclear. To
the extent that our historic rate of success in securing new airport concessions
was partially attributable to our status as a DBE, that growth rate may decline
if we is not recognized as a DBE or if DBE programs are eliminated or curtailed.

In analyzing a concession opportunity, particularly in the airport
industry, we evaluate the following factors, among others: (1) the estimated
rate of return on the investment in the facilities, (2) the historical
performance of the location, (3) the historical and estimated future number of
annual enplanements at the airport, (4) the competition in the vicinity of the
proposed facility, (5) the rent and common area maintenance charges for the
proposed facilities and (6) the length of the proposed concession term. In
customizing the design proposal and theme for a concession opportunity, we
analyze the character of the community and the expected preferences of the
patrons (for example, whether they are primarily tourists or business persons)
to determine the most attractive facility. The scope of the contract and the
size and shape of the site are other elements considered in the analysis.

As part of any proposal or acquisition, we receive information concerning
any historical operations conducted at the specific location. Generally, an
airport authority will provide three years of historical information for a
location with its request for proposal. Similarly, in an acquisition
transaction, we will review a target operator's historical performance as part
of our due diligence review. In either scenario, we then evaluate the estimated
impact on revenues and gross margins that will result from any remodeling,
capital improvements and menu changes. Where the concession location is to be
newly constructed, such as at the Newark New Jersey, airport, we review
estimates of passenger enplanements for the new terminals and amounts typically
spent per passenger at concessions.

Once we have been awarded a concession contract at an airport, we are
generally scheduled to assume the management of the existing facilities within
90 to 120 days after the award, or to commence construction of an entirely new
facility within three to six months after the award. We are generally required
to place three types of bonds with an airport authority before we may take over
operations at a concession. In connection with our bid, we are occasionally
required to post a bond for the amount of capital improvements we are committed

to make at the airport. During commencement of construction for any specific
construction project, we are required to post a construction bond for the
specific facilities to be constructed. This bond terminates upon completion of
each specific project and the bond for all of the capital improvements expires
upon completion of all capital improvements for the airport. In addition, we are
required to post a performance bond to cover some specified percentage of our
minimum rent obligations. This bond remains in place during the term of the
concession. To date we have not experienced significant difficulty in securing
bonds for our obligations to various airport authorities. Our bonding capacity
is limited by our size, and have therefore limited the projects on which we
could bid. If we continue to grow, we anticipate increasing our bonding capacity
and the ability to bid for larger projects at the largest domestic airports.

Typically we operate an existing facility for two to three months before
beginning the remodeling of the site according to the specifications in our
airport bid proposal. During the remodeling phase of an existing facility, which
usually takes 45 to 60 days, the facility is either closed or serves at minimal
levels. Once the remodeling is completed, the facility opens for full service,
generally for most hours during which the airport is actively operating.

ACQUISITION OF GLADCO ENTERPRISES, INC.

On October 9, 2000, we completed the closing of the acquisition of Gladco
Enterprises, Inc., a company located near Pittsburgh, Pennsylvania that
currently manages concessions in five airports.

We completed the acquisition of Gladco in accordance with the terms of a
Purchase Agreement. In accordance with the Purchase Agreement, we acquired 100%
of the stock of Gladco, HLG Acquisition Corporation, a Pennsylvania corporation
and an affiliate of Gladco, and HLG Franchise Marketing Company, a Pennsylvania
limited partnership and an affiliate of Gladco, from Edwin L. Klett, Louis
Coccoli, Jr., Herbert H. Gill and the Virgil A. Gladieux Marital Trust in
consideration for an aggregate amount equal to $7,000,000 (subject to
adjustments as set forth in the Purchase Agreement), payable as follows: (i)
$300,000 in cash which had been prepaid as a deposit, (ii) the payment of all
outstanding principal and accrued interest of, or assumption of obligations and
liabilities as set forth in the Purchase Agreement, which were not in excess of
$2,500,000; (iii) the issuance of shares of our common stock equal to $500,000
divided by the average of the closing prices of our common stock on the NASDAQ
Small Cap exchange for each of the thirty trading days ending two days prior to
closing of the transaction (this resulted in an average price of $7.18, which
resulted in 69,638 shares issued); and (iv) approximately $3.7 million in cash.
We agreed to register the shares of common stock which we completed. The total
issued shares to the sellers was approximately 0.1% of our issued and
outstanding common stock immediately after the acquisition.

We agreed to permit the sellers to elect, by written notice to us, to
require us to repurchase the shares when they are freely tradable and registered
at a price equal to the per share issuance price times the number of shares
repurchased. We repurchased a total of 39,694 of these shares in June 2001 for
total consideration of $285,003, leaving 29,944 of these shares outstanding.

We also agreed to increase the purchase price at any time up to one year
from closing by $280,000 upon execution of a definitive lease, sub-lease or
other operating agreement with respect to each of the two retail sites and
commercial operations at the Newark, New Jersey International Airport. We signed
a lease for the Newark, New Jersey International Airport within the one year
period from closing. As a result, we fulfilled our obligation to increase the
purchase price by $280,000.

We agreed to employ Mr. Coccoli in an executive capacity and as President
of Gladco.

The consideration exchanged pursuant to the Acquisition Agreement was
negotiated between Gladco and our management.

In evaluating Gladco as a candidate for the acquisition, we used criteria
such as the value of the airport concession assets of Gladco, its airport
relationships, cash flows, potential growth and its history with the various
airport operations. We determined that the consideration for the merger was
reasonable.

We obtained part of the funds for the acquisition of Gladco by the sale of
7% Convertible Debentures due September 26, 2003 which resulted in net proceeds
of approximately $1,813,000.

We intend to continue the historical businesses and proposed businesses of
Gladco.

Gladco is a Pittsburgh-based hospitality and service company with $10.5
million in annual revenues, that operates food and beverage concessions in five
international airports, including Pittsburgh International; Atlantic City
International; Logan International, in Boston; Albany International, in New
York; and M.B.S. International in Freeland, Michigan. Gladco operates 22
individual concessions within those airports. Those concessions, combined with
our current concessions, give the combined companies locations in a total of 25
airports nationally, and approximately 95 overall concessions within those
airports. Our management believes that the Gladco acquisition also improves each
company's available co-branding product mix.

In management's view, the Creative Host/Gladco business combination is both
strategic and synergistic, providing an experienced management team, heightened
East Coast presence, and creating an infrastructure that provides efficient
management, setting the stage for additional growth both internally and through
acquisition. With our ability to raise equity, combined with years of experience
of Mr. Coccoli and Mr. Ali, it may open the doors for further opportunities.

Upon completion of the acquisition, Gladco became a wholly-owned subsidiary
of Creative Host, with no noticeable change to any of Gladco's storefronts,
method of operation or Gladco's current management team, led by 30-year industry
veteran, Louis Coccoli, Jr., who will remain President of Gladco. Through the
acquisition, we enhanced our presence on the East Coast through representation
by Gladco's corporate office in Pittsburgh.

Gladco currently manages concessions in five airports. Gladco has also
signed a lease for two store locations in the Newark, New Jersey International
Airport, with projected annual sales of more than $3.7 million. In addition to
its own signature facilities, Gladco operates several national brands, including

Schlotzky's Deli, Hot Licks Bar & Grill and Samuel Adams Brew Pub, and has an
exclusive agreement with Yuengling Brewery, the oldest brewery in the United
States.

The combined companies are expected to realize the benefits of having East
Coast and West Coast offices, providing geographically appealing management,
operations consolidation, additional industry contacts and clout, and creativity
enhancements from combined co-branding and airport concessions experience. As a
company, Gladco has focused its bids to include bar and lounge services that
return higher margins than typical food service concessions, which compliment
our existing operations.

CONCESSION LOCATIONS

The following table identifies our existing airport concessions and those
which have been awarded and are expected to be in operation in 2002, including
the facilities acquired when we purchased Gladco Enterprises, Inc. in October
2000:

EXISTING AND AWARDED CONCESSION LOCATIONS
Year Ended December 31, 2001

Dated of
Completion
Date or Expected
Name/Location of . . . . . . . . . . . . . Description of Commenced Completion Expiration Date 2001
Concession . . . . . . . . . . . . . . . . Concession Operations of Remodeling of Contract Revenue
- ------------------------------------------ ------------------ -------------- ------------- ---------------- ----------

Charleston, SC (1) . . . . . . . . . . . . Food and Beverage July 2000 January 2001 January 2011 $1,787,617

Baton Rouge (1). . . . . . . . . . . . . . Food and Beverage July 1999 July 2000 July 2010 $ 776,499

Shreveport,. . . . . . . . . . . . . . . . Food and Beverage May 1999 February 1996 November 2009 $ 574,464
Lousiana (1) . . . . . . . . . . . . . . . & May 1999

Midland, Texas (1) . . . . . . . . . . . . Food and Beverage January 1999 January 1999 September 2007 $ 836,488

Ontario, California. . . . . . . . . . . . Food and Beverage September 1998 September July 2008 $1,727,567
1998

John F. Kennedy. . . . . . . . . . . . . . Food and Beverage October 1999 July 1999 May 2008 (2) Franchise (8)
International (2)

Greensborough. . . . . . . . . . . . . . . Food and Beverage December 1997 November 1998 May 2008 $2,305,328
(Piedmont Triad)
North Carolina (1)

Sioux Falls, South . . . . . . . . . . . . Food and Beverage August 1997 March 1999 August 2007 $ 708,188
Dakota (1) . . . . . . . . . . . . . . . . Inflight Catering

Des Moines,. . . . . . . . . . . . . . . . Food and Beverage July 1997 November 1998 July 2007(3) $1,556,172
Iowa (3)

Cedar Rapids,. . . . . . . . . . . . . . . Master Concession; November 1996 October 1997 March 2004 (5) $1,485,971
Iowa (1) . . . . . . . . . . . . . . . . . Food and Beverage;
News & Gifts;
Specialty Stores;
Inflight Catering

Columbia,. . . . . . . . . . . . . . . . . Food and Beverage; October 1996 October 1997 October 2006 (4) $1,271,700
South Carolina (1) . . . . . . . . . . . . Catering

[continued]

Allentown, . . . . . . . . . . . . . . . . Food and Beverage July 1996 January 1998 July 2006 $1,329,594
Pennsylvania . . . . . . . . . . . . . . . Inflight Catering

Lexington, . . . . . . . . . . . . . . . . Food and Beverage July 1996 February 1997 July 2006 $ 805,688
Kentucky (1) . . . . . . . . . . . . . . . Inflight Catering

Roanoke, . . . . . . . . . . . . . . . . . Food and Beverage June 1996 January 1997 June 2006 $ 576,995
Virginia(1). . . . . . . . . . . . . . . . Inflight Catering

Freeland (MBS) . . . . . . . . . . . . . . Food and Beverage May 1996 May 1996 May 2006 $ 844,233
Michigan (6)

Appleton,. . . . . . . . . . . . . . . . . Food and Beverage January 1996 January 1996 July 2005 $ 373,735
Wisconsin(1)

Madison, . . . . . . . . . . . . . . . . . Food and Beverage January 1996 July 1996 January 2006 $1,030,010
Wisconsin (1)

Portland . . . . . . . . . . . . . . . . . Food and Beverage October 1995 October 1995 June 2005 $ 819,602
International(1)

Los Angeles. . . . . . . . . . . . . . . . Food and Beverage June 1995 September June 2005 (6) $1,200,472
International(5) 1995

Denver . . . . . . . . . . . . . . . . . . Food and Beverage February 1995 One June 2003 and $1,150,516
International. . . . . . . . . . . . . . . completed November 2006
February
1995

Albany,. . . . . . . . . . . . . . . . . . Food and Beverage February 1995 February 1995 February 2008 $1,442,308
New York (6)

Pittsburgh,. . . . . . . . . . . . . . . . Food and Beverage October 1992 October 1992 October 2006 $6,577,558

Orange County. . . . . . . . . . . . . . . Food and Beverage September 1990 December 2000 February 2001(5) Franchise (8)

Boston,. . . . . . . . . . . . . . . . . . Food and Beverage November 2001 Under May 2003 (3) $ 99,992
Massachusetts (7). . . . . . . . . . . . . Negotiation

Newark,. . . . . . . . . . . . . . . . . . Food and Beverage October 2001 April 2002 September 2008 Under
New Jersey . . . . . . . . . . . . . . . . Construction

- -----------------------------------------
(1) We are currently the sole food and beverage concessionaire at this airport.

(2) Delta Airlines, the owner of the airport terminal, has reserved the right
under its concession agreement with us to recapture the premises upon 30 days
notice and payment for our improvements.

(3) The airport retains the right under the concession to recapture the premises
upon payment for our improvements.

(4) After the initial year of the term, the airport authority has the right to
terminate the concession upon payment to us of our "remaining business interest"
in the concession.

(5) After June 2001, this concession can be terminated by the airport upon 90
days notice.

(6) This concession was acquired by us when we purchased Gladco Enterprises,
Inc.

(7) We are currently negotiating with the airport for a longer-term contract.

(8) All of the locations with revenue listed in the last column of the table
are Company-operated locations. Locations operated by franchisees are indicated
with the word "Franchise" in the last column of the table.

FRANCHISE OPERATIONS

From 1986 through 1994, we were actively engaged in the business of
franchising restaurants under the "Creative Croissant" name. Unfortunately, our

restaurant franchise business was not successful, and, in 1990, we began the
transition to company-owned airport concessions that is the major focus of our
current business plan. We continue to have franchise relationships with the
Orange County airport concessions that is operated by a franchisee.

We expect our revenues from franchising (approximately 0.1% of total
revenues for the twelve month period ended December 31, 2001) to remain
unchanged or decline over time as we concentrate on expanding our concession
business and establishing facilities owned directly by us at airports, other
captive audiences and other public venues. If we are able to establish a greater
national brand name presence, through our airport and other concession business,
then we may devote some resources to the development of the franchising segment
of our business. In the meantime, we may continue to sell franchises in special
situations when a franchise would be more advantageous to our business than a
Company owned facility, when financing is not otherwise available, or generally
in situations that do not involve concession contracts.

MARKETING AND SALES

Our marketing strategy involves two fundamental components: (i) securing
the concession and (ii) increasing sales once the concession has been granted.
We plan to continue to concentrate our marketing and sales efforts on acquiring
high volume concessions at airports and evaluating other public venues with
high, captive pedestrian traffic such as sports stadiums, public libraries,
universities/colleges, zoos and theme parks throughout the United States. For
the near future, we intend to focus on the approximately 123 airports in the
United States with over 400,000 enplanements per year. In those smaller
regional airports, whenever possible we will seek to be the master
concessionaire for all concession operations conducted at such airports.

We target the airport concession business through our presence at airport
authority association meetings and trade shows, our network of existing
relationships in the airport business community, and through submission of bids
in response to requests for proposals by airports. By continually monitoring the
availability of proposals at airports throughout the nation, we seek to be
involved in every proposal that is economically feasible. In bidding for
concessions, we primarily focus on those airports with locations indicating that
the concession will earn annual gross revenues of $500,000 to $2,000,000. Once a
concession has been targeted, we develop a customized bid tailored to address a
theme or culture specific to the concession location. Our management is
currently working with airport managers to design unique and exciting food court
areas with a variety of food choices, comfortable seating and self-serve options
without the inconveniences of traditional restaurants. Our proposals for
airports may include children's play areas, reading areas, mini-libraries and/or
computer services.

Our food and beverage facilities have traditionally been designed with a
European flair for fresh, healthy and nutritious gourmet and specialty foods,
served quickly and at value prices. We are diversifying into agreements with
renowned food and beverage suppliers such as Carls Jr., Schlotzky's and TCBY
Yogurt. The food and beverage concessions sell gourmet coffee beans as gift
packages, colorful sports bottles and thermal coffee mugs featuring the
"Creative Croissants-Registered Trademark" logo and key menu items, custom gift
baskets and other promotional merchandise.

DISTRIBUTION

We rely on Sysco Corporation as our primary distributor for foodservice
products to our customer locations. Our agreement with Sysco provides for
customer service, delivery service and information services to be provided by
Sysco. Our annual purchase volume from Sysco is approximately $7,000,000.

COMPETITION

The concession industry is extremely competitive and there are numerous
competitors with greater resources and more experience than we have. The
dominant competitors in the airport concession market are HMS Host and CA One
Services, Inc., which have been serving the airport concession market for
decades. HMS Host and CA One Services have established a marketing strategy of
offering comprehensive concession services to airport authorities in which they
submit a bid on an entire airport or terminal complex. They generally operate
large airport master concessions with annual sales in excess of $2.2 million.

Other formidable competitors in the concession business, especially food
and beverage, include Service America Corporation, Anton Food, Concession
International, Air Host, Inc.

We are primarily focusing initially on smaller airport concessions where
competition from large competitors is less intense. However, there are a
limited number of concession opportunities domestically. If we achieve greater
penetration in regional airports, we will be required to enter into larger
domestic airports, or other venues to sustain our growth. Entry into larger
domestic airports will necessarily involve direct competition with HMS Host and
CA One Services.

We strive to differentiate our company in all markets with the design and
product mix we offer to each particular airport. We design our concession bids
and facilities around unique themes or concepts that we develop for each
location. In this manner, we seek to appeal to airport authorities that are
seeking individual bidders with interesting and creative food concepts, both to
boost the airport's income from percentage rents and to enhance the look and
reputation of the airport and the cities it serves. We also offer a variety of
food concepts with an emphasis on fresh foods and high quality, while
maintaining value-oriented prices.

GOVERNMENT REGULATION

The airport concession business is subject to the review and approval of
government or quasi government agencies with respect to awarding concession
contracts. In addition, food and beverage concessions are subject to the same
rigorous health, safety and labor regulations that apply to all restaurants and
food manufacturing facilities. Concession businesses are also subject to labor
and safety regulations at the local, state and federal level. Concessions
granted by airport authorities and other public agencies may also be subject to
the special rules and regulations of that agency, including rules relating to
architecture, design, signage, operating hours, staffing and other matters.
Failure to comply with any of these regulations could result in fines or the
loss of a concession agreement.

The Federal Aviation Administration requires airports receiving federal
funds to award contracts for concession facilities producing at least 10% of
total airport concession revenue to certain designated categories of entities

that qualify as Disadvantaged Business Enterprises. The federal requirements do
not specify the nature or manner in which the disadvantaged business must
participate. Historically, companies in the industry have relied on hiring
disadvantaged business employees, purchasing provisions from disadvantaged
business suppliers, contracting for services from disadvantage businesses or
subcontracting a portion of the concession to a disadvantaged business in order
to meet this requirement. When we first entered the airport concession business,
our Common Stock was owned entirely by Mr. Sayed Ali. As a result, we qualified
as a disadvantaged business enterprise. Our status as a disadvantaged business
enterprise assisted us in securing concession awards with several airports, and
some of our concession agreements specify that we will retain our disadvantaged
business status. As a result of our initial public offering and subsequent stock
sales, Mr. Ali's ownership in our common stock decreased to approximately 13.2%.
We do not know what impact this will have on our status as a disadvantaged
business. We have succeeded in securing airport concession contracts at eight
additional locations since our initial public offering, although we are not
aware of the extent to which our disadvantaged business status, or lack thereof,
was a factor in the airport authorities' decisions to award us such contracts.
We will have to address the issue on an airport by airport basis. If necessary,
we will comply with a particular airport's request for additional disadvantaged
business participation through the industry practice of hiring or contracting
with other disadvantaged businesses. We believe that we will retain our existing
locations and can continue to secure new concessions on the basis of the
products and services we offer and our industry reputation. To the extent our
historic rate of success in securing airport concessions is attributable to our
clear status as a disadvantaged business, our growth rate may decline.

The restaurant industry and food manufacturing businesses are highly
regulated by federal, state and local governmental agencies. Restaurants must
comply with health and sanitation regulations, and are periodically inspected
for compliance. Labor laws apply to the employment of restaurant workers,
including such matters as minimum wage requirements, overtime and working
conditions. The Americans With Disabilities Act applies to the Company's
facilities prohibiting discrimination on the basis of disability with respect to
accommodations and employment. Food preparation facilities must comply with the
regulations of the United States Department of Agriculture, as well as state and
local health standards.

Franchising is regulated by the Federal Trade Commission and by certain
state agencies, including the California Department of Corporations. In
addition, the California Franchising Law contains specific restrictions and
limitations on the relationship between franchisors and franchisees.
Franchisors must file an annual Franchise Offering Circular with the Federal
Trade Commission and certain states (many states do not regulate the offer and
sale of franchises) every year.

EMPLOYEES

We presently have over 713 employees, including 17 in administration. The
employees include approximately 260 who were employed by Gladco Enterprises,
Inc. when we acquired Gladco in October 2000. As we expand and open more
concessions, we anticipate hiring additional personnel including administrative
personnel commensurate with growth. We have never had a collective bargaining
agreement with our employees and we are not aware of any material labor
disputes.

SEASONALITY

Our concession operations are expected to experience moderate seasonality
during the course of each year, corresponding with traditional air travel
patterns which generally increase from the first quarter through the fourth
quarter.

TRADEMARKS

We presently have one registered trademark with the United States Patent
and Trademark Office on the Principal Register, registered as "Creative
Croissants-Registered Trademark." In addition, we are in the process of filing
trademark applications to register the names "Creative Host Services, Inc." and
as our business develops, we plan to continue to develop merchandising of
trademark products, such as clothing, drinking bottles, mugs and other similar
products, utilizing our service marks and trademarks in order to generate
additional revenues. Our policy is to pursue registrations of our marks
wherever possible. We are not aware of any infringing uses that could materially
affect our business or any prior claim to the trademarks that would prevent us
from using those trademarks in our business.

PROPERTIES

The Company's executive offices are located in a 3,903 square foot facility
at 16955 Via Del Campo, Suite 110, San Diego, California. The combined facility
is covered by a five-year lease terminating March 31, 2007 with monthly payments
of $6,683 plus common area maintenance charges.

LEGAL PROCEEDINGS

The Company is presently not subject to any material legal proceedings.
The Company is subject from time to time to legal claims in the ordinary course
of its business. Management does not believe that any of these legal claims
will have a significant adverse effect on its financial condition or business.

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth the names and ages of our current directors
and executive officers, their principal offices and positions and the date each
such person became a director or executive officer. Our executive officers are
elected annually by the Board of Directors. Our directors serve one year terms
until their successors are elected. The executive officers serve terms of one
year or until their death, resignation or removal by the Board of Directors.
There are no family relationships between any of the directors and executive
officers. In addition, there was no arrangement or understanding between any
executive officer and any other person pursuant to which any person was selected
as an executive officer. Creative Host will always maintain at least two
independent directors on its board of directors.

The directors and executive officers of Creative Host are as follows:

Name Age Positions
- ---- --- ---------

Sayed Ali 54 Chairman of the Board of Directors,
President and Chief Financial Officer
Booker T. Graves (1)(2) 62 Director
John P. Donohue, Jr .(1)(2) 70 Director
Charles B. Radloff 72 Director
Tasneem Vakharia 41 Secretary

- -----------
(1) Member of Compensation Committee
(2) Member of Audit Committee

SAYED ALI is the founder, Chairman of the Board of Directors, President and
Chief Financial Officer of the Company. Mr. Ali has served as Chairman of the
Board of Directors and President since 1986. Mr. Ali served as Chief Financial
Officer from December 1986 to February 1997, and since August 1997. Mr. Ali
served as the Secretary of the Company from 1986 to December 1996. Prior to
founding the Company, from May 1985 to September 1987, Mr. Ali was the Director
of Operations of Steffa Control Systems, a manufacturer of energy management
systems. From March 1980 until May 1985, Mr. Ali was the Director of Operations
for Oak Industries, Inc., a $250 million telecommunications equipment
manufacturer.

BOOKER T. GRAVES has been a director of the Company since March 1997.
Since 1993, Mr. Graves has been president of Graves Airport Concession
Consultants, a consulting company located in Denver, Colorado, which provides
consulting services to airports and other businesses. From 1993 to 1996, Mr.
Graves was the principal food and beverage consultant to the Denver
International Airport. From 1990 through 1993, Mr. Graves was General Manager of
CA One Services, Inc. (formerly Sky Chefs) at Denver Stapleton International
Airport. From 1980 until 1990, Mr. Graves was the General Manager of CA One
Services, Inc. of Phoenix Sky Harbor Airport.

JOHN P. DONOHUE, JR. has been a director of the Company since March 1997.
From 1990 to the present, Mr. Donohue has been a private investor. Prior to that
time for 25 years, Mr. Donohue was employed by Oak Industries, Inc., a NYSE
listed company, in various capacities. From 1985 to 1990, Mr. Donohue served as
President of Oak Communications, Inc., a division of Oak Industries, Inc. which
manufactured communications equipment for the cable television industry. From
1982 to 1985, he served as Vice President of Manufacturing overseeing up to
6,000 manufacturing employees. From 1977 to 1982, Mr. Donohue served as Vice
President of Operations for the Oak Switch division of Oak Industries, Inc.

CHARLES B. RADLOFF has been a director of the Company since March 1997.
Mr. Radloff has served as a business advisor and member of the board of
directors of DB Products, Inc. a privately owned company engaged in the design,
manufacture, and sale of electronic components for the communications and
aerospace industries. From 1987 to 1991, Mr. Radloff was President and Chief
Executive Officer of AKZO Electronic Materials Company, an electronics
manufacturer and wholly-owned subsidiary of AZKO, which is a Dutch
multi-national corporation with annual sales of approximately $12 billion. From
1965 to 1987, Mr. Radloff served in various executive positions with Oak
Industries, Inc., including his position as President and Chief Executive
Officer of Oak Communications and Chief Executive Officer of Oak Technology. Mr.
Radloff previously served on the board of directors of Comstream, Inc.

Disclosure of Commission Position on Indemnification for Securities Act
Liabilities

Our articles of incorporation limit the liability of directors to the
maximum extent permitted by California law. This limitation of liability is
subject to exceptions including intentional misconduct, obtaining an improper
personal benefit and abdication or reckless disregard of director duties. Our
articles of incorporation and bylaws provide that we may indemnify its
directors, officer, employees and other agents to the fullest extent permitted
by law. Our bylaws also permit us to secure insurance on behalf of any officer,
director, employee or other agent for any liability arising out of his or her
actions in such capacity, regardless of whether the bylaws would permit
indemnification.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to our directors, officers and controlling persons
pursuant to the foregoing provisions, or otherwise, we have been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable.

EXECUTIVE COMPENSATION

EXECUTIVE OFFICER COMPENSATION

Our compensation and benefits programs are designed to attract, retain and
motivate employees to operate and manage our business for the best interests of
our constituents. We design executive compensation to provide incentives for
those senior members of management who bear responsibility for our goals and
achievements. The compensation philosophy is based on a base salary, with
opportunity for significant bonuses to reward outstanding performance, and a
stock option program. Our Compensation Committee is responsible for setting
base compensation, awarding bonuses and setting the number and terms of options
for the executive officers. None of the current Committee members are employees
of the Company. The Committee currently consists of Messrs. Donohue and Graves.

The following table and notes set forth the annual cash compensation paid
to Sayed Ali, our Chairman of the Board and President. No other person's
compensation exceeded $100,000 per annum during the fiscal year ended December
31, 2001.

SUMMARY COMPENSATION TABLE

ANNUAL COMPENSATION LONG TERM COMPENSATION
------------------------------------ ----------------------------------------
AWARDS PAYOUTS
---------------------------- -------
SECURITIES
OTHER RESTRICTED UNDERLYING ALL OTHER
ANNUAL STOCK OPTIONS/ LTIP COMPEN-
NAME/TITLE SALARY BONUS COMP. AWARDS SARS PAYOUTS SATION
YEAR $ $ $ $ #(1) $ $
- ---------------- -------- --------- --------- ---------- -------------- ------- -----------
Sayed Ali
President
2000 $175,000 -0- -0- -0- 60,000 -0- -0-
2001 $200,000 -0- -0- -0- 10,000 -0- -0-

The following table sets forth the options granted to Mr. Ali during the
Company's fiscal year ended December 31, 2001.

OPTION/SAR GRANTS IN LAST FISCAL YEAR
(INDIVIDUAL GRANTS)

NUMBER OF PERCENT OF TOTAL
SECURITIES OPTIONS/SAR'S
UNDERLYING GRANTED TO
OPTIONS/SAR'S EMPLOYEES IN EXERCISE OF BASE
NAME . . . . . . . . . . . . . . . . . GRANTED (#) FISCAL YEAR PRICE ($/SH) EXPIRATION DATE
-------------- ----------------- ------------------ ---------------
Sayed Ali. . . . . . . . . . . . . . . 0 0% $ 1.02 10/18/2004
- -------------------------------------- -------------- ----------------- ------------------ ---------------

The following table summarizes the number and value of all unexercised
options granted to and held by Mr. Ali at the end of 2001. Mr. Ali did not
exercise any stock options in 2001.

FISCAL YEAR-END OPTION VALUES

Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Option at fiscal year end (#) at fiscal year end ($)
------------------------------ ------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ----------------- ----------- ------------- ----------- -------------
Sayed Ali 105,000 20,000 $131,250 $25,000

(1) Based on the closing bid price for the Company's Common Stock at the
close of market on December 31, 2001 as reported by NASDAQ

EMPLOYMENT AGREEMENT

Sayed Ali, our Chairman of the Board, President and Chief Executive
Officer, entered into a five-year employment agreement with us which commenced
effective January 1, 2000. The employment agreement provides for an annual
salary for Mr. Ali of $175,000 in 2000, $200,000 in 2001, $225,000 in 2002,
$248,000 in 2003 and $275,000 in 2004. Mr. Ali was also granted 60,000
additional stock options, vesting 20,000 upon grant, 20,000 in January 2001 and
20,000 in January 2002. The exercise price is 110% of the fair market value of
the stock on the date of grant, and the exercise period is three years from the
date of vesting.

DIRECTOR COMPENSATION

Directors receive no cash compensation for their services to us as
directors, but are reimbursed for expenses actually incurred in connection with
attending meetings of the Board of Directors. In addition, each outside director
is entitled to receive options as approved by the Board of Directors under our
1997 Stock Option Plan and 2001 stock Option Plan.

STOCK OPTION PLAN

In January 2001, the Company's Board or Directors adopted the 2001 Stock
Option Plan for our directors, executive officers, employees and key
consultants. Under the 2001 plan, a total of 450,000 shares are reserved for
potential issuance upon the exercise of up to 450,000 stock options that may be
granted under the plan. A total of 200,000 stock options have been granted
under the 2001 plan to certain of our directors. We expect to grant stock
options under the plan to directors, executive officers and other qualified
recipients in 2002 and in future years. The 2001 plan was ratified by the
shareholders of the Company in January 2002.

SELLING STOCKHOLDERS

The shares of common stock being offered by the selling securityholder were
issued to them in connection with the following transaction:

In September 2000, we sold approximately $2,000,000 in 7% Convertible
Debentures due September 26, 2003 to GCA Strategic Investment Fund Limited.
The purchase price of the debentures was 95% of the principal amount, which
after other fees resulted in net proceeds of $1,813,000. The debentures were
convertible at the lower of 110% of the volume weighted average sales price of
the Company's common stock on the day immediately preceding closing or 85% of
the five lowest volume weighted average sales prices of our common stock
during the 25 days immediately preceding the date of a notice of
conversion. All of these debentures have either been converted or repurchased
by us. GCA Strategic Investment Fund Limited has no relationship with the
Company other than as an investor.

We also sold $945,000 in Units in a private placement to a total of 13
different investors. Berry-Shino Securities, Inc. acted as placement agent in
this private placement. Each Unit consists of one $50,000 convertible note
which is convertible at $1.05 in outstanding principal amount or outstanding
interest per share and 37,500 warrants to purchase common stock at $2.00 per
share.

At closing of the private placement in April 2002, we issued a warrant to
purchase 1.89 of the Units (10% of those sold) issuable in the private placement
at an exercise price of $50,000 per Unit as part of the consideration to Berry
Shino-Securities, the broker/dealer that placed the private placement. Other
than acting as placement agent, neither Berry-Shino Securities nor any of the
investors in the offering has any relationship with the Company. Each of the
Units sold consisted of one $50,000 face amount Series A Convertible
Subordinated Debenture and 37,500 warrants to purchase shares of our common
stock at $2.00 per share until November 21, 2006. The Units purchaseable by
Berry-Shino securities under the broker warrant are identical to the investor
Units.

Finally, in January 2002 we issued 25,000 shares to Cutler Law Group, our
legal counsel, for legal services valued at $1.02 per share. Cutler Law Group
acts as our securities legal counsel. M. Richard Cutler is the principal and
sole beneficial owner of Cutler Law Group.

The following tables provide certain information with respect to shares
offered by the selling stockholder:

% OF SHARES
NUMBER OF NUMBER OF SHARES OWNED BY
SELLING . . . . . . . . . . . . . SHARES OWNED REGISTERED BY NUMBER OF SHARES SHAREHOLDER
SHAREHOLDERS. . . . . . . . . . . BEFORE SALE PROSPECTUS OWNED AFTER SALE AFTER SALE (1)
- --------------------------------- ------------ ---------------- ---------------- --------------
GCA Strategic Investment Fund, LP 410,375 410,375 0 0.00%
- --------------------------------- ------------ ---------------- ---------------- --------------
Cutler Law Group. . . . . . . . . 49,000 25,000 24,000 **
- --------------------------------- ------------ ---------------- ---------------- --------------
Alice C. Tate, Roth IRA . . . . . 0 76,608 0 0.00%
- --------------------------------- ------------ ---------------- ---------------- --------------
Glenbrook Capital Management. . . 0 85,120 0 0.00%
- --------------------------------- ------------ ---------------- ---------------- --------------
Cygnet Lake Limited . . . . . . . 0 85,120 0 0.00%
- --------------------------------- ------------ ---------------- ---------------- --------------
Joel Gold, IRA. . . . . . . . . . 0 170,240 0 0.00%
- --------------------------------- ------------ ---------------- ---------------- --------------
H. Burton & Claire P.Gosline. . . 0 85,120 0 0.00%
- --------------------------------- ------------ ---------------- ---------------- --------------
Francis X. Hanton . . . . . . . . 0 42,560 0 0.00%
- --------------------------------- ------------ ---------------- ---------------- --------------
Matthew M. Hayden . . . . . . . . 0 42,560 0 0.00%
- --------------------------------- ------------ ---------------- ---------------- --------------
Robert & Carole Juranek . . . . . 0 85,120 0 0.00%
- --------------------------------- ------------ ---------------- ---------------- --------------
Knapp Family Trust. . . . . . . . 0 425,600 0 0.00%
- --------------------------------- ------------ ---------------- ---------------- --------------
Maria Molinsky. . . . . . . . . . 0 170,240 0 0.00%
- --------------------------------- ------------ ---------------- ---------------- --------------
Victor & Janet Molinsky . . . . . 0 85,120 0 0.00%
- --------------------------------- ------------ ---------------- ---------------- --------------
Graham Paxton . . . . . . . . . . 0 170,240 0 0.00%
- --------------------------------- ------------ ---------------- ---------------- --------------
Bank Sal. Oppenheim . . . . . . . 0 85,120 0 0.00%
- --------------------------------- ------------ ---------------- ---------------- --------------
Berry Shino Securities. . . . . . 0 160,877 0 0.00%
- --------------------------------- ------------ ---------------- ---------------- --------------

_________________________
** Less than 1.00%

PLAN OF DISTRIBUTION

Sales of the shares of common stock by the selling securityholders may be
effected from time to time in transactions (which may include block
transactions) in the Nasdaq small cap market, in negotiated transactions,
through the writing of options on the common stock or a combination of such
methods of sale, at fixed prices that may be changed, at market prices
prevailing at the time of sale, or at negotiated prices. The selling
securityholders may effect such transactions by selling the shares of common
stock directly to purchasers or through broker-dealers that may act as agents or
principals. Such broker-dealers may receive compensation in the form of
discounts, concessions or commissions from the selling securityholders and/or
the purchasers of shares of common stock for whom such broker-dealers may act as
agents or to whom they sell as principals, or both. Such compensation as to a
particular broker-dealer might be in excess of customary commissions.

The selling securityholders and any broker-dealers that act in connection
with the sale of the shares of common stock as principals may be deemed to be
"underwriters" within the meaning of Section 2(11) of the securities act. Any
commissions received by them and any profit on the resale of the shares of
common stock earned by them as principals might be deemed to be underwriting
discounts and commissions under the securities act. The selling securityholders
may agree to indemnify any agent, dealer or broker-dealer that participates in
transactions involving sales of the shares of common stock against certain
liabilities, including liabilities under the securities act. We will not receive
any proceeds from the sale of the shares of common stock.

The shares of common stock are offered by the selling securityholders on a
delayed or continuous basis pursuant to Rule 415 under the securities act. We
have agreed to pay all expenses incurred in connection with the registration of
the shares offered by the selling securityholders except that the selling
securityholders are exclusively liable to pay all commissions, discounts and
other payments to broker-dealers incurred in connection with its sale of common
stock.

PRINCIPAL STOCKHOLDERS

COMMON STOCK

The following table sets forth certain information regarding beneficial
ownership of common stock as of February 25, 2002 by:
- each person known to Creative Host to own beneficially more than 5%
of our common stock;
- each of our directors;
- each of our named executive officers; and
- all executive officers and directors as a group.

Except as otherwise indicated, the address for each person is c/o Creative
Host Services, Inc., 16955 Via Del Campo, Suite 110, San Diego, California
92127.

Name and Address of Owner. . . . . . . Shares Beneficially Owned(1)
Number Percent(2)
---------------------------- ----------

Sayed Ali. . . . . . . . . . . . . . . 1,030,000(3) 13.2%

Booker T. Graves . . . . . . . . . . . 46,800(4) 0.6%

John P. Donahue, Jr. . . . . . . . . . 60,000(4) 0.8%

Tasneem Vakharia . . . . . . . . . . . 60,000(5) 0.8%

Charles B. Radloff . . . . . . . . . . 15,000 (4) 0.2%

John Stewart Jackson, IV (7) . . . . . 2,803,898 37.4%

All officers and directors as a group. 1,211,800 (6) 15.5%
(5 persons)

- --------------------
* Less than one percent.

(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or investment
power with respect to securities. Shares of common stock subject to options and
warrants currently exercisable or convertible, or exercisable or convertible
within 60 days are deemed outstanding for computing the percentage of the person
holding such option or warrant but are not deemed outstanding for computing the
percentage of any other person. Except as pursuant to applicable community
property laws, the persons named in the table having sole voting and investment
power with respect to all shares of common stock beneficially owned.
(2) Does not include 630,600 shares of common stock issuable upon exercise
of outstanding warrants or 300,000 shares of common stock issuable upon
conversion of long term debt.
(3) Includes 85,000 shares issuable upon the exercise of options outstanding
under our 1997 Stock Option plan and 20,000 shares issuable upon the exercise of
options outstanding under our 2001 Stock Option plan.
(4) Includes 30,000 shares issuable upon the exercise of options outstanding
under our 1997 Stock Option Plan. We expect to grant additional stock options
to the directors in 2002 under the Company's 2001 Stock Option Plan.
(5) Consists solely of shares issuable upon the exercise of options
outstanding under the Company's 1997 Stock Option Plan. We expect to grant
additional stock options to the directors in 2002 under the Company's 2001 Stock
Option Plan.
(6) We expect to grant additional stock options to the directors in 2002
under the Company's 2001 Stock Option Plan.
(7) Of this amount (i) 2,614,513 shares are owned by Mr. Jackson, (ii)
10,000 shares are beneficially owned through his spouse, (iii) 18,435 shares are
beneficially owned through a family foundation, (iv) 970 shares are beneficially
owned by Mr. Jackson through four separate trusts for his minor children
pursuant to the Uniform Minors Trust Act, (v) 400 shares are beneficially owned
by Gregory Development, Inc., a real estate holding company which is controlled
by Mr. Jackson, (vi) 18,350 shares are owned jointly with three daughters, and
(vii) 70,501 shares and 70,729 shares are beneficially owned through two
separate warrants with exercise prices of $13.20 and $8.32 per share,
respectively, which were issued as a dividend by Creative Host to the foregoing
persons and entities.

DESCRIPTION OF SECURITIES

The following description of the Company's securities is qualified in its
entirety by reference to the Company's Articles of Incorporation and Bylaws,
which may be obtained on request from the Company.

The Company is authorized to issue up to 20,000,000 shares of Common Stock,
no par value and 2,000,000 shares of preferred stock.

COMMON STOCK. Each holder of Common Stock of the Company is entitled to
one vote for each share held of record. There is no right to cumulative voting
in the election of directors. The shares of Common Stock are not entitled to
pre-emptive rights and are not subject to redemption or assessment. Each share
of Common Stock is entitled to share ratably in distributions to shareholders
and to receive ratably such dividends as may be declared by the Board of
Directors out of funds legally available therefor. Upon liquidation,
dissolution or winding up of the Company, the holders of Common Stock are
entitled to receive, pro rata, the assets of the Company which are legally
available for distribution to shareholders, subject to the rights and
preferences of outstanding preferred stock.

PREFERRED STOCK. The preferred stock of the Company can be issued in one
or more series as may be determined from time to time by the Board of Directors
without further stockholder approval. In establishing a series the Board of
Directors shall give to it a distinctive designation so as to distinguish it
from the shares of all other series and classes, shall fix the number of shares
in such series, and the preferences, rights and restrictions thereof. All
shares of any one series shall be alike in every particular. There have been no
series of Preferred Stock established and there are no shares of preferred stock
issued or outstanding.

REPORTS TO SHAREHOLDERS.

The Company intends to furnish periodic reports and/or newsletters to
shareholders which may include unaudited financial statements.

TRANSFER AGENT

The transfer agent for our common stock is ComputerShare Trust Company,
12039 W. Alameda Parkway, Suite Z-2, Lakewood, Colorado 80228.

LEGAL MATTERS

The validity of the securities offered hereby will be passed upon for
Creative Host Services by Cutler Law Group, Newport Beach, California. Cutler
Law Group is presently the beneficial owner of an aggregate of 49,000 shares of
our common stock.

AVAILABLE INFORMATION

This prospectus is part of a registration statement on Form SB-2 which has
been filed by us with the Securities and Exchange Commission under the
Securities Act of 1933, as amended, relating to the securities offered by this
prospectus. This prospectus does not contain all of the information set forth in
the registration statement, certain parts of which are omitted in accordance
with the rules and regulations of the commission. For further information, you
may read the registration statement. Statements made in this prospectus as to
the contents of any contract, agreement or other document referred to in this
prospectus are not necessarily complete. With respect to each such contract,
agreement or other document filed as an exhibit to the registration statement,
you may read the exhibit for a more complete description of the matter involved,
and each such statement shall be deemed qualified in its entirety by such
reference.

We are subject to the informational reporting requirements of the
Securities Exchange Act of 1934, as amended, and in accordance with the Exchange
Act we file reports, proxy and information statements and other information with
the commission. Such reports, proxy and information statements and other
information, as well as the registration statement and exhibits of which this
prospectus is a part, filed by us may be inspected and copied at the public
reference facilities of the commission, Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, DC 20549. You may obtain copies of such material from
the commission by mail at prescribed rates. You should direct your requests to
the commission's public reference section, Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, DC 20549. The commission maintains a web site that
contains reports, proxies, and information statements regarding registrants that
file electronically with the commission. The address of the web site is
http://www.sec.gov. Our common stock is traded on the Nasdaq Small Cap Market.
Reports and other information concerning us can also be obtained at the offices
of the National Association of Security Dealers, Inc., Market Listing Section,
1735 K Street, N.W., Washington, D.C., 20006.

EXPERTS

The financial statements included in this prospectus for Creative Host
Services for the fiscal years ended December 31, 2000 and December 31, 2001 have
been audited by Stonefield Josephson, independent certified public accountants,
as set forth in their report appearing with the financial statements, and have
been so included in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.

Effective May 17, 2002, the Company dismissed its prior auditors Stonefield
Josephson, Inc. The former accountant's reports on the Company's financial
statements during its past two fiscal years did not contain any adverse opinion
or disclaimer of opinion, nor were they qualified or modified as to uncertainty,
audit scope or accounting principles. During the Company's two most recent
fiscal years and through the date hereof, the Company did not have any

disagreements with the former accountant on any matter of accounting principles
or practices, financial statement disclosure, or auditing scope or procedure
which, if not resolved to the former accountant's satisfaction, would have
caused it to make reference to the subject matter of the disagreement in
connection with its reports. The decision to change accountants was recommended
and approved by the Company's Board of Directors.

On May 17, 2002, the Company engaged Deloitte & Touche LLP as its new
independent auditors. Deloitte & Touche LLP will audit the Company's financial
statements for the fiscal year ending December 31, 2002.

CREATIVE HOST SERVICES, INC. AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2001 AND 2000

CONTENTS

Page
----

INDEPENDENT AUDITORS' REPORT F-1

CONSOLIDATED FINANCIAL STATEMENTS:
Consolidated Balance Sheet F-2
Consolidated Statements of Operations F-3
Consolidated Statements of Shareholders' Equity F-4-F-5
Consolidated Statements of Cash Flows F-6-F-7
Notes to Consolidated Financial Statements F-8-F-20

F-1

INDEPENDENT AUDITORS' REPORT

Board of Directors
Creative Host Services, Inc. and Subsidiaries
San Diego, California

We have audited the accompanying consolidated balance sheet of Creative Host
Services, Inc. and Subsidiaries as of December 31, 2001, and the related
consolidated statements of operations, shareholders' equity and cash flows for
each of the years ended December 31, 2001 and 2000. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit.

We conducted our audit 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Creative Host
Services, Inc. and Subsidiaries at December 31, 2001, and the results of its
operations and cash flows for the years ended December 31, 2001 and 2000, in
conformity with accounting principles generally accepted in the United States of
America.

/s/ Stonefield Josephson, Inc.
CERTIFIED PUBLIC ACCOUNTANTS

Santa Monica, California
March 15, 2002

F-2

CREATIVE HOST SERVICES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET - DECEMBER 31, 2001

ASSETS
CURRENT ASSETS:
Cash. . . . . . . . . . . . . . . . . . . . . . . . . $ 1,801,288
Receivables, net of allowance of $33,985. . . . . . . 533,137
Inventory . . . . . . . . . . . . . . . . . . . . . . 451,734
Prepaid expenses and other current assets . . . . . . 311,848
------------

Total current assets. . . . . . . . . . . . . $ 3,098,007

PROPERTY AND EQUIPMENT, net of accumulated
depreciation and amortization . . . . . . . . . . . . 15,892,732

OTHER ASSETS:
Deposits. . . . . . . . . . . . . . . . . . . . . . . 295,261
Goodwill, net . . . . . . . . . . . . . . . . . . . . 4,272,119
Other assets. . . . . . . . . . . . . . . . . . . . . 103,581
------------

Total other assets. . . . . . . . . . . . . . 4,670,961
------------

$23,661,700
============

LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses . . . . . . . . $ 1,874,778
Current maturities of notes payable . . . . . . . . . 603,972
Current maturities of leases payable. . . . . . . . . 916,302
Income taxes payable. . . . . . . . . . . . . . . . . 63,017
------------

Total current liabilities . . . . . . . . . . $ 3,458,069

LINE OF CREDIT. . . . . . . . . . . . . . . . . . . . . 1,779,888

NOTES PAYABLE, less current maturities. . . . . . . . . 757,027

LEASES PAYABLE, less current maturities . . . . . . . . 1,429,217
------------

Total Liabilities . . . . . . . . . . . . . . 7,424,201

REDEEMABLE COMMON STOCK . . . . . . . . . . . . . . . . 214,997

SHAREHOLDERS' EQUITY:
Common stock; no par value, 20,000,000 shares
authorized, 7,806,018 shares issued and outstanding 16,912,900
Additional paid-in capital. . . . . . . . . . . . . . 879,111
Accumulated deficit . . . . . . . . . . . . . . . . . (1,769,509)
------------

Total shareholders' equity. . . . . . . . . . 16,022,502
------------

$23,661,700
============

See accompanying independent auditors' report and notes to consolidated
financial statements.

F-3

CREATIVE HOST SERVICES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

Year ended Year ended
December 31, 2001 December 31, 2000
------------------- -------------------
REVENUES:
Concessions . . . . . . . . . . . . . . . . . . . . . . . $ 30,646,435 $ 23,506,452
Food preparation center sales . . . . . . . . . . . . . . 5,620 171,463
Franchise royalties . . . . . . . . . . . . . . . . . . . 40,639 47,944
Other . . . . . . . . . . . . . . . . . . . . . . . . . . 53,157 -
------------------- -------------------

Total revenues. . . . . . . . . . . . . . . . . . 30,745,851 23,725,859
------------------- -------------------

OPERATING COSTS AND EXPENSES:
Cost of goods sold. . . . . . . . . . . . . . . . . . . . 8,716,551 7,368,000
Payroll and other employee benefits . . . . . . . . . . . 9,746,338 7,575,967
Occupancy . . . . . . . . . . . . . . . . . . . . . . . . 4,768,824 3,563,886
Selling expenses. . . . . . . . . . . . . . . . . . . . . 2,772,040 1,867,614
General and administrative. . . . . . . . . . . . . . . . 1,428,234 1,193,264
Depreciation and amortization . . . . . . . . . . . . . . 2,085,262 1,327,270
------------------- -------------------

Total operating costs and expenses. . . . . . . . 29,517,249 22,896,001
------------------- -------------------

INCOME FROM OPERATIONS. . . . . . . . . . . . . . . . . . . 1,228,602 829,858
------------------- -------------------

OTHER EXPENSES:
Loss on sale of assets. . . . . . . . . . . . . . . . . . 130,725 -
Interest expense. . . . . . . . . . . . . . . . . . . . . 661,630 529,965
Interest charge related to beneficial conversion feature. - 352,941
------------------- -------------------

Total other expense . . . . . . . . . . . . . . . . . . . 792,355 882,906

INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES . . . . . . 436,247 (53,048)

PROVISION FOR INCOME TAXES, current . . . . . . . . . . . . 98,300 20,280
INCOME TAX BENEFIT, deferred. . . . . . . . . . . . . . . . (120,053) (5,000)
------------------- -------------------

INCOME (LOSS) BEFORE EXTRAORDINARY ITEM . . . . . . . . . . 458,000 (68,328)
------------------- ===================

EXTRAORDINARY ITEM:
Gain on extinguishment of convertible debt - net. . . . . (128,261) -
------------------- -------------------
NET INCOME (LOSS) . . . . . . . . . . . . . . . . . . . . . $ 586,261 $ (68,328)
=================== ===================

NET INCOME (LOSS) PER SHARE -
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM . . . . . . . . . 0.06 (0.01)
------------------- ===================
EXTRAORDINARY ITEM. . . . . . . . . . . . . . . . . . . . 0.02 -
------------------- -------------------
Net Income (loss), basic and diluted. . . . . . . . . . . $ 0.08 $ (0.01)
=================== ===================

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING -
basic and diluted . . . . . . . . . . . . . . . . . . . . 7,386,478 5,887,953
=================== ===================

See accompanying independent auditors' report and notes to consolidated
financial statements.

F-4

CREATIVE HOST SERVICES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

Additional Total
Common stock paid-in Accumulated shareholders'
Shares Amount capital deficit equity
------------- ------------ ------------- --------------- -----------

Balance at January 1, 2000. . . . . . . 4,369,887 $ 7,769,665 $ 922,472 $ (2,287,442) $ 6,404,695

Warrants exercised in exchange
for common stock. . . . . . . . . . . . 812,571 2,717,323 2,717,323

Conversion of convertible debt. . . . . 573,857 1,478,348 1,478,348

Net proceeds from issuance
of common stock . . . . . . . . . . . . 597,700 3,493,409 3,493,409

Stock options exercised in exchange
for common stock. . . . . . . . . . . . 70,500 114,600 114,600

Common stock issued for services. . . . 20,000 133,750 133,750

Issuance of warrants in connection
with financing. . . . . . . . . . . . . 450,450 450,450

Issuance of warrants in connection with
settlement agreement. . . . . . . . . 10,250 10,250

Intrinsic value of beneficial
conversion feature
issued in connection with financing . . 352,941 352,941

Net loss for the year ended
December 31, 2000 . . . . . . . . . . (68,328) (68,328)

Balance at December 31, 2000. . . . . . 6,444,515 15,707,095 1,736,113 (2,355,770) 15,087,438
------------- ------------ ------------- --------------- -----------

(Continued)

See accompanying independent auditors' report and notes to consolidated
financial statements.

F-5

CREATIVE HOST SERVICES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (CONTINUED)

Additional Total
Common stock paid-in Accumulated shareholders'
Shares Amount capital deficit equity
------------- ------------ ------------- --------------- -----------

Conversion of convertible debt. . . . . 1,345,003 1,193,642 1,193,642

Common stock issued
for services. . . . . . . . . . . . . . 39,000 38,030 38,030

Retire discount on debt
converted to common stock . . . . . . . (179,753) (179,753)

Retire balance of beneficial
conversion feature
issued in connection with financing . . (677,249) (677,249)

Purchase common stock on open market. . (22,500) (25,867) (25,867)

Net income for the year
ended December 31, 2001 . . . . . . . . 586,261 586,261
------------- ------------ ------------- --------------- -----------

Balance at December 31, 2001. . . . . . 7,806,018 $16,912,900 $ 879,111 $ (1,769,509) $16,022,502
============= ============ ============= =============== ===========

See accompanying independent auditors' report and notes to consolidated
financial statements.

F-6

CREATIVE HOST SERVICES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

Year ended Year ended
December 31, 2001 December 31, 2000
------------------- -------------------
CASH FLOWS PROVIDED BY
OPERATING ACTIVITIES:
Net income (loss) . . . . . . . . . . . $ 586,261 $ (68,328)
------------------- -------------------

ADJUSTMENTS TO RECONCILE NET INCOME
(LOSS) TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
Depreciation and amortization . . . 2,085,262 1,327,270
Provision for bad debts . . . . . . (17,589) 12,608
Amortization of debenture discount. 101,056 38,806
Loss on sale of assets. . . . . . . 130,725 -
Gain on extinguishment of debt. . . (128,261) -
Intrinsic value of beneficial
conversion feature. . . . . . . . - 352,941
Income tax benefit - deferred . . . - (5,000)
Value of warrants issued in
connection with
settlement agreement. . . . . . . - 10,250

CHANGES IN ASSETS
AND LIABILITIES:
(INCREASE) DECREASE IN ASSETS:
Accounts receivable . . . . . . . . 131,428 (75,428)
Inventory . . . . . . . . . . . . . 13,747 (108,011)
Prepaid expenses and
other current assets. . . . . . . (122,348) (116,763)
Deposits and other assets . . . . . (87,076) (281,013)

INCREASE (DECREASE) IN LIABILITIES:
Accounts payable and
accrued expenses. . . . . . . . . (636,237) 874,024
Deferred taxes. . . . . . . . . . . (97,940) -
Income taxes payable. . . . . . . . (45,474) 108,491
------------------- -------------------

Total adjustments . . . . . . . 1,327,293 2,138,175
------------------- -------------------

Net cash provided by
operating activities. . . . . 1,913,554 2,069,847
------------------- -------------------

CASH FLOWS PROVIDED BY (USED FOR)
INVESTING ACTIVITIES:
Property and equipment. . . . . . . . . (2,143,486) (4,481,546)
Construction in progress. . . . . . . . (528,460) -
Excess of purchase price over
fair market value of assets . . . . . - (3,370,722)
Proceeds from sale of assets. . . . . . 364,362 -
------------------- -------------------

Net cash used for
investing activities. . . . . (2,307,584) (7,852,268)
------------------- -------------------

CASH FLOWS PROVIDED BY (USED FOR)
FINANCING ACTIVITIES:
Proceeds from notes payable . . . . . . 1,268,000 1,992,362
Proceeds from (payments on)
line of credit, net. . . . . . . . . . 1,779,888 (56,664)
Issuance of capital stock . . . . . . . (272,468) 6,387,332
Redeem common stock . . . . . . . . . . (153,985) -
Repayment on notes payable. . . . . . . (1,220,250) (143,847)
Repayment on leases payable . . . . . . (918,922) (873,730)
------------------- -------------------

Net cash provided by
financing activities. . . . . . . . . . 482,263 7,305,453
------------------- -------------------

NET INCREASE IN CASH. . . . . . . . . . . 88,233 1,523,032
CASH, beginning of year . . . . . . . . . 1,713,055 190,023
------------------- -------------------

CASH, end of year . . . . . . . . . . . . $ 1,801,288 $ 1,713,055
=================== ===================

(Continued)

See accompanying independent auditors' report and notes to consolidated
financial statements.

F-7

CREATIVE HOST SERVICES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

Year ended Year ended
December 31, 2001 December 31, 2000
------------------- -------------------

SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION:
Interest paid . . . . . . . . . . . . . $ 560,574 $ 557,811
=================== ===================
Income taxes paid . . . . . . . . . . . $ 99,155 $ 5,845
=================== ===================

SUPPLEMENTAL DISCLOSURE OF NON-CASH
INVESTING AND FINANCING ACTIVITIES:
Notes payable and accrued interest
converted to common stock . . . . . . $ 1,193,565 $ 1,505,000
=================== ===================
Intrinsic value of warrants
issued with common stock. . . . . . . $ - $ 647,444
=================== ===================
Common stock issued in
exchange for outstanding
stock of GladCo Enterprises, Inc. . . $ - $ 500,000
=================== ===================
Equipment acquired and financed
by a capital lease. . . . . . . . . . $ 47,473 $ 252,142
=================== ===================
Equipment acquired and financed
by a note . . . . . . . . . . . . . . $ 12,223 $ -
=================== ===================
Deferred tax liability arising
from business combination . . . . . . $ - $ 200,000
=================== ===================
Common stock issued in
exchange for services . . . . . . . . $ 38,030 $ 133,750
=================== ===================
Common stock redeemed
by issuing notes. . . . . . . . . . . $ 142,501 $ -
=================== ===================
Notes issued in settlement
of a contingent liability . . . . . . $ 105,000 $ -
=================== ===================

See accompanying independent auditors' report and notes to consolidated
financial statements.

F-8

CREATIVE HOST SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2001 AND 2000

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

ORGANIZATION AND BASIS OF PRESENTATION:

Creative Host Services, Inc. (the "Company") was formed in 1986 to acquire the
operating assets of Creative Croissants, Inc., which consisted of a food
preparation center in San Diego and two French-style cafes featuring hot meal
croissants, muffins, pastas and salads. The cafes were acquired in May 1987 and
the food preparation center was acquired in April 1988 in transactions accounted
for using the purchase method of accounting. In 1989, the Company commenced
franchising operations, licensing its trademarks to third parties, who agreed to
purchase baked goods from the Company's food preparation center under franchise
arrangements with the Company, and earned an initial franchise fee, a royalty
based upon sales, and in some cases advertising and marketing fees as a
percentage of gross sales. In 1990 the Company entered into the captive audience
market at airports with its first franchisee-operated concession at the John
Wayne International Airport in Orange County, California. In 1994, the Company
began operating company owned food and beverage concessions at airports and
commenced certain in-flight catering sales. The accompanying financial
statements include the operations of Company-owned concessions (mainly at
various airports across the United States), revenues earned from franchisees and
operations from its wholesale food preparation activities.

Effective October 9, 2000, the Company acquired 100% of the outstanding stock of
GladCo Enterprises, Inc., a Pennsylvania corporation, the outstanding shares of
HLG Acquisition Corporation, a Pennsylvania corporation and the outstanding
limited partnership interest in HLG Franchise Marketing Company for $7.3
million.

PRINCIPLES OF CONSOLIDATION:

The accompanying consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries, GladCo Enterprises, Inc, HLG
Acquisition Corporation and HLG Franchise Marketing Company. All material
intercompany accounts have been eliminated in consolidation.

REVENUE RECOGNITION:

Concession revenues are recorded as the sales are made; sales from the food
preparation center are recorded upon shipment and revenues from in-flight
catering are recorded upon delivery. Revenues from the initial sale of
individual franchises are recognized, net of an allowance for uncollectible
amounts and any commissions to outside brokers, when substantially all
significant services to be provided by the Company have been performed.

USE OF ESTIMATES:

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

See accompanying independent auditors' report.

F-9

CREATIVE HOST SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 2001 AND 2000

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:

FAIR VALUE:

Unless otherwise indicated, the fair values of all reported assets and
liabilities which represent financial instruments (none of which are held for
trading purposes) approximate the carrying values of such amounts.

INVENTORY:

Inventory, consisting principally of foodstuffs and supplies, is valued at the
lower of cost (first-in, first-out) or market.

PROPERTY AND EQUIPMENT:

Property and equipment are recorded at cost, including interest on funds to
finance the construction of concession locations. Such interest amounted to
approximately $23,000 during 2000. For financial statement purposes,
depreciation is computed primarily by the straight-line method over the
estimated useful lives of the assets, as follows:

Office equipment 10 years
Restaurant concession and commissary equipment 10 years

Leasehold improvements are amortized over the useful lives of the improvements,
or terms of the leases, whichever is shorter.

GOODWILL:

In connection with its acquisition of GladCo Enterprises, Inc., which was
accounted for under the purchase method of accounting, the Company recorded
goodwill. The goodwill was amortized through December 31, 2001 using the
straight-line method over the estimated useful life of twenty years. The
Company will continually evaluate the existence of goodwill impairment in
accordance with the provisions of SFAS 121, "Accounting for the Impairment of
Long-Lived Assets and Long-Lived Assets to be Disposed of".

DEBT WITH STOCK PURCHASE WARRANTS:

The proceeds received from debt issued with stock purchase warrants is allocated
between the debt and the warrants, based upon the relative fair values of the
two securities valued using the Black-Scholes method. The value of the warrants
results in a debt discount which is included in additional paid-in capital and
is amortized to expense over the term of the debt instrument, using the interest
method. In the event of settlement of such debt in advance of the maturity
date, an expense is recognized based upon the difference between the then
carrying amount of the debt (i.e., face amount less unamortized discount) and
amount of payment.

See accompanying independent auditors' report.

F-10

CREATIVE HOST SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 2001 AND 2000

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:

INCOME TAXES:

Deferred income taxes are reported using the liability method. Deferred tax
assets are recognized for deductible temporary differences and deferred tax
liabilities are recognized for taxable temporary differences. Temporary
differences are the differences between the reported amounts of assets and
liabilities and their tax bases. Deferred tax assets are reduced by a valuation
allowance when, in the opinion of management, it is more likely than not that
some portion or all of the deferred tax assets will not be realized. Deferred
tax assets and liabilities are adjusted for the effects of changes in tax laws
and rates on the date of enactment.

EARNINGS PER SHARE:

Earnings per share was computed based upon the weighted average number of shares
of common stock outstanding during each period. Diluted earnings per share
reflect per share amounts that would have resulted if diluted potential common
stock had been converted to common stock. Common stock equivalents, which
consist of 402,000 and 218,500 shares of options and 698,982 shares of warrants,
have not been included in the earnings per share computation for the years ended
December 31, 2001 and 2000, respectively, as the amounts are anti-dilutive.

CASH:

Equivalents
- -----------

For purposes of the statement of cash flows, cash equivalents include all highly
liquid debt instruments with original maturities of three months or less which
are not securing any corporate obligations.

Concentration
- -------------

The Company maintains its cash in bank deposit accounts, which at times may
exceed federally insured limits. The Company has not experienced any losses in
such accounts.

COMPREHENSIVE INCOME AND LOSS:

SFAS No. 130, "Reporting Comprehensive Income," establishes standards for the
reporting and display of comprehensive income and its components in the
financial statements. As of December 31, 2001 and 2000, the Company has no
items that represent other comprehensive income and, therefore, has not included
a schedule of comprehensive income in the financial statements.

See accompanying independent auditors' report.

F-11

CREATIVE HOST SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 2001 AND 2000

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:

CONCENTRATION OF CREDIT RISK:

The Company provides in-flight catering to various airlines throughout the
United States primarily through its own concession operations and does not
require collateral. Over 90% of the Company's sales are on a cash basis. One
location accounts for more than 10% of the Company's revenues. Allowances have
been provided for uncollectible amounts, which have historically been within
management's expectations.

NEW ACCOUNTING PRONOUNCEMENTS:

In January 2001, the FASB Emerging Issues Task Force issued EITF 00-27 effective
for convertible debt instruments issued after November 16, 2000. This
pronouncement requires the use of the intrinsic value method for recognition of
the detachable and imbedded equity features included with indebtedness, and
requires amortization of the amount associated with the convertibility feature
over the life of the debt instrument rather than the period for which the
instrument first becomes convertible. Inasmuch as all debt instruments were
entered into prior to November 16, 2000 and all of the debt discount relating to
the beneficial conversion feature was previously recognized in 2000 as expense
in accordance with EITF 98-5, there was no impact on these financial statements.
This EITF 00-27, could impact future financial statements, should the Company
enter into such agreements.

In July 2001, the FASB issued SFAS No. 141 "Business Combinations." SFAS No.
141 supersedes Accounting Principals Boards ("APB") No. 16 and requires that any
business combinations initiated after June 30, 2001 be accounted for as a
purchase, therefore, eliminating the pooling-of-interest method defined in APB
16. The statement is effective for any business combination initiated after
June 30, 2001, and shall apply to all business combinations accounted for by the
purchase method for which the date of acquisition is July 1, 2001 or later. The
adoption of this pronouncement did not affect the Company's financial position
or results of operations since the Company has not participated in such
activities covered under this pronouncement.

In July 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangibles."
SFAS No. 142 addresses the initial recognition, measurement and amortization of
intangible assets acquired individually or with a group of other assets (but not
those acquired in a business combination), and addresses the amortization
provisions for excess cost over fair value of net assets acquired or intangibles
acquired in a business combination. The statement is effective for fiscal years
beginning after December 15, 2001, and is effective July 1, 2001 for any
intangibles acquired in a business combination initiated after June 30, 2001.
After adoption of this pronouncement the Company will no longer amortize
goodwill (approximately $227,000 during the year ended December 31, 2001), but
instead will test goodwill for impairment at least annually.

See accompanying independent auditors' report.

F-12

CREATIVE HOST SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 2001 AND 2000

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:

In October 2001, the FASB recently issued SFAS No. 143, "Accounting for Asset
Retirement Obligations," which requires companies to record the fair value of a
liability for asset retirement obligations in the period in which they are
incurred. The statement applies to a company's legal obligations associated
with the retirement of a tangible long-lived asset that results from the
acquisition, construction, and development or through the normal operation of a
long-lived asset. When a liability is initially recorded, the company would
capitalize the cost, thereby increasing the carrying amount of the related
asset. The capitalized asset retirement cost is depreciated over the life of
the respective asset while the liability is accreted to its present value. Upon
settlement of the liability, the obligation is settled at its recorded amount or
the company incurs a gain or loss. The statement is effective for fiscal years
beginning after June 30, 2002. The Company does not expect the adoption to have
a material impact to the Company's financial position or results of operations.

In October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets." Statement 144 addresses the accounting and
reporting for the impairment or disposal of long-lived assets. The statement
provides a single accounting model for long-lived assets to be disposed of. New
criteria must be met to classify the asset as an asset held-for-sale. This
statement also focuses on reporting the effects of a disposal of a segment of a
business. This statement is effective for fiscal years beginning after December
15, 2001. The Company does not expect the adoption to have a material impact on
the Company's financial position or results of operations.

(2) PROPERTY AND EQUIPMENT:

A summary at December 31, 2000 is as follows:

Food and beverage concession equipment $ 16,209,560
Leasehold improvements 3,881,472
Office equipment 189,779
Construction in progress 362,490
-----------

20,643,301
Less accumulated depreciation and amortization 4,750,569
---------

$ 15,892,732
==========

Depreciation and amortization expense totaled $1,799,519 and $1,279,667 for the
years ended December 31, 2001 and 2000, respectively.

See accompanying independent auditors' report.

F-13

CREATIVE HOST SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 2001 AND 2000

(3) OTHER ASSETS:

Goodwill
--------

Goodwill, arising from the acquisition of GladCo. Enterprises, Inc., is being
amortized over 20 years. A summary at December 31, 2001 is as follows:

Goodwill $ 4,547,210
Less accumulated amortization 275,091
-------

$ 4,272,119
=========

Amortization expense amounted to $219,174 and $55,917 for the years ended
December 31, 2001 and 2000, respectively.

Other
-----

A summary at December 31, 2001 is as follows:

Franchise costs $ 335,909
Loan fees 72,218
Other 28,278
------

436,405
Less accumulated amortization 332,824
-------

103,581
=======

Amortization expense amounted to $66,569 and $18,686 for the years ended
December 31, 2001 and 2000, respectively.

(4) ACCOUNTS PAYABLE AND ACCRUED EXPENSES:

Purchases from one supplier amounted to approximately $4,418,000 for the year
ended December 31, 2001. Approximately $231,500 of the accounts payable was due
to this supplier at December 31, 2001.

See accompanying independent auditors' report.

F-14

CREATIVE HOST SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 2001 AND 2000

(5) NOTES PAYABLE:

A summary is as follows:

Note payable to a bank, interest at 9% per annum,
due July 2004 . . . . . . . . . . . . . . . . . . . . . . . . 1,033,333
Notes payable to former shareholders, interest at 9% per annum,
due in monthly installments of $8,493 through December 2002 . 97,114
Notes payable to former shareholders, interest at 9% per annum,
due in monthly installments of $4,797 through December 2003 . 105,000
Note payable to a finance company, interest at 13.1% per annum,
due in monthly installments of $1,264 through April 2004. . . 8,923
Note payable to a finance company, interest at 11.1% per annum,
due in monthly installments of $7,909 through May 2002. . . . 38,472
Note payable to a corporation, interest at 8% per annum,
due in monthly installments of $1,784 through May 2006 . . . . 78,157
-------

1,360,999
Less current maturities . . . . . . . . . . . . . . . . . . . . 603,972
------------

$ 757,027
============

The following is a summary of the principal amounts payable over the next
five years and thereafter:

2002 $ 603,972
2003 476,181
2004 253,252
2005 19,833
2006 7,761
--------

$ 1,360,999
=========

See accompanying independent auditors' report.

F-15

CREATIVE HOST SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 2001 AND 2000

(5) NOTES PAYABLE, CONTINUED:

Convertible Debentures
-----------------------

In September 2000, the Company entered into a purchase agreement with an
investment company to issue a total of $2,500,000 convertible debentures with
interest at 7% per annum at a 5% discount rate and a warrant to purchase 125,000
shares of the Company's common stock at an exercise price of $6.86 per share.
In September 2000, the Company issued $2,000,000 of the convertible debenture at
a 5% discount rate, or $100,000, and the warrant. A payment of interest only is
payable on the last day of each quarter starting December 31, 2000. The
remaining principal balance of the debenture is payable in full in September
2003. The debentures are convertible at the option of the holder at any time
after October 26, 2000 at the lesser of $7.70 per share or 85% of the average of
the 5 lowest volume weighted average sales prices of the common stock during the
past 25 trading days immediately preceding the notice of conversion. The
intrinsic value of the beneficial conversion feature totaled $352,941 and has
been charged to interest expense pursuant to EITF 98-5. The debenture is
collateralized by substantially all assets of the Company. The fair value of
the associated warrant was determined based on the Black-Scholes pricing method.
The value of the warrant totaled $450,450 and was included in paid-in capital at
December 31, 2000. The debenture, net of discounts totaling $550,450, has an
effective interest rate of 30.2%. The discount is being amortized to interest
expense over the life of the debenture using the interest rate method.

During the year ended December 31, 2001, $1,193,642 of the outstanding
debenture, including related interest was converted to 1,345,003 shares of
common stock at an average rate of $0.89 per share.

In August 2001, the Company paid-off the remaining balance of $941,915, for
$1,200,000 cash, including principal and interest, of the convertible debenture,
before its expiration date, with cash obtained through bank financing. On the
date of retirement, the intrinsic value of shares into which the debt was
convertible was $1,619,163, of which $677,249 related to the beneficial
conversion feature. The extinguishment of this debt gave rise to a gain of
$419,163 which is presented net of related interest and discounting of the
original note, giving rise to a net gain of $128,261 for the year ended December
31, 2001.

The Company does not expect to issue the remaining $500,000 of convertible
debentures under the purchase agreement.

(6) LINE OF CREDIT:

The Company has a $2,500,000 revolving line of credit with a bank expiring
October 31, 2003. The line incurs an interest rate of 0.25% under the bank's
reference rate. The line is collateralized by inventory, furniture, equipment
and intangible property. $1,779,887 was due the bank on the line at December
31, 2001. The Company must maintain the following covenants:

Debt to worth .85 : 1.0
Current ratio .9 : 1.0
Debt coverage ratio 1.7 : 1.0 to June 30, 2002
1.8 : 1.0 to December 31, 2002
2.0 : 1.0 thereafter
Capital expenditures limit $5,000,000 per year
Acquisition limit $5,000,000 per year

See accompanying independent auditors' report.

F-16

CREATIVE HOST SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 2001 AND 2000

(7) LEASES PAYABLE:

Equipment leases payable to a finance company with an approximate average
interest at 14.3%, are due in monthly installments through the year 2006, and
are secured by food and beverage concession equipment.

The following is a summary of the principal amounts payable over the next five
years:

2002 $ 1,164,525
2003 980,449
2004 588,424
2005 14,134
2006 3,036
---------

Total minimum lease payments 2,750,568
Less amount representing interest 405,049
----------

Present value of net minimum
lease payments 2,345,519
Less current maturities 916,302
---------

$ 1,429,217
=========

(8) INCOME TAXES:

For federal income tax return purposes, the Company has available net operating
loss carryforwards of approximately $850,000, which expire through 2019 and are
available to offset future income tax liabilities. Due to the completion of the
Company's initial public offering, there are significant limitations on the
Company's ability to utilize this operating loss carryforward.

Temporary differences which give rise to deferred tax assets and liabilities at
December 31, 2001 and 2000 are as follows:

2001 2002
---------- ----------
Current deferred tax asset (liability) arising from:
Net operating loss carryforward. . . . . . . . . . . $ 289,900 $ 822,800
Accrued vacation . . . . . . . . . . . . . . . . . . 27,200 -
State income taxes . . . . . . . . . . . . . . . . . 26,600 -
Allowance for doubtful accounts. . . . . . . . . . . 14,600 -
AMT credit . . . . . . . . . . . . . . . . . . . . . 20,000 -
Insurance claim receivable . . . . . . . . . . . . . (81,500) -
---------- ----------

296,800 822,800
Less valuation allowance . . . . . . . . . . . . . . . (296,800) (822,800)

$ - $ -
========== ==========

Long-term deferred tax asset (liability) arising from:
Depreciation and amortization. . . . . . . . . . . . $ 845,800 $ 97,060
Non-taxable business combination . . . . . . . . . . (195,000) (200,000)
---------- ----------

650,800 (102,940)
Amortization of deferred tax . . . . . . . . . . . . 20,000 5,000
---------- ----------

670,800 (97,940)
Less valuation allowance . . . . . . . . . . . . . . . (670,800) -
---------- ----------

$ - $ (97,940)
========== ==========

See accompanying independent auditors' report.

F-17

CREATIVE HOST SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 2001 AND 2000

(8) INCOME TAXES, CONTINUED:

Reconciliation of the Federal income tax expense (benefit) to the statutory rate
is as follows.

Federal income tax expense (benefit)
at statutory rate . . . . . . . . . . $ 191,933 $(18,036)
Amortization of goodwill not deductible
for income tax purposes . . . . . . . 77,303 20,216
----------- --------

State income taxes. . . . . . . . . . . 98,300 20,280
Net operating loss carryforward . . . . (194,289) -
----------- --------

Less valuation allowance. . . . . . . . (195,000) (5,000)
----------- --------

$ (21,753) $ 15,280
=========== ========

(9) COMMITMENTS AND CONTINGENCIES:

Leases
- ------
The Company leases its office facility and concession locations under various
lease agreements expiring through 2010. Rental expense under operating leases
totaled $4,523,047 and $3,577,693 for 2001 and 2000, respectively. As of
December 31, 2001, future minimum rental payments required under operating
leases, exclusive of additional rental payments based on concession sales and
number of enplanements, are as follows:

Year ending December 31,
2002 $ 5,431,550
2003 5,479,477
2004 5,238,386
2005 4,941,672
2006 4,113,821
Thereafter 6,666,851
---------

$ 31,871,757
==========

In connection with the concessionaire agreements with various airport
authorities, the Company has obtained surety bond coverage for the guarantee of
lease payments in the event of non-performance under the agreements, in the
aggregate amount of approximately $425,000. The insurer may seek
indemnification from the Company for any amounts paid under these bonds.

Capital Improvements
- ---------------------
The Company plans to make capital improvements at two of its locations. The
cost of the capital improvements is estimated at approximately $3,500,000,
excluding capitalized interest. The construction is expected to be completed by
2002.

Employment Agreements
- ----------------------
The Company has an employment agreement with its chairman of the board providing
for total compensation of $748,000 through the year 2004. The Company also has
an employment agreement with Louis Coccoli, Jr providing for total compensation
of $562,500 through the year 2005

See accompanying independent auditors' report.

F-18

CREATIVE HOST SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 2001 AND 2000

(10) REDEEMABLE COMMON STOCK:

On October 9, 2000 the Company acquired for approximately $7.3 million all of
the outstanding stock of Gladco Enterprises, Inc., and related entities, an
operator of airport food concessions based in Pittsburgh, Pennsylvania. The
purchase consideration consisted of approximately $6.5 million cash, 69,638
shares of the Company's common stock valued at $500,000 and contingent
consideration of $280,000 which was paid during 2001. The Company agreed to
permit the sellers to elect to require the Company to repurchase these shares
when they are freely tradable at a price equal to the per share issuance price
times the number of shares repurchased. 39,694 of these shares were redeemed
for $142,502 cash and by issuing notes for $142,501 in December 2001. 29,944 of
these shares remain outstanding. Accordingly, these shares are excluded from
stockholders' equity. The contingent consideration resulted from the Company's
execution of a lease agreement for the Newark, New Jersey International Airport
within one year from the acquisition date.

(11) COMMON STOCK:

In September 2000, one purchase warrant was issued to an investment company in
connection with a convertible debenture. The warrant entitles the holder to
purchase 125,000 shares of the Company's common stock at an exercise price of
$6.86 per share. The warrants are exercisable immediately and expire in
September 2003.

In 2000, warrants to purchase 81,500 shares of stock were exercised for net
proceeds of $149,425.

In 2000, individuals exercised 229,100 warrants to purchase common stock. The
individuals exercised the warrants on a "cashless" basis and as a result were
issued 218,621 shares of the Company's common stock.

In 2000, employees and directors of the Company exercised 70,500 options to
purchase common stock at an average exercise price of $1.63. The exercises
generated proceeds totaling $114,600. In 2000, the Company commenced three
private placement offerings of 261,700, 211,000 and 125,000 shares of the
Company's common stock at a purchase price of $5.00, $7.25 and $7.00 per share,
respectively. The offerings generated proceeds, net of offering costs, totaling
$1,133,120, $1,485,289 and $875,000, respectively.

In 2001, $1,193,642 of a convertible debenture and the associated accrued
interest were converted into 1,345,003 shares of common stock. See convertible
debenture at Note (5).

(12) STOCK OPTIONS:

The Company has adopted the 1997 Stock Option Plan (the "1997 Plan"). The 1997
Plan authorizes the issuance of an additional 280,000 shares of the Company's
common stock pursuant to the exercise of options granted thereunder. The
Compensation Committee of the Board of Directors administers the Plan, selects
recipients to whom options are granted and determines the number of shares to be
awarded. Options granted under the 1997 Plan are exercisable at a price
determined by the Compensation Committee at the time of grant, but in no event
less than fair market value.

See accompanying independent auditors' report.

F-19

CREATIVE HOST SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 2001 AND 2000

(12) STOCK OPTIONS, CONTINUED:

During the year ended December 31, 2001, the Company adopted the 2001 Stock
Option Plan (the "2001 Plan"). The 2001 Plan authorized the issuance of 450,000
shares of the Company's common stock pursuant to the exercise of the options
granted thereunder. All remaining terms are the same as the 1997 Plan. The
Company granted 200,000 options under the 2001 Plan during the year.

The number and weighted average exercise prices of options granted under both
plans, for the years ended December 31, 2001 and 2000 are as follows:

2001 2000
-------- -------
Average Average
Exercise Exercise
Number Price Number Price
------- ------- ------- ------

Outstanding at beginning of the year 208,000 $ 4.31 226,500 $2.89
Exercisable at end of the year . . . 260,666 3.19 159,500 3.80
Granted during the year. . . . . . . 205,000 1.17 67,000 6.20
Exercised during the year. . . . . . - - 70,500 1.63
Expired during the year. . . . . . . 6,000 4.07 15,000 -
Outstanding at end of the year . . . 407,000 2.93 208,000 4.31

The following table summarizes information about stock options outstanding at
December 31, 2001.

Weighted
Average Weighted Weighted
Range of. . . Number Remaining Average Number Average
Exercise. . . Outstanding at Contractual Exercise Exerciseable at Exercise
Prices. . . . December 31, 2001 Life Price December 31, 2001 Price
- ------------- ----------------- ------------ --------- ------------------ ---------
0.01 - $1.00 15,000 7.79 years $ 0.93 15,000 $ .93
- ------------- ----------------- ------------ --------- ------------------ ---------
1.01 - $2.00 203,500 9.29 years $ 1.16 83,500 $ 1.16
- ------------- ----------------- ------------ --------- ------------------ ---------
2.01 - $3.00 2,500 4.04 years $ 2.13 - -
- ------------- ----------------- ------------ --------- ------------------ ---------
3.01 - $4.00 105,000 4.39 years $ 3.55 105,000 $ 3.55
- ------------- ----------------- ------------ --------- ------------------ ---------
4.01 - $5.00 20,000 2.65 years $ 4.41 16,666 $ 4.31
- ------------- ----------------- ------------ --------- ------------------ ---------
5.01 - $7.00 61,000 7.93 years $ 6.33 40,500 $ 6.33
- ------------- ----------------- ------------ --------- ------------------ ---------
407,000 7.41 years $ 2.71 260,666 $ 3.11
================= ============ ========= ================== =========

The Company has elected to follow Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" (APB 25) and related interpretations
in accounting for its employee stock options because the alternative fair value
accounting provided for under FASB Statement No. 123, "Accounting for
Stock-Based Compensation," requires use of option valuation models that were not
developed for use in valuing employee stock options. Under APB 25, because the
exercise price of the Company's employee stock options equals the market price
of the underlying stock on the date of grant, no compensation expense is
recognized.

See accompanying independent auditors' report.

F-20

CREATIVE HOST SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 2001 AND 2000

(12) STOCK OPTIONS, CONTINUED:

Proforma information regarding net income (loss) and income (loss) per share
under the fair value method is as follows:

Year ended Year ended
December 31, 2001 December 31, 2000
------------------ -------------------
Net income (loss) . . . . . . . . . . . . . . . $ 586,261 $ (68,328)

Proforma expense associated with stock options
Under SFAS123 . . . . . . . . . . . . . . 211,291 329,587
------------------ -------------------

PROFORMA NET INCOME (LOSS). . . . . . . . . . . $ 374,970 $ (397,915)
================== ===================

Net income (loss) per common share. . . . . . . $ 0.05 $ (0.07)
================== ===================

The fair value of each option is estimated on the date of grant using the
present value of the exercise price and is pro-rated on the percent of time from
the grant date to the end of the vesting period. The weighted-average fair
value of the options on the grant date was $1.17 and $6.23 per share for 2001
and 2000, respectively. The following assumptions were used for grants in 2001
and 2000: risk free interest rates ranging from 5.68% and 6.19%, respectively,
expected lives of five years; dividend yield of 0%; and expected volatility of
298.35% and 417.78%. respectively.

(13) WARRANTS:

On July 3, and October 2, 2000, the Company issued warrant dividends to its
shareholders of record at an exercise price of 110% of the closing stock price
on each of the dates. Each shareholder of record received one warrant for each
40 shares of stock owned. The Company issued 151,128 and 162,864 warrants at an
exercise price of $13.20 and $8.32 per share in July and October 2000,
respectively.

At December 31, 2000, the Company had warrants outstanding that allow the
holders to purchase up to 608,575 shares of common stock at exercise prices
ranging from $1.38 to $13.20, expiring through November 2004.

The number and weighted average exercise prices of the warrants for the years
ended December 31, 2001 and 2000 are as follows:

2001 2000
------------------ ----------------
Average Average
Exercise Exercise
Number Price Number Price
-------- ------- --------- -----

Outstanding at beginning of the year 608,575 $ 7.37 1,057,693 $3.65
Outstanding at end of the year . . . 608,575 7.37 608,575 7.37
Exercisable at end of the year . . . - - - -
Granted during the year. . . . . . . - - 438,982 9.58
Exercised during the year. . . . . . - - 823,050 3.93
Terminated during the year . . . . . - - 65,050 5.40

F-29
F-29

See accompanying independent auditors' report.

F-21

CREATIVE HOST SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 2001 AND 2000

(14) EMPLOYEE PROFIT SHARING PLAN:

The Company has a salary reduction plan under the provision of Section 401(k) of
the Internal Revenue Code. The plan covers all full-time employees who have
completed one full year of service with the Company. Participation in the plan
is voluntary. For those employees participating, up to 15% of annual
compensation may be deferred as prescribed by the Internal Revenue Code.
Company contributions to the plan are discretionary. No contributions were made
to the plan for the years ended December 31, 2001 and 2000.

(15) SUBSEQUENT EVENT:

In November 2001, the Company entered into a private placement agreement with an
entity whereby they would sell to qualified buyers and accredited investors a
minimum of 10 units with a maximum of 100 units. Each unit consists of $50,000
principal amount Series A 9% Subordinated Convertible Note due December 31, 2006
and 37,500 warrants to purchase the Company's common stock, par value of $0.001
per share, at an exercise price of $2.50 per share. Subsequent to year-end and
through March 2002, approximately $925,000, before expenses, was raised through
the sale of these units.

In January 2002, the Company sold its location in Atlantic City, New Jersey to a
related party for $250,000 cash. The $250,000 sales price represents the fair
market value of the Atlantic City, New Jersey location. No gain or loss was
recorded for this transaction as of December 31, 2001.

See accompanying independent auditors' report.

F-22

CREATIVE HOST SERVICES, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEET - MARCH 31, 2002 - UNAUDITED

ASSETS

CURRENT ASSETS:
Cash. . . . . . . . . . . . . . . . . . . . . . . . . $ 1,562,250
Receivables, net of allowance of $33,364. . . . . . . 525,494
Inventory . . . . . . . . . . . . . . . . . . . . . . 457,514
Prepaid expenses and other current assets . . . . . . 331,326
------------

Total current assets. . . . . . . . . . . . . $ 2,876,584

PROPERTY AND EQUIPMENT, net of accumulated
depreciation and amortization . . . . . . . . . . . . 15,864,466

OTHER ASSETS:
Deposits. . . . . . . . . . . . . . . . . . . . . . . 352,460
Goodwill and acquisition costs, net of
accumulated amortization. . . . . . . . . . . . . . 4,309,381
Other assets. . . . . . . . . . . . . . . . . . . . . 378,997
------------

Total other assets. . . . . . . . . . . . . . 5,040,838
------------

$23,781,888
============

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
Accounts payable and accrued expenses . . . . . . . . $ 1,696,310
Current maturities of notes payable . . . . . . . . . 562,286
Current maturities of leases payable. . . . . . . . . 886,446
Income taxes payable. . . . . . . . . . . . . . . . . 58,837
------------

Total current liabilities . . . . . . . . . . $ 3,203,879

LINE OF CREDIT. . . . . . . . . . . . . . . . . . . . . 1,215,668

NOTES PAYABLE AND OTHER, less current maturities. . . . 1,228,081

LEASES PAYABLE, less current maturities . . . . . . . . 1,363,185

REDEEMABLE COMMON STOCK . . . . . . . . . . . . . . . . 80,249

SHAREHOLDERS' EQUITY:
Common stock; no par value, 20,000,000 shares
authorized, 7,845,962 shares issued and outstanding 17,322,176
Additional paid-in capital. . . . . . . . . . . . . . 879,111
Accumulated deficit . . . . . . . . . . . . . . . . . (1,510,461)
------------

Total shareholders' equity. . . . . . . . . . 16,690,826
------------

$23,781,888
============

See accompanying notes to financial statements

F-23

CREATIVE HOST SERVICES, INC.
CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED

Three Months Ended
March 31
2002 2001
------------------- ----------
Revenues:
Concessions. . . . . . . . . . . . . . . . $ 7,609,715 $7,334,392
Food preparation center sales. . . . . . . - 5,620
Franchise royalties. . . . . . . . . . . . 18,373 9,941
Other. . . . . . . . . . . . . . . . . . . 14,370 15,000
------------------- ----------

Total revenues . . . . . . . . . . 7,642,458 7,364,953
------------------- ----------

Operating costs and expenses:
Cost of goods sold . . . . . . . . . . . . 2,040,724 2,080,605
Payroll and other employee benefits. . . . 2,332,399 2,421,347
Occupancy. . . . . . . . . . . . . . . . . 1,210,745 1,161,208
selling expenses . . . . . . . . . . . . . 797,378 625,742
General & administrative expenses. . . . . 419,050 356,645
Depreciation and Amortization. . . . . . . 508,605 509,395
------------------- ----------

Total operating costs and expenses 7,308,901 7,154,942
------------------- ----------

Income from operations . . . . . . . . . . . 333,557 210,011

Gain on sale of assets . . . . . . . . . . . (80,487) -
Interest expense, net. . . . . . . . . . . . 145,496 200,823
------------------- ----------

Net income before taxes. . . . . . . . . . . 268,548 9,188

Income taxes . . . . . . . . . . . . . . . . 9,500 -
------------------- ----------

Net Income . . . . . . . . . . . . . . . . . $ 259,048 $ 9,188
------------------- ----------

Net income per common share. . . . . . . . . $ 0.03 $ -
=================== ==========

Weighted average outstanding shares used to
calculate income per share . . . . . . . . 7,845,962 6,644,697
=================== ==========

See accompanying notes to financial statements

F-24

CREATIVE HOST SERVICES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS - UNAUDITED
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

Three Months Ended
March 31
------------------- -----------
2002 2001
------------------- -----------
Cash flows provided by (used for) operating activities:
Net income (loss) . . . . . . . . . . . . . . . . . . . . $ 259,048 $ 9,188
------------------- -----------

Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization . . . . . . . . . . . . 508,605 500,022
Bad debt expense in excess of provision . . . . . . . - 42,582
Amortization of debenture discount. . . . . . . . . . 13,893 41,168
Gain on sale of assets. . . . . . . . . . . . . . . . (80,487) -
Common stock issued for services. . . . . . . . . . . - 7,280

Changes in assets and liabilities:
(Increase) decrease in assets:
Accounts receivable . . . . . . . . . . . . . . . . . 7,643 (40,888)
Inventory . . . . . . . . . . . . . . . . . . . . . . (5,780) (32,478)
Prepaid expenses and other current assets . . . . . . (19,478) (133,933)

Increase (decrease) in liabilities:
Accounts payable and accrued expenses . . . . . . . . (74,436) (415,454)
Income taxes payable. . . . . . . . . . . . . . . . . (4,180) (49,294)
------------------- -----------

Total adjustments . . . . . . . . . . . . . . . . 345,780 (80,995)
------------------- -----------

Net cash provided by (used for) by operating
activities . . . . . . . . . . . . . . . . . 604,828 (71,807)
------------------- -----------

Cash flows used for investing activities:
Property and equipment. . . . . . . . . . . . . . . . . . (899,970) (1,145,827)
Deposits and other assets . . . . . . . . . . . . . . . . - (247,102)
Other long term liabilities . . . . . . . . . . . . . . . 62,954 -
------------------- -----------

Net cash used for investing activities. . . . . . (837,016) (1,392,929)
------------------- -----------

Cash flows provided by (used for) financing activities:
Proceeds from notes payable . . . . . . . . . . . . . . . 945,000 -
Proceeds from line of credit. . . . . . . . . . . . . . . 250,000 810,886
Conversion of notes payable . . . . . . . . . . . . . . . - (383,400)
Issuance of capital stock . . . . . . . . . . . . . . . . - 383,519
Repayment on notes payable. . . . . . . . . . . . . . . . (223,203) (7,288)
Repayment on leases payable . . . . . . . . . . . . . . . (164,427) (211,994)
Repayment on line of credit . . . . . . . . . . . . . . . (814,220) -
------------------- -----------

Net cash (used) provided by financing activities. (6,850) 591,723
------------------- -----------

Net decrease in cash. . . . . . . . . . . . . . . . . . . . (239,038) (873,013)

Cash, beginning of the period . . . . . . . . . . . . . . . 1,801,288 1,713,054
------------------- -----------

Cash, end of period . . . . . . . . . . . . . . . . . . . . $ 1,562,250 $ 840,041
=================== ===========

See accompanying notes to financial statements

F-25

CREATIVE HOST SERVICES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS - UNAUDITED
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

Three Months Ended
March 31
2002 2001
------------------- --------
Supplemental disclosure of cash flow information:
Interest paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 120,698 $200,823
=================== ========

Income taxes paid . . . . . . . . . . . . . . . . . . . . . . . . . . $ 13,680 $ -
=================== ========

Supplemental disclosure of non-cash investing and financing activities:

Equipment acquired and financed by capital leases . . . . . . . . . . $ 68,539 $ -
=================== ========

See accompanying notes to financial statements

F-26

CREATIVE HOST SERVICES, INC.

Notes to Financial Statements

The accompanying consolidated unaudited financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial statements. Accordingly, they do not include all of the information
and disclosures required for annual financial statements. These financial
statements should be read in conjunction with the financial statements and
related footnotes for the year ended December 31, 2001, included in the
Company's Annual Report on Form 10-KSB. In the opinion of the Company's
management, all adjustments (consisting of normal recurring accruals) necessary
to present fairly the Company's financial position as of March 31, 2002 and the
results of operations and cash flows for the three-month period ended March 31,
2002 have been included.

Net income per share amounts have been calculated using the weighted average
number of common shares outstanding. Stock options and warrants have been
excluded as common stock equivalents because of their antidilutive effect.

RECENT ACCOUNTING PRONOUNCEMENTS The Company has implemented SFAS Number 142,
Goodwill and Other Intangible Assets, as of the 1st Quarter of 2002 which among
other thing requires a reallocation of purchased, intangible assets and
discontinuance of amortization of goodwill. Management has not yet completed
the complex analysis required for the determination of impairment loss, if any,
but does not believe that there will be a material write-down required during
2002.

F-27

YOU MAY RELY ON THE INFORMATION
CONTAINED IN THIS PROSPECTUS. WE HAVE
NOT AUTHORIZED ANYONE TO PROVIDE
INFORMATION DIFFERENT FROM THAT CONTAINED
IN THIS PROSPECTUS. NEITHER THE DELIVERY 2,205,020 SHARES
OF THIS PROSPECTUS NOR SALE OF COMMON STOCK OF COMMON STOCK
MEANS THAT INFORMATION CONTAINED IN THIS
PROSPECTUS IS CORRECT AFTER THE DATE OF
THIS PROSPECTUS. THIS PROSPECTUS IS NOT
AN OFFER TO SELL OR A SOLICITATION OF
AN OFFER TO BUY THESE SHARES OF THE
COMMON STOCK IN ANY CIRCUMSTANCES UNDER
WHICH THE OFFER OR SOLICITATION IS UNLAWFUL.

_____________________

TABLE OF CONTENTS
Page
---- CREATIVE HOST
Prospectus Summary 2 SERVICES, INC.
Risk Factors 4
Price Range of Securities 8
Dividend Policy 8
Dilution 8
Use of Proceeds 8 _________________
Management's Discussions and
Analysis of Financial PROSPECTUS
Condition and Results _________________
of Operations 9
Business 20
Management 31
Executive Compensation 32
Selling Stockholders 35
Plan of Distribution 37
Principal Stockholders 38
Description of Securities 39
Legal Matters 40
Available Information 40
Experts 40
Index to Consolidated
Financial Statements F-1

Dealer prospectus delivery obligation
until ______, 2002; all dealers that
effect transactions in these securities,
whether or not participating in this offering, AUGUST __, 2002
may be required to deliver a prospectus.
This is in addition to the dealers'
obligation to deliver a prospectus when
acting as underwriters and with respect
to their unsold allotments or subscriptions.

INFORMATION NOT REQUIRED IN PROSPECTUS

INDEMNIFICATION OF DIRECTORS AND OFFICERS

The laws of the State of California and our corporate bylaws provide for
certain indemnification of our directors and officers for liabilities and
expenses that they may incur while acting in such capacities. Our articles of
incorporation provide that liability of directors and officers is protected to
the extent possible under California law. In general, our directors and
officers are indemnified for actions they take in good faith and in a manner
reasonably believed to be in, or not opposed to, our best interests. With
respect to criminal actions or proceeds, they are indemnified if they had no
reasonable cause to believe their actions were unlawful.

We do not currently have a policy of directors and officers insurance.

OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth our estimated expenses in connection with
the distribution of the securities being registered. None of the expenses will
be paid by selling securityholders. Except for SEC filing fees, all expenses
have been estimated and are subject to future contingencies.

SEC registration fee $ 941.01
Legal fees and expenses 15,000.00
Printing and engraving expenses 3,000.00
Accounting fees and expenses 15,000.00
Blue sky fees and expenses 5,000.00
Transfer agent registration fees and expenses 1,000.00
Miscellaneous Expenses 1,058.99

Total $ 41,000.00

RECENT SALES OF UNREGISTERED SECURITIES

In September 2000, the Company entered into a purchase agreement with GCA
Strategic Investment Fund, an accredited investor and an investment company, to
issue a total of $2,500,000 convertible debentures with interest at 7% per annum
at a 5% discount rate and a warrant to purchase 125,000 shares of the Company's
common stock at an exercise price of $6.86 per share. In September 2000, the
Company issued $2,000,000 of the convertible debenture at a 5% discount rate, or
$100,000, and the warrant. This issuance was completed in accordance with
Section 4(2) of the Securities Act of 1933, as amended, in that the negotiations
and placement were accomplished directly between the Company and principals of
the investment company without any public announcement, disclosure or other
solicitation prior to closing.

During the year ended December 31, 2001, $1,193,642 of the outstanding
debenture held by GCA Strategic Investment Fund, including related interest was
converted to 1,345,003 shares of common stock at an average rate of $0.89 per
share.

II-1

In September 2000, one purchase warrant was issued to GCA Strategic
Investment Fund in connection with their purchase of the onvertible debentures.
The warrant entitles GCA Strategic Investment Fund to purchase 125,000 shares of
the Company's common stock at an exercise price of $6.86 per share. The warrants
are exercisable immediately and expire in September 2003.

In January through July 2000, shareholders exercised 512,450 warrants to
purchase common stock at an exercise price of $5.40 per share. The exercises
generated proceeds, net of costs, totaling $2,567,898. In 2000, warrants to
purchase 81,500 shares of stock were exercised for net proceeds of $149,425.

In 2000, individuals exercised 229,100 warrants to purchase common stock.
The individuals exercised the warrants on a "cashless" basis and as a result
were issued 218,621 shares of the Company's common stock.

In 2000, employees and directors of the Company exercised 70,500 options to
purchase common stock at an average exercise price of $1.63. The exercises
generated proceeds totaling $114,600.

In 2000, the Company commenced three private placement offerings of
261,700, 211,000 and 125,000 shares of the Company's common stock at a purchase
price of $5.00, $7.25 and $7.00 per share, respectively. The offerings
generated proceeds, net of offering costs, totaling $1,133,120, $1,485,289 and
$875,000, respectively. These placements were completed in accordance with Rule
506 promulgated under Section 4(2) of the Securities Act of 1933, as amended, in
that these were traditional private placements, solely to accredited investors
and in discussions only with persons who were either known to the Company or the
placement agent conducting the offering.

In 2001, $1,193,642 of a convertible debenture and the associated accrued
interest were converted into 1,345,003 shares of common stock. See convertible
debenture at Note (5).

On January 29, 2002, the Company closed on a private placement of 18.9
Units to 14 accredited investors. Each Unit consists of one $50,000 principal
amount convertible note and warrants to purchase 37,500 shares of common stock
at an exercise price of $2.00 per share. This issuance was completed in
accordance with Rule 506 promulgated under Section 4(2) of the Securities Act of
1933, as amended. The placement was conducted by Berry-Shino Securities, Inc.
to its accredited investor customers in a private placement without any public
solicitation by either the Company or Berry-Shino.

II-2

EXHIBITS

Exhibit No. Description
- ------------ -----------

3.1 Amended and Restated Articles of Incorporation*
3.2 Bylaws*
4.1 Specimen Certificate for Common Stock*
4.3 Warrant Agreement (including form of Warrant Certificate)*
4.4 The Company's 2001 Stock Option Plan for Directors, Executive
Officers, Employees and Key Consultants*
5 Opinion of Cutler Law Group******
10.1 1997 Stock Option Plan*
10.2 Employment Agreement between the Company and Sayed Ali*
10.3 Lease Space In The Cedar Rapids Municipal Airport Terminal For The
Purpose of Operating Food/Beverage, News/Gift, And Airline Catering
Concessions dated as of September 16, 1996 between the Company and
Cedar Rapids Airport Commission.*
10.4 Food And Beverage Concession Agreement And Lease dated as of
October 4, 1996 between the Company and Richland -Lexington Airport
District.*
10.5 Agreement between the Company and Delta Airlines.*
10.6 Concession And Lease Agreement dated as of May 24, 1996 between
the Company and Lehigh-Northhampton Airport Authority.*
10.7 Food And Beverage Concession Agreement And Lease Bluegrass Airport
between the Company and Lexington-Fayette Urban County Airport
Board.*
10.8 Food And Beverage Concession Agreement dated as of July 26, 1995
between the Company and Outagamie County.*
10.9 Food And Beverage Lease And Concession Agreement dated as of May
17, 1996 between the Company and Roanoke Regional Airport
Commission.*
10.10 Food And Beverage Concession Agreement dated as of October 24,
1995 between the Company and the County of Dane.*
10.11 Food And Beverage Concession Lease Agreement dated as of June 10,
1994 between the Company and the Port of Portland.*
10.12 Concession Agreement dated as of March 25, 1995 between the
Company and City of Los Angeles.*
10.13 License And Use Agreement Food/Beverage Service Aspen/Pitkin
County Airport 1994 Through 1999 dated as of April 1994 between
the Company and Board of County Commissions of Pitkin County
Colorado.*
10.14 Food Court Agreement dated as of November 14, 1996 between the
Company and City and County of Denver.*
10.15 Agreement between the Company and the City and County of Denver
as of November 19, 1996.*
10.16 Agreement dated as of February 8, 1996 between the Company and
the County of Orange.*

II-3

10.17 Concession Agreement for Food and Beverage Operations at the Des
Moines International Airport between the Company and the City of
Des Moines, Iowa dated as of June 2, 1997.**
10.18 Concession Agreement between the City of Los Angles Department of
Airports and the Companing Covering the Operation and Management
of the Food and Beverage Package #3 Concession at Ontario
International Airport.**
10.19 Concession Agreement and Lease between the Piedmont Triad Airport
Authority and the Company.**
10.20 Form of Franchise Agreement.*
10.21 TCBY Franchise Agreement dated October 29, 1996 between TCBY
Systems, Inc., and St. Clair Development Corporation.*
10.22 Industrial Real Estate Lease between the Company and WHPX-S Real
Estate Limited Partnership.*
10.23 Employment Agreement between the Company and Sayed Ali, Dated
January 1, 2000.***
10.24 Purchase Agreement between Creative Host Services, Inc. and
Edwin L. Klett, Louis Coccoli, Jr., Herbert H. Gill and the Virgil
Gladieux marital Trust dated as of September 28, 2000.****
10.25 Securities Purchase Agreement, dated as of September 26, 2000,
between Creative Host Services, Inc. and GCA Strategic Investment
Fund Limited.****
10.26 Convertible Debenture, dated as of September 26,2000, issued by
Creative Host Services, Inc. to GCA Strategic Investment Fund
Limited.****
10.27 Warrant, dated as of September 26,2000, issued by Creative Host
Services, Inc. to GCA Strategic Investment Fund Limited.****
10.28 Registration Rights Agreement, dated as of September 26,2000,
between Creative Host Services, Inc. and GCA Strategic Investment
Fund Limited.****
10.29 Escrow Agreement, dated as of September 26,2000, between Creative
Host Services, Inc. and GCA Strategic Investment Fund Limited and
the Law Offices of Kim T. Stephens.****
10.30 Sysco Corporation Master Distribution Agreement dated January 3,
2000.*****
10.31 Form of Convertible Promissory Note dated January 29, 2002 and
due December 31, 2006.
10.32 Form of Purchase Warrant for shares exercisable at $2.00 per
share.
23.1 Consent of Cutler Law Group (included in opinion Exhibit 5)
23.2 Consent of Stonefield Josephson, Inc.
23.2 Letter from Stonefield Josephson, Inc., dated June 25, 2002
_____________
* Incorporated by reference from the exhibits included with the Company's
Registration Statement (No. 333-6722) on Form SB-2 filed with the SEC on April
3, 1997.

**Incorporated by reference from the exhibits included with the Company's Annual
Report (No. 000-22845) on Form 10-KSB filed with the SEC on March 31, 1998.

II-4

***Incorporated by reference from the exhibits included in the Company's Form
S-3 Registration Statement filed with the SEC on March 13, 2000.

****Incorporated by reference from the exhibits included in the Company's Form
8-K filed with the SEC on October 9, 2000.

*****Incorporated by reference from the exhibits included in the Company's Form
10KSB/A filed with the SEC on October 16, 2001.

******Incorporated by reference from the exhibits included in the Company's Form
SB-2 filed with the SEC on May 1, 2002.

II-5

UNDERTAKINGS

The undersigned Registrant hereby undertakes:

(1) To file, during any period in which it offers or sells securities,
a post-effective amendment to this registration statement to:

(i) Include any prospectus required by section 10(a)(3) of the
Securities Act;

(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the information in
the registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any deviation
from the low or high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price represent no more
than a 20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration statement;
and

(iii) Include any additional or changed material information on
the plan of distribution.

(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial bona
fide offering.

(3) File a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the offering.

(4) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors, officers and
controlling persons of the small business issuer pursuant to the foregoing
provisions, or otherwise, the small business issuer has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as express in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the small business issuer of expenses incurred or paid by a
director, officer or controlling person of the small business issuer in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the small business issuer will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication such issue.

(5) For determining any liability under the Securities Act, treat the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of

II-6

prospectus filed by the small business issuer under Rule 424(b)(1), or (4) or
497(h) under the Securities Act as part of this registration statement as of the
time the Commission declared it effective.

(6) For determining any liability under the Securities Act, treat each
post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the registration statement,
and that offering of the securities at that time as the initial bona fide
offering of those securities.

II-7

SIGNATURES

In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that is has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of San Diego, State of California, on August 14, 2002.

Creative Host Services, Inc.

By: /s/ Sayed Ali
------------------------
Sayed Ali, President,
Chief Executive Officer and
Chief Financial Officer

II-8