U.S. Securities and Exchange Commission

Washington, D.C. 20549



Form 10-QSB





[X] Quarterly report pursuant section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended:  March 31, 2002.



[ ] Transition report pursuant section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from

to

.



Commission file number:  333-45210



Supreme Hospitality

(Exact name of small business issuer as specified in its charter)



Nevada

(State or other jurisdiction of incorporation or organization)



88-0460457

(IRS Employer Identification No.)



41919 Skywood Drive, Temecula, California 92591

(Address of principal executive office)



(909) 506-3435

(Issuers telephone Number)



Check whether the issuer:

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

Yes.[X]

No[ ]



Applicable only to corporate issuers:

State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date:  8,547,000 shares outstanding of Common Stock.



Transitional Small Business Disclosure Format (check one):Yes.[ ]

No[X]





Table of Contents



|Part I:  Financial Information                | 3
|--------------------------------------------- | -
|Item 1:  Financial Statements                 | 3
|Condensed Consolidated Balance Sheets         | 3
|Condensed Consolidated Statement of Income    | 4
|Condensed Consolidated Statement of Cash Flow | 5
|Notes to Financial Statements                 | 6
|Item 2:  Managements Discussion & Analysis    | 8
|Part II:  Other Information                   | 8
|Item 6:  Exhibits and Reports 8-K             | 8
|Signatures                                    | 9



<page>

Part I:  Financial Information

Item 1:  Financial Statements

SUPREME HOSPITALITY AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

(Unaudited)

|                                               | As of March 31,
2002 | As of December 31,
2001
|---------------------------------------------- | -------------------- | -----------------------
|ASSETS                                         |                      |                        
|Current Assets                                 |                      |                        
|Cash & Cash Equivalents                        | $  -                 | $1,754                 
|Trade accounts receivable                      | 30,506               | 31,756                 
|Other                                          | 362                  | -                      
|Total Current Assets                           | 30,868               | 33,510                 
|Property and Equipment                         |                      |                        
|Property and Equipment at Cost Net             | 4,676,431            | 4,738,902              
|Total Property & Equipment                     | 4,676,431            | 4,738,902              
|Other Assets:                                  |                      |                        
|Deferred offering costs                        | 81,000               | 81,000                 
|Other Assets                                   | 52,992               | 29,059                 
|Loan fees, net                                 | 14,809               | 40,387                 
|Total Other assets                             | 148,801              | 150,446                
|Total Assets                                   | $4,856,100           | $4,922,858             
|Liabilities and Stockholders Equity (Deficit) |                      |                        
|Current Liabilities                            |                      |                        
|Trade accounts payable                         | $493,800             | $446,173               
|Cash Overdraft                                 | 48,602               | -                      
|Related party loans                            | 118,471              | 93,650                 
|Accrued liabilities                            | 251,469              | 221,983                
|Current maturities of long-term debt           | 228,686              | 228,686                
|Total Current Liabilities                      | 1,141,028            | 990,492                
|                                               |                      |                        
|Long-Term Debt, Less Current Maturities        | 4,664,336            | 4,732,850              
|Total Long Term Notes Payable                  | 4,664,336            | 4,732,850              
|Total Liabilities                              | 5,805,364            | 5,723,342              
|Commitments and Contingencies                  |                      |                        
|Stockholders Equity                           |                      |                        
|Preferred stock, $.0001 par value; authorized  |                      |                        
|1,000,000 shares;  none outstanding            | --                   | --                     
|Common stock, $.0001 par value; authorized     |                      |                        
|50,000,000 shares; 8,547,000 outstanding       | 854                  | 1,000                  
|Paid-in Capital                                | 48,646               | 1,500                  
|Pre-merger Capital (deficit)                   | (691,927)            | (691,927)              
|Post-merger accumulated deficit)               | (306,837)            | (111,057)              
|Net Stockholders Equity                       | (949,264)            | (800,484)              
|Total Liabilities and Stockholders Equity     | 4,856,100            | 4,922,858              

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS

3

<page>

SUPREME HOSPITALITY AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)



|                                                     | For the Three Months Ended
March 31, | For the Three Months Ended
March 31,
|---------------------------------------------------- | ------------------------------------ | ------------------------------------
|                                                     | 2002                                 | 2001                                
|Revenues                                             | $
358,478                            | $
400,368                           
|Total Revenues                                       | $
358,478                            | $
400,368                           
|Operating Expenses                                   |                                      |                                     
|Selling, general and administrative                  | 299,907                              | 312,436                             
|Depreciation                                         | 68,425                               | 68,025                              
|Consulting Services                                  | 47,000                               | -                                   
|Interest                                             | 138,926                              | 143.436                             
|                                                     |                                      |                                     
|Total Cost of Revenues                               | 554,258                              | 523,897                             
|                                                     |                                      |                                     
|Net Income                                           | (195,780)                            | (123,529)                           
|                                                     |                                      |                                     
|Net Loss Per Share:                                  | (0.02)                               | (0.01)                              
|                                                     |                                      |                                     
|Weighted Average number of Common Shares Outstanding | 8,547,000                            | 10,000,000                          



SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS

4

<page>

SUPREME HOSPITALITY AND SUBSIDIARY

STATEMENTS OF CASH FLOWS

(UNAUDITED)

| | For the Three Months Ended
March 31,
| | ------------------------------------

|                                                                                         | 2002       | 2001      
|---------------------------------------------------------------------------------------- | ---------- | ----------
|Cash Flows From Operating Activities                                                     |            |           
|Net Income                                                                               | $(195,780) | $(123,529)
|Adjustments to reconcile net income (loss) to net cash provided by operating activities: |            |           
|Depreciation and amortization                                                            | 68,425     | 68,025    
|Change in Operating Assets & Liabilities                                                 |            |           
|(Increase) decrease Trade accounts receivable:                                           | 1,250      | (13,906)  
|(Increase) decrease in Other current assets                                              | (362)      | 767       
|(Increase) decrease in Accounts payable                                                  | 47,627     | 10,514    
|Increase (decrease) in Accrued liabilities:                                              | 29,486     | 34,647    
|NET CASH PROVIDED (USED) IN OPERATING ACTIVITIES:                                        | $(49,354)  | $(23,482) 
|                                                                                         |            |           
|CASH FLOWS FROM INVESTING ACTIVITIES                                                     |            |           
|Deferred offering costs                                                                  | -          | (750)     
|Issuance of common stock for services                                                    | 47,000     | -         
|Other                                                                                    | (23,933)   | 1,022     
|NET CASH (USED) IN INVESTING ACTIVITIES:                                                 | $(26,287)  | $272      
|                                                                                         |            |           
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                    |            |           
|Purchase of equipment                                                                    | (5,954)    | (5,772)   
|Related party loans                                                                      | 24,821     | 142,165   
|Loan fees                                                                                | 25,578     | --        
|Loan repayments                                                                          | (68,514)   | (60,603)  
|NET CASH PROVIDED BY FINANCING ACTIVITIES                                                | $(24,069)  | $75,790   
|INCREASE (DECREASE) IN CASH & CASH EQUIVALENTS                                           | (50,356)   | 52,580    
|Cash and Cash Equivalents at Beginning of Period                                         | $1,754     | 2,677     
|Cash and Cash Equivalents at End of Period                                               | $(48,602)  | 55,257    
|                                                                                         |            |           
|Disclosure from Operating activities                                                     |            |           
|Interest Expense                                                                         | $138,926   | $149,923  
|Taxes                                                                                    | --         | --        



SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS

5

<page>

SUPREME HOSPITALITY

NOTES TO FINANCIAL STATEMENTS

NOTE 1- BASIS OF PRESENTATION



General

The Company

Supreme Hospitality (the Company or Supreme), formerly Grubstake, Inc. and Richwood, Inc. were incorporated in Nevada on November 10, 1997. Until it acquired all of the outstanding common stock of Temecula Valley Inn, Inc. (TVI) in a recapitalization (reverse merger), the Company had no operations and was a development stage company as defined in FASB No.7. On April 17, 2000, pursuant to the pending recapitalization, the Company changed its name to Supreme Hospitality, and on April 30, 2000, TVI became a wholly owned subsidiary of Supreme in a qualifying reorganization under Section 368 (a)(1)(B) of the Internal Revenue Code of 1986.



TVI's activities were the construction and subsequent operation of a ninety-room, 3-story hotel located in Temecula, California, which was opened to the public in December 1998 under the name of Temecula Valley Inn. In July of 2000, the hotel, pursuant to a franchise agreement, operated under the name of Days Inn.



Principles of Consolidation

The Company's consolidated financial statements include the financial statements of Supreme and TVI for all periods presented. All significant intercompany accounts and transactions have been eliminated.



Financial Statement Presentation

The historical cost basis of all assets and liabilities of TVI have been carried forward, similar to the accounting treatment given in a "pooling of interests". TVI is considered the accounting acquirer because it became the owner of substantially all of the outstanding common stock of the acquired "shell" company. Pre-merger losses of TVI, net of $3,000 of common stock, have been classified as "pre-merger capital (deficit)" in the accompanying financial statements, since such losses have been passed through and utilized by the former owners of TVI when it was initially a proprietorship through December 31, 1999, and an S corporation in 2000, until the date of merger. Unless otherwise indicated, all references to the Company include Supreme and TVI. The corporation's year-end is December 31.



The consolidated unaudited interim financial statements of the Company as of March 31, 2002 and for the three months ended March 31, 2002, included herein have been prepared in accordance with the instructions for Form 10QSB under the Securities Exchange Act of 1934, as amended, and Article 10 of Regulation S-X under the Securities Act of 1933, as amended. The December 31, 2001 Consolidated Balance Sheet was derived from audited financial statements, but does not include all disclosures required by generally accepted accounting principles. Certain information and note disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations relating to interim consolidated financial statements.



In the opinion of management, the accompanying consolidated unaudited interim financial statements reflect all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the financial position of the Company at March 31, 2002, and the results of their operations for the three months ended March 31, 2002 and 2001, and their cash flows for the three months ended March 31, 2002.



The results of operations for such periods are not necessarily indicative of results expected for the full year or for any future period. These financial statements should be read in conjunction with the audited consolidated financial statements as of December 31, 2001and related notes included in the Companys Form 10-KSB filed with the Securities and Exchange Commission



6

<page>

Loss per Common Share

The Company adopted Financial Accounting Standards  (SFAS) No.  128,  Earnings Per Share, which simplifies the computation of earnings per share requiring the restatement of all prior periods.



Basic earnings per share are computed on the basis of the weighted average number of common shares outstanding during each year.



Diluted earnings per share are computed on the basis of the weighted average number of common shares and dilutive securities outstanding.  Dilutive securities having an anti-dilutive effect on diluted earnings per share are excluded from the calculation.  The Company does not have any dilutive securities as of March 31, 2002.



NOTE 2 - RELATED PARTIES

A construction company owned by Supreme's president was the general contractor for the hotel, which was completed in late1998 at a cost of approximately $2,400,000. Approximately $110,000 was paid to his construction company for supervision and reimbursement of costs incurred of which less than 50 percent was compensation. The project manager for the hotel's construction was a company owned by one of three shareholders of TVI which was paid approximately $58,000 for supervision services.



Since inception the president of the Company has provided financing to maintain the positive cash flow of the Company, substantially through personal and related party corporate loans, the majority of which were interest bearing from 8 to 10 percent per annum. As of March 31, 2002, these related party loans totaled $492,123 the majority of which are considered due within one year. During the quarter ended March 31, 2002 the net loans from related parties is $24,821.



Included in the loans payable to related parties at December 31, 2001 are two loans that were obtained from a water district and the city prior to 2000. The latter of these loans is collateralized by an interest in the Company's real estate, whereas the other loan provides for termination of the water supply to the hotel in the event the loan becomes delinquent. Although the Company was delinquent in the monthly payments to the city, the city agreed to take no action provided the loan, which was due September 1, 2000, is paid off at the rate of $10,000 a month, commencing April, 2001.



Note 3  Commitment and Contingencies

Substantially all of the accounts payable at March 31, 2002 and December 31, 2001, totaling $ 493,800 and $446,173 were past due based on their payment terms of which $104,000 consisted of real estate taxes, interest and penalties for the period from December, 1999 through May, 2000. The past due status and penalties added to real estate taxes are technical violations of both bank loans, however, the Company has verbal assurances that as long as the loan payments are currently maintained, and the Company timely and fully explains its reasons for any technical violations, the banks will not call the loan.



In December 2001, the Company ceased doing business as a Days Inn franchise. The Company contends that franchisor has failed to do certain things contained in the franchise agreement and the franchisor was still wanting the Company to honor the franchise agreement and pay its royalties as specified in the agreement. This has resulted in the Company taking legal action against the franchisor and the franchisor taking legal action again the Company.



The Companys financial statements are prepared using generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. However, the issues raised above raise substantial doubt about its ability to continue as a going concern.



Note 4  Subsequent Events



There are no subsequent events that warrant disclosure in these financial statements.



7

<page>

Item 2:  Managements Discussion and Analysis or Plan of Operation



On February 15, 2002, the hotel received a notice of default from the Valley Independent Bank, the first lien holder on the hotel.  The reason for the default being the hotel was one month behind on their loan payment and also delinquent on their back taxes due the county.  Mr. Lang noted this was one of the banks that had previously stated to the companys auditor they would not take this action as a result of the delinquent taxes.  This filing of the default by the Valley Independent Bank subsequently caused the second lien holder, Temecula Valley Bank, and the third lien holder, Donald Coop, to file notices of default.



The revenues for the hotel have been significantly reduced since the September 11 tragedy.  The Board reviewed all options to raise capital to pay off these defaults, but have been unable to find sufficient capital.  The Board feels the only option is to sell the hotel.



After discussion at the special meeting of the Board of Directors held on March 22nd, 2002 the Board unanimously agreed:

A.

To grant Mr. Lang the right to sell the hotel and its assets for a significant amount so as to leave no debt for the corporation.

B.

To allow Mr. Lang to return the 292,000 common shares of Supreme Hospitality stock previously approved by the Board of Directors November 27, 2001.  In return for the stock, the company agrees to pay Mr. Lang the $611,741.39 for the total debt and accrued interest Supreme Hospitality owes Mr. Lang, individual, and Lang Construction & Development, Inc. owned by Larry W. Lang.  In addition to the $611,741.39, the company agrees to pay any additional funds owed to Mr. Lang from the proceeds of the sell of the hotel.



March 31, 2002 Quarter Compared to Prior Quarter in 2001



Total Revenue for the three months ended March 31, 2002, is $358,478 compared to the three months ended March 31, 2001, which was $400,368.  This is a decrease of $41,890.  As explained above in greater detail, revenue has significantly decreased since the September 11 tragedy.



Total operating expenses for the three months ended March 31, 2002, are $554,258 compared to the three months ended March 31, 2001, which was $523,897.  This is an increase in expenses of $30,361 or 5.7%.  This change is insignificant and needs no further explanations.



Thus, the net loss for the three months ended March 31, 2002 is $195,780 compared to the three months ended March 31, 2001, which was a loss of $123,529.  Net loss has increased by $72,251 this period.  Total revenues decreased during the three month period ending March 31, 2002 and total expenses increased slightly by 5.7% thus, resulting in an increase in the companys net loss for these periods.





Part II:  Other Information

Item 6:  Exhibits and Reports on Form 8-K

(a) Exhibits Schedule

The exhibits marked with an * were filed with the companys registration statement, form 10SB12G filed on 06/14/2000.



*3.1 Articles of Incorporation

*3.2 Bylaws



(b) Reports on Form 8-K:  No reports for this quarter.



8

<page>

Signatures

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



Supreme Hospitality

(Registrant)



By: /s/ Larry W. Lang

--------------------------------------

Larry W. Lang

Chairman, Sole Director, President

and Secretary/Treasurer (Principal

and Accounting Officer)

Date:  May 29, 2002

9