SECURITIES AND EXCHANGE COMMISSION
                          Washington, D.C. 20549
                          ----------------------

                                FORM 10-KSB


[x] Annual Report pursuant to Section 13 or 15(d) of the Securities
    Exchange Act of 1934

For the fiscal year ended December 31, 2002

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

                      Commission file number 000-22845


                        CREATIVE HOST SERVICES, INC.
                       ------------------------------
                (Name of Small Business Issuer in Its Charter)

           California                                   33-0169494
   ------------------------------                    ------------------
  (State or Other Jurisdiction of                    (IRS Employer
   Incorporation or Organization)                    Identification No.)


  16955 Via Del Campo, Suite 110, San Diego, California    92127
  -----------------------------------------------------  ----------
  (Address of Principal Executive Offices)               (Zip Code)

                               (858) 675-7711
              ----------------------------------------------------
              (Registrant's Telephone Number, Including Area Code)


Securities registered pursuant to Section 12(b) of the Exchange Act: None


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

                           Common Stock, no par value
                           --------------------------
                                (Title of Class)

    Check whether the issuer (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.  Yes [X]  No [ ]

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

<PAGE>

    The issuer's revenues for the fiscal year ended December 31, 2002 were
34,615,454.

    The aggregate market value of the common equity held by non-affiliates of
issuer computed by reference to the closing price at which the stock sold on
March 25, 2003 as reported by Nasdaq was $12,011,495.

    The number of shares outstanding of issuer's no par value Common Stock,
as of March 25, 2003 was 8,006,210.

Transitional Small Business Disclosure Format:  Yes [ ]    No [X]

                     DOCUMENTS INCORPORATED BY REFERENCE: None

                            TABLE OF CONTENTS

PART I                                                              PAGE

Item  1.  Description of Business.                                    3

Item  2.  Description of Property.                                   15

Item  3.  Legal Proceedings.                                         16

Item  4.  Submission of Matters to a Vote of Security Holders.       16

PART II

Item  5.  Market For Common Equity and Related                       16
           Stockholder Matters.

Item  6.  Management's Discussion and Analysis of Financial          19
           Condition and Results of Operations.

Item  7.  Financial Statements.                                      29

Item  8.  Changes in and Disagreements with Accountants on           30
          Accounting and Financial Disclosure.

PART III

Item  9.  Directors, Executive Officers, Promoters and               30
          Control Persons; Compliance with Section 16(a)
          of The Exchange Act.

Item 10.  Executive Compensation.                                    32

Item 11.  Security Ownership of Certain Beneficial Owners and        36
          Management.

Item 12.  Certain Relationships and Related Party Transactions.      39

Item 13.  Exhibits, Financial Statement Schedules, and               39
          Reports on Form 8-K.

Item 14.  Controls and Procedures                                    43

SIGNATURES                                                           44

                                     -2-
<PAGE>

                                   PART I

Item 1.  Description of Business.

THE CONCESSION BUSINESS

Creative Host Services, Inc. ("Creative Host" or the "Company") is primarily
engaged in the business of acquiring and operating food, beverage and other
concessions at airports throughout the United States of America. The Company
currently has 142 individual concessions located in 28 airports, two of which
are franchised.  The Company has concessions at the following locations: 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; Charleston and Columbia, South Carolina; Sioux Falls,
South Dakota; Cedar Rapids and Des Moines, Iowa; Baton Rouge and Shreveport,
Louisiana; Midland, Texas; John F. Kennedy and Albany, New York; Boston,
Massachusetts; Saginaw (MBS), Michigan; Orlando/Sanford, Florida; San
Antonio, Texas and Santa Barbara, California.  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. The
Company's airport concession business is complemented by in-flight catering
contracts awarded by major airlines at certain airports. In-flight catering
comprised approximately six percent of the Company's revenue in 2001 and two
percent in 2002. The Company has in-flight catering contracts with Delta
Airlines, United Airlines and numerous other smaller airline companies.

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, the Company evaluates 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, the Company
evaluates 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, the
Company makes large capital outlays at the beginning of a concession term,
which it seeks 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.

The Company has secured most of its existing airport concessions through the
request for proposal process.  The Company believes its success in securing
concessions through this process is attributable to tailoring its

                                     -3-
<PAGE>

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,
the Company strives to provide foods that are healthy and higher quality than
typical fast food or cafeteria-style products, while maintaining value
pricing. The Company's 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, the Company's
strategy is to secure franchise relationships with nationally recognized food
and beverage companies as part of our proposals.  The Company has entered
into agreements with several such companies, including Carl's Jr.,
Schlotsky's Deli, Nathan's Hotdogs and TCBY Yogurt. Under these arrangements,
the Company owns the concession rights from the airport authority and its
employees operate the location.  The Company then pays franchise fees under a
franchise agreement.  The Company's strategy is to continue to develop
relationships with a number of national and regional food and beverage
companies, which it expects will provide it with the flexibility to tailor
product offerings to meet a particular airport's desires.

While the Company has seriously pursued the submission of proposals only
since 1989, it has been successful in a significant number of the proposals
it has submitted.  Management attributes this success in winning airport
proposals principally to its efforts to customize each bid, striving to make
creative proposals that address local preferences and distinguish the Company
from its competitors in its offering of decor and food products.  The Company
has found a niche market in small to medium size airports. The following are
examples of the Company's approaches to the concession business:

MASTER CONCESSION:  The Company 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. The Company currently serves as
the master concessionaire at the Cedar Rapids, Iowa airport.

CAFE AND SPIRITS: If the opportunity for a master concession is not
available, then the Company 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 non-branded food and beverages, such as TCBY Yogurt and Creative
Croissants, along with a bar, lounge and mini library.  The Company currently
operates Cafe and Spirits formats at all Creative Croissants locations that
serve liquor.

CREATIVE CROISSANTS-Registered Trademark- BAKERY DELI: The Company can
implement its 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.  The Company
currently operates Creative Croissants at nearly every airport it services.

                                     -4-
<PAGE>



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

ACQUISITION OF OTHER CONCESSIONAIRES:  The Company has also sought to expand
its 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 the
Company demonstrates 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.  The Company has 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, the Company completed the acquisition of GladCo Enterprises,
Inc., an airport concessions company headquartered in Pittsburgh,
Pennsylvania with annual revenues of approximately $10 million at the time of
acquisition.

The Company's strategy is to expand our captive audience business to more
airports in the United States, and eventually to other public venues.  The
Company also intends to seek to expand the types of concession services that
it provides, and to be awarded more multiple and master concession contracts
such as the one it was awarded for the Cedar Rapids, Iowa airport.  While the
Company has historically focused on the food and beverage segment, it intends
to seek concession awards to provide newsstands, gift shops, specialty stores
and other services to augment the Company's food and beverage business at
airports and other venues.

Prior to the Company's initial public offering in July 1997, it qualified as
a Disadvantaged Business Enterprise ("DBE") based on Mr. Sayed Ali's
ownership of all of our common stock.  The Company's historical success in
securing concession locations may have been partially attributed to its DBE
status. The impact of the initial public offering on the Company's status as
a DBE and the impact of any such potential loss of DBE status on the
Company's ability to secure new concession locations is unclear. To the
extent that the Company's historic rate of success in securing new airport
concessions was partially attributable to its status as a DBE, that growth
rate may decline.

In analyzing a concession opportunity, particularly in the airport industry,
the Company evaluates the following factors, among others: (1) the estimated
rate of return on the investment in the facilities, (2) the historical

                                     -5-
<PAGE>


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,
the Company analyzes 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, the Company receives 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, the Company will review a target operator's
historical performance as part of its due diligence review. In either
scenario, the Company then evaluates 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, the
Company reviews estimates of passenger enplanements for the new terminals and
amounts typically spent per passenger at concessions.

Once the Company has been awarded a concession contract at an airport, it is
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.  The
Company is generally required to place three types of bonds with an airport
authority before it may take over operations at a concession.  In connection
with its bid, the Company is occasionally required to post a bond for the
amount of capital improvements it is committed to make at the airport.

During commencement of construction for any specific project, the Company is
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, the Company is
required to post a performance bond to cover some specified percentage of its
minimum rent obligations.  This bond remains in place during the term of the
concession.  To date the Company has not experienced significant difficulty
in securing bonds for its obligations to various airport authorities.  The
Company's bonding capacity is limited by its size, and has therefore limited
the projects on which it can bid.  If the Company continues to grow, it
anticipates increasing its bonding capacity and the ability to bid for larger
projects at the largest domestic airports.

Typically the Company operates 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.

                                     -6-
<PAGE>


ACQUISITION OF GLADCO ENTERPRISES, INC.

On October 9, 2000, the Company completed its acquisition of GladCo
Enterprises, Inc. ("GladCo"), a company located near Pittsburgh, Pennsylvania
that managed concessions in five airports.  In accordance with the Purchase
Agreement, the Company acquired 100% of the stock of GladCo and its
affiliates for an aggregate adjusted purchase price of $7,300,000.

The Company obtained part of the funds for the acquisition of GladCo by
issuing approximately $2,000,000 in 7% Convertible Debentures (the
"Debentures") to GCA Strategic Investment Fund Limited. The purchase price of
the Debentures was 95% of the principal amount, or $1,900,000. The Debentures
were convertible at the lower of 110% of the volume weighted average sales
price of Creative Host's common stock on the day immediately preceding
closing or 85% of the five lowest volume weighted average sales prices of the
Company's common stock during the 25 days immediately preceding the date of a
notice of conversion. The Company also issued 100,000 warrants to purchase
common stock to GCA Strategic Investment Fund at an exercise price of 102% of
the closing bid price on the day immediately preceding the Closing Date. The
exercise price of the warrants is $6.86 per share.

The Company paid off the $900,000 balance of the GCA note in July 2001.  As
of the date the note was retired, Global Capital had converted $1,100,000 of
the debentures and $93,642 of related accrued interest into 1,345,003 shares
of Creative Host common stock.

In connection with the transaction, the Company agreed to employ Gladco's
President and principal shareholder, Louis Coccoli, Jr., in an executive
capacity and retain him as President of GladCo.

In management's view, the Creative Host/GladCo business combination was 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 the Company's ability to raise equity, combined
with the 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 Louis
Coccoli, Jr.  Through the acquisition, the Company enhanced its presence on
the East Coast through representation by GladCo's corporate office in
Pittsburgh.

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.

                                     -7-
<PAGE>


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 the Company's existing operations.


RECENT BUSINESS DEVELOPMENTS:

On January 17, 2003, the Company closed on a senior secured financing with
ING Capital LLC pursuant to the terms of a Credit Agreement.  The Credit
Agreement provides for a total financing commitment of $13,000,000 consisting
of two separate facilities: a term loan facility and an expansion facility.
The term loan facility provides for financing in an amount up to $7,400,000
to be used to refinance the Company's existing debt, finance the purchase
price of acquisitions made on the closing date of the loan and lender-
approved acquisitions after the closing date, to finance build-outs of the
Company's concession locations and pay fees and expenses associated with the
financing and the closing date acquisitions.  The term loan facility matures
on December 31, 2007 with quarterly principal payments scheduled to begin on
June 30, 2004 in amounts equal to percentages of the outstanding principal
amount of the term loan facility ranging from 3.72% to 9.97%.

The expansion facility, in an amount up to $5,600,000, may be used to finance
the cash purchase price for approved acquisitions, to finance build outs of
concession locations, to provide ongoing working capital needs of the Company
and to provide a letter of credit sub-facility of $4,000,000.  Availability
under the expansion facility will be reduced by outstanding letters of
credit. The expansion facility matures on December 31, 2008, with certain
principal payments due on December 31, 2007, March 31, 2008 and June 30, 2008
equal to the greater of (i) fifteen percent of the reduced commitment amount
or (ii) $800,000, with the remaining amount due on December 31, 2008.

The term loan of the credit facility bears interest at a rate of 10% per
annum plus 2% per annum paid in kind (PIK) rate. Interest accruing on the PIK
rate will be paid annually in cash, or at the Company's option, such interest
will accrue on the principal amount.  The interest on the expansion facility
is based, at the option of the Company, upon either a Eurodollar rate plus
3.50% or the higher of Prime plus 1% or the Fed Funds Rate plus .5% per
annum.  A commitment fee is charged on the unused portion of the term loan
and the expansion facility at rates of 0.75% and 0.50% per annum,
respectively.

The credit facility is secured by perfected first security interests in, and
first mortgages on, substantially all of the Company's assets and the assets
of its subsidiaries, existing and future.  The credit agreement also contains
affirmative, negative and financial covenants, as well as events of default.

                                     -8-
<PAGE>



As additional consideration for the financing, the Company issued to ING
452,050 warrants to purchase 452,050 shares of its common stock, representing
4% of the fully diluted capital stock (excluding warrants and options with
exercise prices exceeding $8.00 per share).  The warrants have a ten year
life with an exercise price of $1.87 per share, which was equal to the
closing price of the Company's common stock on January 16, 2003. Terms and
conditions of the warrants include, among others, shelf and piggyback
registration rights, anti-dilution protection and "tag-along" rights.

As a condition of the financing, the Company was required to close an
acquisition transaction at the same time as the financing using proceeds from
the term loan facility to finance the purchase price for the acquisition.
The Company used $1,075,542 of the financing proceeds to acquire the assets
and a total of five concession leases at three locations at the Sanford
International Airport in Orlando, Florida in satisfaction of that condition.
The Company expects to utilize the term loan facility and expansion facility
to finance additional acquisitions in the future.

The Company also used approximately $2,213,000 of the term loan facility to
retire substantially all of its existing debt (other than certain capital
lease obligations), which included its bank note and line of credit.
Transaction fees, commissions and related due diligence expenses were also
paid from the financing proceeds.

In February 2003, the Company was awarded a contract for a concession
location at the San Antonio International Airport in San Antonio, Texas.  The
Contract term is for a period of seven years and expires in May 2010.  The
Company anticipates that this contract will yield approximately $1.7 million
in average annual revenues once it becomes fully operational in the third
quarter of 2003.

In February 2003, the Company was awarded a contract for a concession
location at the Santa Barbara Airport in Santa Barbara, California.  The
contract term is for a period of five years and expires in May 2008. It is
expected that this location will be fully operational in May 2003 and will
yield approximately $800,000 in average annual revenues once it is fully
operational.


CONCESSION LOCATIONS

The following table identifies the existing airport concessions of Creative
Host Services and its subsidiary as well as those which have been awarded and
are expected to be in operation in 2003:

                                     -9-
<PAGE>



                EXISTING AND AWARDED CONCESSION LOCATIONS
                       Year Ended December 31, 2002
<TABLE>

                                               Date               Expiration
Name/Location of         Description of        Commenced          Date of           2002
Concession               Concession            Operations         Contract          Revenue
------------------       ----------------      ------------       -----------       ----------
<S>                      <C>                   <C>                <C>               <C>

Denver . . . . . . . . . Food and Beverage     February 1995      November 2004     $1,001,022
International. . . . . .

Los Angeles. . . . . . . Food and Beverage     June 1995          June 2005         $1,257,730
International

Portland . . . . . . . . Food and Beverage     October 1995       June 2005         $  717,619
International(1)

Madison, . . . . . . . . Food and Beverage     January 1996       January 2006      $1,253,392
Wisconsin (1)

Appleton,. . . . . . . . Food and Beverage     January 1996       January 2006      $  400,550
Wisconsin(1)

Roanoke, . . . . . . . . Food and Beverage     June 1996          June 2006         $  620,087
Virginia(1). . . . . . . Inflight Catering

Lexington, . . . . . . . Food and Beverage     July 1996          July 2006         $1,015,241
Kentucky (1) . . . . . . Inflight Catering

Allentown, . . . . . . . Food and Beverage     July 1996          July 2006         $  571,784
Pennsylvania . . . . . . Inflight Catering

Columbia,. . . . . . . . Food and Beverage;    October 1996       October 2006(3)   $1,296,479
South Carolina (1) . . . Catering

Cedar Rapids,. . . . . . Master Concession;    November 1996      March 2004        $1,332,363
Iowa (1) . . . . . . . . Food and Beverage;
                         News & Gifts;
                         Specialty Stores;
                         Inflight Catering

Sioux Falls, South . . . Food and Beverage     August 1997        August 2007       $  706,416
Dakota (1) . . . . . . . Inflight Catering

Greensboro   . . . . . . Food and Beverage     December 1997      May 2008          $2,215,205
(Piedmont Triad)
North Carolina (1)

Ontario, California. . . Food and Beverage     September 1998     July 2008         $1,768,226

Midland, Texas (1) . . . Food and Beverage     January 1999       September 2007    $  813,405

Shreveport,. . . . . . . Food and Beverage     May 1999           November 2009     $  540,815
Louisiana (1)

Baton Rouge (1). . . . . Food and Beverage     July 1999          July 2010         $  725,918

Charleston, (1)    . . . Food and Beverage     July 2000          January 2011      $2,064,611
South Carolina

Orlando/Sanford. . . . . Food and Beverage     January 2003           (7)              (7)
Sanford, Florida

San Antonio, Texas . . . Food and Beverage     February 2003      May 2010             (8)

Santa Barbara,. . .. . . Food and Beverage     May 2003           May 2008             (9)
California

</TABLE>

(Continued)

                                     -10-
<PAGE>
<TABLE>

Franchises:
----------
<S>                      <C>                   <C>                <C>               <C>
Orange County. . . . . . Food and Beverage     September 1990     June 2004         Franchise

John F. Kennedy. . . . . Food and Beverage     October 1999       May 2008(4)       Franchise
International


GladCo Enterprises, Inc. Locations:
----------------------------------

Pittsburgh,. . . . . . . Food and Beverage     October 1992       October 2006      $6,645,400

Albany,. . . . . . . . . Food and Beverage     February 1995      February 2008     $1,836,369
New York

Freeland (MBS) . . . . . Food and Beverage     May 1996           May 2006          $  853,092
Michigan

Des Moines,. . . . . . . Food and Beverage     July 1997          July 2007(2)      $2,084,457
Iowa

Newark,. . . . . . . . . Food and Beverage     October 2001       September 2008    $1,610,241(6)
New Jersey

Boston,. . . . . . . . . Food and Beverage     November 2001      May 2010(2)(5)    $3,196,472
Massachusetts

</TABLE>

(1) The Company is currently the sole food and beverage concessionaire at
this airport.

(2) The airport retains the right under the contract to recapture the
premises upon payment for the Company's improvements.

(3) After the initial year of the term, the airport authority has the right
to terminate the contract upon payment to the Company of its "remaining
business interest" in the concession.

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

(5) The Company has a commitment from the airport for a long-term contract to
May 2010 with the final lease being drafted.

(6) Reflects partial year revenues as the three locations at this airport did
not open until May, June and September 2002.

(7) The locations in this airport became operational in January 2003.  It is
anticipated that they will yield average annual revenues of approximately
$2.4 million. The Company is in the process of finalizing new concession
agreements with terms ranging from ten to fifteen years.

(8) It is expected that this location will be fully operational in the third
quarter of 2003 and it is anticipated that it will produce average annual
revenues of approximately $1.7 million when fully operational.

(9) It is expected that this location will become operational in May 2003. It
is anticipated that it will yield average annual revenues of approximately
$800,000.

                                     -11-
<PAGE>

FRANCHISE OPERATIONS

From 1986 through 1994, the Company was actively engaged in the business of
franchising restaurants under the "Creative Croissant" name. Unfortunately,
the Company's restaurant franchise business was not successful, and, in 1990,
it began the transition to company-owned airport concessions that is the
major focus of its current business plan.  The Company continues to have
franchise relationships with the Orange County airport concessions that are
operated by a franchisee.

The Company expects its revenues from franchising (approximately 0.1% of
total revenues for the twelve month period ended December 31, 2002) to remain
unchanged or decline over time as it concentrates on expanding its concession
business and establishing facilities owned directly by the Company at
airports, other captive audiences and other public venues.  If the Company is
able to establish a greater national brand name presence, through its airport
and other concession business, then it may devote some resources to the
development of the franchising segment of its business.  In the meantime, the
Company may continue to sell franchises in special situations when a
franchise would be more advantageous to its 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

The Company's 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, the Company intends 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
the Company will seek to be the master concessionaire for all concession
operations conducted at such airports.

The Company targets the airport concession business through its presence at
airport authority association meetings and trade shows, its 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, the Company seeks to be involved in every proposal that is
economically feasible.  In bidding for concessions, the Company primarily
focuses 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, the Company develops a customized bid tailored to address a
theme or culture specific to the concession location.  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.  The
Company's proposals for airports may include children's play areas, reading
areas, mini-libraries and/or computer services.

                                     -12-
<PAGE>

The Company's 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

The Company relies on Sysco Corporation as its primary distributor for
foodservice products to its customer locations.  The Company's agreement with
Sysco provides for customer service, delivery service and information
services to be provided by Sysco.  The Company's annual purchase volume from
Sysco is approximately $4,900,000.

COMPETITION

The concession industry is extremely competitive and there are numerous
competitors with greater resources and more experience than the Company has.
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 and Air Host, Inc.

The Company is 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 the Company
achieves greater penetration in regional airports, it will be required to
enter into larger domestic airports or other venues to sustain its growth.
Entry into larger domestic airports will necessarily involve direct
competition with HMS Host and CA One Services.

The Company strives to differentiate itself in all markets with the design
and product mix it offers to each particular airport.  The Company designs
its concession bids and facilities around unique themes or concepts that it
develops for each location.  In this manner, the Company seeks 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.  The Company also offers a variety of food concepts with an emphasis
on fresh foods and high quality, while maintaining value-oriented prices.

                                     -13-
<PAGE>

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 the Company first entered the airport
concession business, its Common Stock was owned entirely by the Company's
President, Mr. Sayed Ali.  As a result, the Company qualified as a
disadvantaged business enterprise.  The Company's status as a disadvantaged
business enterprise assisted it 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 issuances of stock, Mr. Ali's ownership in our common
stock is now approximately 12.4%.  The Company has succeeded in securing
airport concession contracts at eight additional locations since its initial
public offering, although it is not aware of the extent to which its
disadvantaged business status, or lack thereof, was a factor in the airport
authorities' decisions to award the Company such contracts.  The Company will
have to address the issue on an airport by airport basis.  If necessary, it
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.  The Company believes that it will
retain its existing locations and can continue to secure new concessions on
the basis of the products and services it offers and its industry reputation.
To the extent its historic rate of success in securing airport concessions is
attributable to its clear status as a disadvantaged business, the Company's
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.

                                     -14-
<PAGE>

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

As of December 31, 2002, the Company and its subsidiaries had over 700
employees, including 18 in administration.  As the Company expands and opens
more concessions, it anticipates hiring additional personnel including
administrative personnel commensurate with growth.  The Company has never had
a collective bargaining agreement with its employees and it is not aware of
any material labor disputes.


SEASONALITY

Historically, the Company has experienced seasonal variability in quarterly
operating results with higher concessions revenues in the second and third
quarters than the first and fourth quarters.  The higher concession revenues
in the second and third quarters improve profitability by increasing revenues
and reducing the impact of fixed costs.  This seasonal impact on operating
results is expected to continue.


TRADEMARKS

The Company presently has one registered trademark with the United States
Patent and Trademark Office on the Principal Register, registered as
"Creative Croissants-Registered Trademark."  As its business develops, the
Company plans to continue to develop merchandising of trademark products,
such as clothing, drinking bottles, mugs and other similar products,
utilizing its service marks and trademarks in order to generate additional
revenues.  The Company's policy is to pursue registrations of its marks
wherever possible.  The Company is not aware of any infringing uses that
could materially affect its business or any prior claim to the trademarks
that would prevent it from using those trademarks in its business.


Item 2.  Description of Property.

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.

                                     -15-
<PAGE>


Item 3.  Legal Proceedings.

The Company is 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.


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

No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this Report.



                                PART II

Item 5.  Market For Common Equity and Related Stockholder Matters.

MARKET INFORMATION

The Company's Common Stock trades on the Small-Cap Market tier of The Nasdaq
Stock Market, Inc. ("NASDAQ") under the symbol CHST.  The following table
sets forth the range of high and low sales prices for Creative Host's Common
Stock for each full quarterly period for the fiscal years ended December 31,
2002 and 2001, as reported by NASDAQ.

       Year       PERIOD                           High      Low
       ----    -------------                      ------    ------

       2002    First Quarter                     $ 1.34     $ 0.97
               Second Quarter                      1.87       1.28
               Third Quarter                       2.24       1.31
               Fourth Quarter                      2.04       1.55

       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

HOLDERS

The number of record holders of the Common Stock was 93 on March 25, 2003.
Such number of record owners was determined from the Company's shareholder
records, and does not include beneficial owners of the Company's Common Stock
whose shares are held in the names of various security holders, dealers and
clearing agencies.  The Company believes that there are a significant number
of beneficial owners of its Common Stock whose shares are held as such in
"street name."  The Company believes that the number of beneficial owners of
its Common Stock held by others in nominee names exceeds 1200 in number.


DIVIDENDS

The Company has never paid cash dividends on its Common Stock and does not
anticipate paying cash dividends on its Common Stock in the future. Instead,
the Company intends to retain future earnings, if any, to fund the
development and growth of its business.

                                     -16-
<PAGE>

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS.

The following table sets forth information as of December 31, 2002, with
respect to compensation plans (including individual compensation
arrangements) under which equity securities of the Company are authorized for
issuance, aggregated as follows:

                   Equity Compensation Plan Information


Plan Category        Number of       Weighted-average    Number of securities
                    securities to     exercise price     remaining available
                      be issued       of outstanding     for future issuance
                    upon exercise        options,           under equity
                    of outstanding     warrants and      compensation plans
                       options,           rights            (excluding
                     warrants and                           securities
                       rights                               reflected in
                                                             column (a))
-----------------------------------------------------------------------------
                         (a)                (b)                 (c)
-----------------------------------------------------------------------------
Equity compensation
plans approved by
security holders       730,000            $ 3.02               174,000
-----------------------------------------------------------------------------
Equity compensation
plans not approved
by security holders      None               N/A                 None
-----------------------------------------------------------------------------

     Total             730,000            $ 3.02               174,000
-----------------------------------------------------------------------------



RECENT SALES OF UNREGISTERED SECURITIES; USE OF PROCEEDS FROM REGISTERED
SECURITIES

On January 29, 2002, the Company closed on a private placement of 18.9 Units
to 13 accredited investors in which it received $945,000 in gross proceeds.
Each Unit consisted 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 for a period of
five years from January 29, 2002.  This issuance was completed in accordance
with Rule 506 promulgated under Section 4(2) of the Securities Act of 1933,
as amended. The private placement was conducted by Berry-Shino Securities, a
broker-dealer registered with the National Association of Securities Dealers,
Inc. to its accredited investor customers without any public solicitation by
either the Company or the broker-dealer.  In addition, the Company issued
warrants to the broker-dealer giving it the right to purchase Units equal to
10% of the Units issued in the private placement with each Unit consisting of
the same convertible notes and warrants as those issued to the investors.  If

                                     -17-
<PAGE>

the broker warrants are exercised in full amount of $94,500, the Company will
issue to the broker-dealer convertible promissory notes and warrants to
purchase 70,875 shares of common stock at an exercise price of $2.00 per
share.  The broker warrants expire on January 29, 2007.  The Company also
issued 25,000 shares of common stock to its counsel for legal services in
connection with the private placement.

Two investors subsequently rescinded their investments in two of the Units
because they were unwilling to sign the subordination agreement required
under the terms of the private placement. In November 2002, the Company
refunded to those investors a total amount of $100,000 and cancelled the
securities to be issued to those investors.  In August 2002, one investor was
issued 95,238 shares of common stock upon conversion of $100,000 in
convertible promissory notes.  No warrants have been exercised.

Pursuant to the terms of the notes and warrants, the common stock issuable
upon the conversion of the notes and exercise of the warrants was to be
registered with the Securities and Exchange Commission.  A registration
statement on Form SB-2 (No. 333-87328) was filed by the Company respecting
those shares, which became effective March 24, 2003.  The Company will not
realize any proceeds from the sales of the common stock registered, but will
receive proceeds from any warrants that may be exercised.


The Company closed on a senior secured financing with ING Capital LLC, on
January 17, 2003, pursuant to the terms of a Credit Agreement.  As additional
consideration for the financing, the Company issued to ING 452,050 warrants
to purchase 452,050 shares of its common stock, representing 4% of the fully
diluted capital stock (excluding warrants and options with exercise prices
exceeding $8.00 per share).  ING qualified as an "accredited investor" as
such term is defined in Rule 501(a) of Regulation D under the Securities Act.
The warrants have a ten-year life with an exercise price of $1.87 per share,
which was equal to the closing price of the Company's common stock on January
16, 2003. Terms and conditions of the warrants include, among others, shelf
and piggyback registration rights, anti-dilution protection and "tag-along"
rights. On January 31, 2003, the Company filed a shelf registration statement
on Form S-3 (No. 333-102869) respecting the shares of common stock that could
be acquired by ING pursuant to the exercise of the warrants.  That
registration statement became effective March 24, 2003.  The Company will not
realize any proceeds from the sale of the underlying common stock, but will
receive proceeds from the exercise by ING of the warrants.

                                     -18-
<PAGE>


Item  6.  Management's Discussion and Analysis of Financial
          Condition and Results of Operations.


FORWARD-LOOKING STATEMENTS AND PROJECTIONS

The Private Securities Reform Act of 1995 provides a "safe harbor" for
forward-looking statements. Certain information included in this report, and
other reports issued by the Company, contain statements that are forward
looking. The Company may from time to time make forward-looking statements
and projections concerning future expectations.  When used in this
discussion, the words "estimate," "project," "anticipate" and similar
expressions are intended to identify forward-looking statements and include,
but are not limited to, statements relating to anticipated trends in
revenues, plans for future expansion and other business development
activities, including acquisition of new concessions as well as other capital
spending, financing sources, the effects of regulation and competition, and
the ability to increase net income and cash flow.  Such forward-looking
information involves numerous risks and uncertainties that could
significantly affect anticipated results in the future and, accordingly, such
results may differ from those expressed in any forward-looking statements
made by or on behalf of the Company.  These risks and uncertainties include,
but are not limited to, those relating to additional capital necessary to
complete construction of capital improvements awarded under existing and
future concession agreements, possible early termination of 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, governmental regulatory requirements including
applications for licenses and approvals under applicable jurisdictional laws
and regulations, the terms and conditions of any potential merger or
acquisition of existing airport concession operations, the volatility of the
Company's stock price and of securities markets in general, domestic and
international economic conditions, debt service (including sensitivity to
fluctuations in interest rates), the impact of terrorism and war on tourism
and airline travel, and other factors discussed herein.


OVERVIEW

The Company 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 Company ceased the sale of new franchises in 1994 due to
the lack of profitability of this business type.

The Company entered the airport food and beverage concession market when it
was awarded a concession to operate a food and beverage location, which is
currently operated by one of the Company's franchisees, for John Wayne
Airport in Orange County, California.  In 1994, the Company was awarded its
first multiple concession contract for the Denver International Airport.

In 1996, the Company was awarded its first master concession contract to
install and manage all food, beverage, news, gift and other services for the
airport in Cedar Rapids, Iowa. The Company currently operates more than 100
concession locations at 28 airports, two of which are franchised.

                                     -19-
<PAGE>


The Company's historical revenues have been derived from three principal
sources: airport concession revenues, restaurant franchise royalties and
wholesale sales from its food preparation center.  These revenue categories
comprise a fluctuating percentage of total revenues from year to year. The
food preparation center was sold in 2001. Over the past eight years, revenues
from concession operations have grown from 59% of total revenues in 1995 to
nearly 100% of total revenues in 2002.

During the fiscal year ended December 31, 2002, the Company sold its interest
in the assets and lease at its Atlantic City, New Jersey location to a
related party for $250,000 cash.  There were existing contractual liabilities
owed to the related party at the time of the sale, and the $250,000 sales
proceeds were offset against the contractual liabilities.  The sales price
represents the estimated fair market value of the Atlantic City, New Jersey
location.  In connection with this sale, the Company recorded a gain of
$80,487.

The Company had a working capital deficit at December 31, 2002 of $1,336,305
compared to a working capital deficit of $503,062 at December 31, 2001.
Capital improvement costs incurred to meet the requirements of new airport
concession contracts and the retirement of debt have placed demands on the
Company's working capital. During the fiscal year ended December 31, 2002,
the Company raised $250,000 in capital through the sale of assets, borrowed
$845,000 by issuing convertible notes and financed $1,244,799 of equipment
purchases with capital lease obligations at an average interest rate of
approximately 8.7% per annum.

The Company will have capital requirements as new agreements are secured in
2003 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.


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 for the
year ended December 31, 2002, 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 the Company.

Revenue Recognition:

The Company records concession revenues as the sales are made and it records
revenues from in-flight catering upon delivery.  Royalties from franchise
concession locations are recorded as revenue when earned.

                                     -20-
<PAGE>



Goodwill:

In connection with the Company's acquisition of GladCo Enterprises, Inc.,
which was accounted for under the purchase method of accounting, the Company
recorded goodwill.  Until the Company's adoption of Statement of Financial
Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible
Assets," on January 1, 2002, the Company amortized goodwill using the
straight-line method over its estimated useful life of twenty years. Goodwill
is tested for impairment at least annually to determine whether the carrying
value of goodwill exceeds its implied fair value.  The fair value of a
reporting unit is based on discounted projected cash flow but the Company
also considers factors such as market capitalization and comparable industry
price multiples.  The Company employs cash flow projections that are believed
to be reasonable under current and forecasted circumstances, the results of
which form the basis for making judgments about carrying values of the
reported net assets of the Company's reporting units.  Actual results may
differ from these estimates under different assumptions or conditions.


Income Taxes:

The provision for income taxes is based on the income reported in the
financial statements. The Company recognizes deferred tax assets for
deductible temporary differences and deferred tax liabilities for taxable
temporary differences.  Temporary differences are the differences between the
reported amounts of assets and liabilities and their tax bases.  The Company
will reduce deferred tax assets by a valuation allowance when, in its
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 the net income realized
during 2001 and 2002 and other considerations, management's expectation is
that these assets will in fact be realized and in 2002 has reversed the
valuation allowance accordingly.  The effective tax rate of 5% in 2002
reflects the reversal of the Company's valuation allowance.  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.
The Company's operating results would be affected if other alternatives were
used.

                                     -21-
<PAGE>



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.

                                          YEAR ENDED DECEMBER 31,
                                          -----------------------
                                              2002      2001
                                             ------    ------
Revenues:
  Concessions                                 99.9%     99.9%
  Franchise royalties                          0.1       0.1
                                             ------    ------
  Total revenues                             100.0%    100.0%

Operating Costs and Expenses:
  Cost of goods sold                          26.9      28.4
  Payroll and employee benefits               30.4      31.7
  Occupancy                                   15.7      15.5
  Selling                                      8.9       9.0
  General and administrative                   6.4       4.6
  Depreciation and amortization                6.1       6.7
  (Gain) loss on sale of assets               (0.2)      0.4
  Interest expense, net                        2.0       2.3
  Provision (benefit) for income taxes         0.2      (0.1)
  Gain on extinguishment of debt                 -      (0.4)
                                             ------    ------
  Net income                                   3.6%      1.9%
                                             ======    ======


YEAR ENDED DECEMBER 31, 2002 COMPARED TO YEAR ENDED DECEMBER 31, 2001.

REVENUES.  The Company's revenues for the year ended December 31, 2002 were
$34,615,454 compared to $30,745,851, for the year ended December 31, 2001.
Revenues from concession activities increased $3,862,554 ($34,567,766
compared to $30,705,212) and food preparation center sales decreased $5,620
(from $5,620 to zero) while franchise royalties increased $7,049 (from
$40,639 to $47,688), for the fiscal year ended December 31, 2002 as compared
to the fiscal year ended December 31, 2001.  The increase in total concession
revenues was attributable to $3,096,480 in additional revenue due to a full
year of operations in 2002 for one location which commenced operations in
November 2001, an increase of $1,610,241 due to the opening of one new
location in 2002 and an increase of $660,774 from 2001 to 2002 at locations
that operated for a full year during both years.  These increases were
partially offset by a $414,832 decrease from 2001 to 2002 from two locations
that operated for a part of 2001 and were sold during that year and by a
decrease of $1,075,042 from 2001 to 2002 for a location that operated for a
full year in 2001, but was sold in January 2002.

OPERATING COSTS AND EXPENSES. Operating costs and expenses for the year ended
December 31, 2002 were $32,694,601, compared to $29,486,680 for the fiscal
year ended December 31, 2001.  Cost of goods sold increased from $8,716,551
in 2001 to $9,319,742 in 2002.  As a percentage of total revenues, however,
cost of goods sold was 28.4% in 2001 and decreased to 26.9% in 2002. The

                                     -22-
<PAGE>


improvement in cost of goods sold as a percentage of revenue is due to the
continuing efficiencies realized from the consolidation of purchasing with a
major supplier.  Payroll expenses increased from $9,746,338 in 2001 to
$10,537,767 in 2002.  As a percentage of total revenues, payroll expense was
31.7% in 2001 and decreased to 30.4% in 2002.  Occupancy expenses increased
from $4,768,824 in 2001 to $5,439,208 in 2002. As a percentage of total
revenues, occupancy expenses were 15.5% in 2001 and increased to 15.7% in
2002. Selling expenses increased from $2,772,040 in 2001 to $3,081,972 in
2002. As a percentage of total revenues, selling expenses decreased from 9.0%
in 2001 to 8.9% in 2002.  General and administrative expenses increased from
$1,428,234 in 2001 to $2,207,330 in 2002. As a percentage of total revenues,
general and administrative expenses increased from 4.6% in 2001 to 6.4% in
2002. The increase in general and administrative expenses is related to the
write-off of approximately $204,000 of deal costs and other related
professional fees associated with a financing transaction that the Company
terminated in order to establish a more favorable credit facility.  In
addition, the Company reserved approximately $140,564 related to receivables
for two major airlines under bankruptcy protection.

INTEREST EXPENSE. Interest expense for the fiscal year ended December 31,
2001 was $692,199 compared to $675,054 for the fiscal year ended December 31,
2002. As a percentage of total revenues, interest expense was 2.3% in 2001
and decreased to 2.0% in 2002.

OTHER INCOME AND EXPENSE. Gain on sale of assets for the year ended December
31, 2002 was $80,487.  This gain represents the net effect of the sale of the
assets of the Atlantic City, New Jersey location to a related party.  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.  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. Net income for the fiscal year ended December 31, 2002 was
$1,257,805 compared to $586,261 for the fiscal year ended December 31, 2001.

SAME STORE SALES. Results of operations reflect the operations of locations
at twenty one airports during both the years ended December 31, 2001 and
December 31, 2002. Sales for those locations were $29,072,487 for the fiscal
year ended December 31, 2001 and $29,720,182 for the fiscal year ended
December 31, 2002, representing an increase of $647,695, or 2.2%.   Partial
period operations include the sale of one location in 2001 and three
locations in 2001, as well as one new location opened in 2002 and 2001
respectively.

                                     -23-
<PAGE>



LIQUIDITY AND CAPITAL RESOURCES

The Company has funded its capital requirements in recent years through the
sale of equity and debt securities, cash flow from operations and bank debt.

During the fiscal year ended December 31, 2002, the Company raised $250,000
in capital through the sale of assets, borrowed $845,000 by issuing
convertible notes and financed $1,244,799 of equipment purchases with capital
lease obligations at an average interest rate of approximately 8.7% per
annum.  As of December 31, 2002, $64,016 was available to the Company from
its line of credit.  The line of credit was originated with First National
Bank of San Diego for $2,500,000 on November 13, 2000 and was to expire on
October 31, 2003.  At December 31, 2002, the Company was not in compliance
with one of the covenants of the credit agreement. The Company subsequently
refinanced the line of credit in January 2003 with senior debt.  As of
December 31, 2002, the Company had a working capital deficit of $1,336,305.

Cash decreased $559,522 for the year ended December 31, 2002 compared to an
increase of $88,233 for the year ended December 31, 2001. Net cash provided
by operating activities for the year ended December 31, 2002 was $3,219,958
compared to $1,913,554 for the year ended December 31, 2001.  Cash provided
by investing activities for the year ended December 31, 2002 included $18,567
received on a note receivable from a related party. Cash provided by
investing activities for the year ended December 31, 2001 included $364,362
of proceeds from the sale of assets.  Cash used for investing activities for
the year ended December 31, 2002 included $2,343,396 for property and
equipment, $23,265 for acquisition costs and $55,000 for a note receivable
issued to a related party.  Cash used for investing activities for the year
ended December 31, 2001 included $2,671,946 for property and equipment.  Cash
provided by financing activities for the year ended December 31, 2002
included $909,000 of proceeds from notes issued to investors, $1,782,076 of
proceeds from a line of credit and $10,500 proceeds from issuing common
stock.  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 net
proceeds from a line of credit.  Cash used for financing activities for the
year ended December 31, 2002 included $631,109 to retire debt, $1,195,873 for
the principal portion of capitalized lease obligations and $2,250,980 for
payment on a line of credit.  Cash used for financing activities for the year
ended December 31, 2001 included $168,368 to redeem common stock ($142,501
for redeemable common stock and $25,867 on the open market); $258,085 to
redeem the equity feature of retired debt; $1,220,250 to retire debt; and,
$918,922 for the principal portion of capitalized lease obligations.

During the first two months of 2002, the Company raised approximately
$945,000 of capital in a private placement of convertible notes and warrants
through a broker-dealer registered with the National Association of
Securities Dealers, Inc.  Two investors subsequently rescinded their
investments because they were unwilling to sign the subordination agreement
required under the terms of the private placement and the Company refunded
their investment in the total amount of $100,000 in September 2002.  The
convertible notes are convertible into a total of 804,762 shares of common
stock, and the 633,750 warrants issued entitle the warrant holders to
purchase a total of 633,750 additional shares of the Company's common stock
for an exercise price of $2.00 per share for a period of five years from the
date of issuance.  The Company terminated the offering in early March 2002.

                                     -24-
<PAGE>

In January 2003, the Company borrowed approximately $4,316,000 on its term
loan facility which was used to refinance existing debt, finance the Sanford
acquisition and pay fees and expenses related to the financing transaction.
In connection with this transaction, the Company has a commitment for an
additional $3,084,000 available for financing as well as an expansion
facility, in an amount up to $5,600,000, to finance the cash purchase price
for approved acquisitions, build outs of concession locations, and to provide
ongoing working capital needs of the Company.

The Company generally commits to expend a negotiated amount for capital
improvements to newly awarded concession facilities. In addition, the Company
is responsible for acquiring equipment necessary to conduct its operations.
As a result, the Company incurs substantial costs for capital improvements at
the commencement of a concession term. Generally, the term of the concession
grant is for a period of 10 years, providing the Company with an opportunity
to recover its capital expenditures. Substantially all of the Company's
concession locations have been obtained in the past five years, which has
resulted in significant capital needs.  As a result, the Company has been
required to seek capital, and to apply capital from operations, for leasehold
improvements at newly awarded concession locations.  The Company intends to
continue to bid for concession locations.  Cash flows from operations may not
be sufficient to finance new acquisitions at the level of growth experienced
over the past three years.  Accordingly, to the extent the Company is
successful in securing new concession contracts, the Company will continue to
need additional capital, beyond cash flow from operations, to finance the
construction of new capital improvements.

The Company anticipates capital requirements of approximately $3.7 million in
fiscal 2003 to complete the construction of improvements at concession
facilities that have already been awarded.  This includes approximately $1.2
million for recently acquired concession locations, approximately $1.7
million in connection with new concession agreements awarded in Boston Logan
Airport in Boston Massachusetts, Santa Barbara Airport in Santa Barbara,
California, and San Antonio Airport in San Antonio, Texas, and an additional
$0.8 million at other existing concession locations. The Company is continually
evaluating other airport concession opportunities, including submitting bid
proposals and acquiring existing concession owners and operators. The level
of the Company's capital requirements will depend upon the number of airport
concession facilities that are successfully acquired.

We believe that the anticipated cash flow from operations combined with funds
anticipated to be available from our existing credit facility and our cash
balance of $1.2 million as of December 31, 2002 will be sufficient to satisfy
our working capital and capital expenditure requirements for the next 12
months. Changes in our operating plans, our acquisition and growth plans,
lower than anticipated sales from concession locations, our ability to meet
the financial covenants of our credit facility, increased expenses or other
unforeseen events may cause us to seek additional or alternative financing
sooner than anticipated.  Additional or alternative financing may not be
available on acceptable terms or at all.  Failure to obtain additional or
alternative financing as needed could have a material adverse effect on our
business and results of operations.

                                     -25-
<PAGE>


The following table summarizes the Company's contractual obligations at
December 31, 2002.

<TABLE>
<CAPTION>
                                                              Payments Due by Period
--------------------------------------------------------------------------------------------------
Contractual Obligations                            Less than     1 to                      After
                                        Total       one year    3 years     4 to 5 years   5 years
<S>                                 <C>           <C>          <C>          <C>           <C>
----------------------------------  ------------  -----------  -----------  ------------  ----------
Long-term debt (1)                  $  1,538,889  $   512,144  $   273,003  $    753,742  $        -
----------------------------------  ------------  -----------  -----------  ------------  ----------
Employment Contract - Mr. Ali       $  1,498,000  $   248,000  $   900,000  $    350,000  $        -
----------------------------------  ------------  -----------  -----------  ------------  ----------
Employment Contract - Mr. Coccoli   $    487,322  $   172,000  $   315,322  $          -  $        -
----------------------------------  ------------  -----------  -----------  ------------  ----------
Line of Credit - FNB-SD (1)         $  1,310,984  $ 1,310,984  $         -  $          -  $        -
----------------------------------  ------------  -----------  -----------  ------------  ----------
Capital Lease Obligations           $  2,647,850  $ 1,364,053  $ 1,255,277  $     28,520  $        -
----------------------------------  ------------  -----------  -----------  ------------  ----------
Operating Leases                    $ 19,112,778  $ 3,055,607  $ 5,981,220  $  4,906,172  $5,169,779
----------------------------------  ------------  -----------  -----------  ------------  ----------
Midterm Refurbishments              $    528,500  $   528,500  $         -  $        -    $        -
----------------------------------  ------------  -----------  -----------  ------------  ----------
Total Contractual Cash Obligations  $ 27,124,323  $ 7,191,288  $ 8,724,822  $  6,038,434  $5,169,779
----------------------------------  ------------  -----------  -----------  ------------  ----------
</TABLE>

(1) Approximately $2,366,000 of these amounts was refinanced in January 2003.
See Recent Business Developments.

The operating leases for the facilities, the capital leases on the equipment
and the employment contracts are operating costs and will be paid with cash
generated from operations. In 2002, income from operations was $1,920,853.
The repayment of principal on the long-term debt and the line of credit will
be paid either by cash generated from operations or refinanced at or before
maturity. In 2002, the cash generated from operating activities totaled
$3,219,958, which is in excess of the amount of the long-term debt repayment
due in 2003.


RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible
Assets." 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.  SFAS No.
142 also addresses how goodwill and other intangible assets should be
accounted for after they have been initially recognized in the financial
statements. The statement was effective January 1, 2002.  The Company stopped
amortizing goodwill effective January 1, 2002 and completed both the
transitional impairment test in the second quarter of 2002 and the annual
impairment test as of January 1, 2003, which indicated no impairment of
existing goodwill.

In June 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

                                     -26-
<PAGE>

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 Company depreciates the capitalized asset's 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 15, 2002.  The Company does
not expect the adoption of SFAS No. 143 to have a material impact on its
financial position or results of operations.

On January 1, 2002, the Company adopted SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." SFAS No. 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 addresses reporting the effects of a disposal
of a segment of a business. The adoption of this new standard did not have a
material impact on the Company's financial position or results of operations.

In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements
No. 4, 44 and 64, Amendment of SFAS No. 13 and Technical Corrections", which
the Company does not believe will materially affect its financial statements.
SFAS No. 145 requires that gains and losses from the extinguishment of debt
be classified as extraordinary items only if they meet the criteria in
Accounting Principles Board Opinion No. 30.

In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities", which addresses financial accounting and
reporting for costs associated with exit or disposal activities and
supersedes EITF Issue No. 94-3, Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (including Certain
Costs Incurred in a Restructuring). SFAS No. 146 requires that a liability
for a cost associated with an exit or disposal activity be recognized when
the liability is incurred. Under EITF Issue No. 94-3, a liability for an exit
cost as defined in EITF No. 94-3 was recognized at the date of an entity's
commitment to an exit plan. SFAS No. 146 also establishes that the liability
should initially be measured and recorded at fair value. The Company will
adopt the provisions of SFAS No. 146 for exit or disposal activities that are
initiated after December 31, 2002.

In November 2002, the FASB issued FASB Interpretation No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others ", which elaborates on the disclosures
to be made by a guarantor about its obligation under certain guarantees
issued.  It also clarifies that a guarantor is required to recognize, at the
inception of a guarantee, a liability for the fair value of the obligation
undertaken in issuing the guarantee.  The interpretation expands on the
accounting guidance of SFAS No. 5, "Accounting for Contingencies, " SFAS No.
57, "Related Party Disclosures," and SFAS No. 107 " Disclosures about Fair
value of Financial Instruments."  It also incorporates without change the
provisions of FASB Interpretation No. 34, "Disclosure of Indirect Guarantees
of Indebtedness of Others."  Companies must implement the initial recognition
and measurement provision of Interpretation No. 45 for guarantees issued or

                                     -27-
<PAGE>

modified after December 31, 2002.  The disclosures of Interpretation No. 45
are effective for financial statements of interim or annual reports ending
after December 31, 2002. The Company does not believe the adoption of
Interpretation No. 45 will have a material impact of the Company's financial
statements.

In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation-Transition and Disclosure, an Amendment of FASB Statement No.
123," SFAS No. 148 provides alternative methods of transition for a voluntary
change to the fair-value based method of accounting for stock-based employee
compensation.  In addition, SFAS No. 148 amends the disclosure requirements
of SFAS No. 123 to require prominent disclosures in both annual and interim
financial statements about the method of accounting for stock-based
compensation and the effect of the method used on reported results.  The
voluntary transition and amended disclosure requirements are effective for
the Company for the year ended December 31, 2002.  The interim reporting
requirements are effective for the Company's interim reporting periods
beginning January 1, 2003.  The Company currently accounts for stock-based
employee compensation under the intrinsic value method in accordance with APB
No. 25.  The Company does not plan to voluntarily change its method of
accounting, but has implemented the amended disclosure requirements for the
year ended December 31, 2002.

In January 2003, The FASB issued FASB Interpretation No. 46, "Consolidation
of variable Interest Entities, an Interpretation of ARB No. 51."
Interpretation No. 46 provides guidance for identifying a controlling
financial interest established by means other than voting interests. It
requires consolidation of a variable interest entity by an enterprise that
holds such a controlling financial interest.  The Interpretation is effective
for all newly formed variable interest entities after January 31, 2003.  The
Interpretation is effective for fiscal years or interim periods beginning
after June 15, 2003, for variable interest entities in which a company holds
a variable interest that it acquired before February 1, 2003.  The Company
does not believe that the adoption of FASB Interpretation No. 46 will have a
material impact on its financial statements.

                                     -28-
<PAGE>


Item 7. Financial Statements



                CREATIVE HOST SERVICES, INC. AND SUBSIDIARIES
                  INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
                    YEARS ENDED DECEMBER 31, 2002 AND 2001



                                                                        Page
                                                                        ----

INDEPENDENT AUDITORS' REPORTS                                            F-1

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


                                     -29-
<PAGE>



INDEPENDENT AUDITORS' REPORT


Board of Directors and Shareholders of
Creative Host Services, Inc.

We have audited the accompanying consolidated balance sheet of Creative Host
Services, Inc. and subsidiaries (the "Company") as of December 31, 2002, and
the related consolidated statements of operations, shareholders' equity and
cash flows for the year then ended.  These financial statements are the
responsibility of the Company's management.  Our responsibility is to express
an opinion on these 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
audit provides a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Creative Host Services, Inc. and
subsidiaries as of December 31, 2002, and the results of their operations and
their cash flows for the year then ended, in conformity with accounting
principles generally accepted in the United States of America.

As discussed in Note 4 to the consolidated financial statements, effective
January 1, 2002, the Company adopted the provisions of Statement of Financial
Accounting Standards No. 142, "Goodwill and Other Intangible Assets".



/s/ DELOITTE & TOUCHE LLP
San Diego, California
March 31, 2003






                                      F-1
<PAGE>


                           INDEPENDENT AUDITORS' REPORT


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

We have audited the accompanying consolidated statements of operations,
shareholders' equity and cash flows of Creative Host Services, Inc. and
Subsidiaries for the year ended December 31, 2001. 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
audit provides 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 year ended December 31, 2001, 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
<PAGE>
<TABLE>

           CREATIVE HOST SERVICES, INC. AND SUBSIDIARIES
           CONSOLIDATED BALANCE SHEET - DECEMBER 31, 2002

<S>                                                             <C>
ASSETS
CURRENT ASSETS:
  Cash. . . . . . . . . . . . . . . . . . . . . . . . .         $ 1,241,766
  Receivables, net of allowance of $153,694. . . . . . .            401,959
  Current maturities of note receivable from related party           30,000
  Inventory . . . . . . . . . . . . . . . . . . . . . .             554,529
  Prepaid expenses and other current assets . . . . . .             295,579
  Deferred income taxes . . . . . . . . . . . . . . . .             145,429
                                                               ------------
          Total current assets. . . . . . . . . . . . .           2,669,262

PROPERTY AND EQUIPMENT, net of accumulated
  depreciation and amortization . . . . . . . . . . . .          17,073,751


DEPOSITS . . . . . . . . . . . . . . . . . . . . . . .              165,006
NOTE RECEIVABLE FROM RELATED PARTY, LESS CURRENT MATURITES            6,433
GOODWILL  . . .. . . . . . . . . . . . . . . . . . . .            4,303,119
OTHER ASSETS . . . . . . . . . . . . . . . . . . . . .              824,912
DEFERRED INCOME TAXES . . . . . . . . . . . . . . . . .             684,914
                                                               ------------
          Total other assets. . . . . . . . . . . . . .           5,984,384
                                                               ------------
                                                               $ 25,727,397
                                                               ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
  Accounts payable . . . . . . . . . . .  . . . . . . .        $    813,078
  Accrued expenses . . . . . . . . . . . . . . . . .  .           1,372,018
  Current maturities of capital lease obligations. . . .          1,174,395
  Income taxes payable. . . . . . . . . . . . . . . . .             646,076
                                                               ------------
          Total current liabilities . . . . . . . . . .           4,005,567

OTHER LONG TERM LIABILITIES . . . . . . . . . . . . . . .           162,898

LINE OF CREDIT . . . . . . . . . . . . . . . . . . . . .          1,310,984

NOTES PAYABLE . . . . . . . . . . . .. . . . . . . . . .          1,277,936

CAPITAL LEASE OBLIGATIONS, less current maturities . . .          1,220,050
                                                               ------------
          Total liabilities . . . . . . . . . . . . . .           7,977,435

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY:
  Preferred stock; no par value, 2,000,000 shares
    authorized, no shares issued or outstanding  . . . .                  -
  Common stock; no par value, 20,000,000 shares
    authorized, 8,006,210 shares issued and outstanding          17,159,590
  Additional paid-in capital. . . . . . . . . . . . . .           1,245,076
  Accumulated deficit . . . . . . . . . . . . . . . . .           (654,704)
                                                              ------------
          Total shareholders' equity. . . . . . . . . .          17,749,962
                                                               ------------
                                                               $ 25,727,397
                                                               ============
</TABLE>
             See notes to consolidated financial statements.

                                  F-3
<PAGE>
<TABLE>

                 CREATIVE HOST SERVICES, INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF OPERATIONS

                                                              Year ended          Year ended
                                                          December 31, 2002    December 31, 2001
                                                          -----------------    -----------------
<S>                                                        <C>                  <C>
REVENUES:
  Concessions . . . . . . . . . . . . . . . . . . . .      $    34,567,766      $    30,705,212
  Franchise royalties . . . . . . . . . . . . . . . .               47,688               40,639
                                                            --------------       --------------
          Total revenues. . . . . . . . . . . . . . .           34,615,454           30,745,851
                                                            --------------       --------------
OPERATING COSTS AND EXPENSES:
  Cost of goods sold. . . . . . . . . . . . . . . . .            9,319,742            8,716,551
  Payroll and other employee benefits . . . . . . . .           10,537,767            9,746,338
  Occupancy . . . . . . . . . . . . . . . . . . . . .            5,439,208            4,768,824
  Selling expenses. . . . . . . . . . . . . . . . . .            3,081,972            2,772,040
  General and administrative. . . . . . . . . . . . .            2,207,330            1,428,234
  Depreciation and amortization . . . . . . . . . . .            2,108,582            2,054,693
                                                            --------------       --------------
          Total operating costs and expenses. . . . .           32,694,601           29,486,680
                                                            --------------       --------------
INCOME FROM OPERATIONS. . . . . . . . . . . . . . . .            1,920,853            1,259,171
                                                            --------------       --------------
OTHER INCOME/EXPENSE:
  Gain on sale of assets to a related party. . . . .               (80,487)                   -
  Loss on sale of assets. . . . . . . . . . . . . . .                    -              130,725
  Interest expense, net of capitalized interest
   of $54,878 and  $0, respectively . . . . . .  . . .             675,054              692,199
                                                            --------------       --------------
  Total other expense . . . . . . . . . . . . . . . .              594,567              822,924

INCOME BEFORE INCOME TAXES AND EXTRAORDINARY ITEM. .             1,326,286              436,247

PROVISION (BENEFIT) FOR INCOME TAXES. . . . . . . . .               68,481              (21,753)
                                                            --------------       --------------
INCOME BEFORE EXTRAORDINARY ITEM . . . . . . . . . .             1,257,805              458,000
                                                            --------------       --------------
EXTRAORDINARY ITEM:
  Gain on extinguishment of convertible debt - net. .                    -             (128,261)
                                                            --------------       --------------
NET INCOME . . . . . . . . . . . . . . . . . . . . . .     $     1,257,805      $       586,261
                                                            ==============       ==============
NET INCOME PER SHARE -
  Income before extraordinary item . . . . . . . . . .     $          0.16      $          0.06

  Extraordinary item. . . . . . . . . . . . . . . . .                   -                  0.02
                                                            -------------        --------------
  Net Income
  Basic and diluted . . . . . . . . . . . . . . . . . .    $          0.16      $          0.08
                                                            ==============       ==============
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING -
  Basic . . . . . . . . . . . . . . . . . . . . . . .            7,913,223            7,386,478
                                                            ==============       ==============
  Diluted . . . . . . . . . . . . . . . . . . . . . .            7,987,819            7,413,411
                                                            ==============       ==============

</TABLE>

             See notes to consolidated financial statements.

                                    F-4
<PAGE>

<TABLE>

                CREATIVE HOST SERVICES, INC. AND SUBSIDIARIES
              CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

                                                      Additional                        Total
                                 Common stock           paid-in      Accumulated    shareholders'
                              Shares       Amount        capital        deficit          equity
                             ---------   ----------    -----------     -----------    -----------
<S>                          <C>         <C>          <C>             <C>            <C>
Balance at
January 1, 2001              6,444,515   $15,707,095  $  1,736,113    $(2,498,770)   $ 14,944,438

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                                                                586,261        586,261
                             ---------    ----------   ------------   -----------    -----------

Balance at
December 31, 2001            7,806,018    16,912,900       879,111     (1,912,509)    15,879,502


Common stock issued
for services                    65,010        86,750                                      86,750

Exercise of stock options       10,000        10,500                                      10,500

Conversion of convertible
debt, net                       95,238        69,191                                      69,191

Beneficial conversion
Feature of convertible notes                               201,191                       201 191

Warrants issued in connection
with convertible notes                                     164,774                       164,774

Reclassification of
Redeemable common stock         29,944        80,249                                      80,249


Net income                                                              1,257,805      1,257,805
                             ---------    ----------    ----------    -----------    -----------

Balance at
December 31, 2002            8,006,210   $17,159,590    $1,245,076    $  (654,704)   $17,749,962
                             =========   ===========    ==========    ===========    ===========

</TABLE>

                See notes to consolidated financial statements.

                                    F-5
<PAGE>
<TABLE>
             CREATIVE HOST SERVICES, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF CASH FLOWS


                                                 Year ended           Year ended
                                              December 31, 2002    December 31, 2001
                                              -----------------    -----------------
<S>                                            <C>                  <C>
OPERATING ACTIVITIES:
  Net income . . . .. . . . . . . . . . .      $    1,257,805       $      586,261

 ADJUSTMENTS TO RECONCILE NET INCOME
 TO NET CASH PROVIDED BY OPERATING
 ACTIVITIES:
      Depreciation and amortization . . .           2,108,582            2,085,262
      Provision for bad debts . . . . . .             119,889              (17,589)
      Amortization of debt discount. . . .            105,012              101,056
      Amortization of loan costs . . . . .             80,017                    -
      Loss on sale of assets. . . . . . .                  -               130,725
      Gain on sale of assets to related party         (80,487)                   -
      Gain on extinguishment of debt. . .                   -             (128,261)

 CHANGES IN ASSETS AND LIABILITIES:
      Receivables . . . . . . . .                      11,289              131,428
      Inventory . . . . . . . . . . . . .            (102,795)              13,747
      Prepaid expenses and
        other current assets. . . . . . .              16,269             (122,348)
      Deposits and other assets . . . . .            (482,587)             (87,076)
      Deferred income taxes . . . . . . . . . .      (830,343)             (97,940)
      Accounts payable and
        accrued expenses. . . . . . . . .             271,350             (636,237)
      Income taxes payable. . . . . . . .             583,059              (45,474)
      Long-term liabilities . . . . . . .             162,898                    -
                                              ----------------     ----------------

          Net cash provided by
            operating activities. . . .             3,219,958            1,913,554
                                              ----------------     ----------------

INVESTING ACTIVITIES:
  Purchases of property and equipment. .           (2,343,396)          (2,671,946)
  Acquisition costs . . . . . . . . . . .             (23,265)                   -
  Proceeds from sale of assets. . . . . .                   -              364,362
  Note receivable from related party . .              (55,000)                   -
  Payments on note receivable
    from related party . . . . . . . . . .             18,567                    -
                                              -----------------    -----------------
          Net cash used for
            investing activities. . . . .          (2,403,094)          (2,307,584)
                                              ----------------     ----------------

FINANCING ACTIVITIES:
  Proceeds from notes payable . . . . . .             909,000            1,268,000
  Proceeds from line of credit . . . . .            1,782,076            2,152,888
  Payments on line of credit . . . . . .           (2,250,980)            (373,000)
  Net cash amount paid upon retirement of
   beneficial conversion feature . . .  .                   -             (258,085)

</TABLE>

                 See notes to consolidated financial statements.

                                     F-6
<PAGE>

<TABLE>

                  CREATIVE HOST SERVICES, INC. AND SUBSIDIARIES
               CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

                                               Year ended           Year ended
                                            December 31, 2002    December 31, 2001
                                            -----------------    -----------------
<S>                                           <C>                  <C>
  Issuance of common stock . . . . . . .              10,500                    -
  Redemption of common stock . . . . . .                 -               (168,368)
  Payments on notes payable. . . . . . .            (631,109)          (1,220,250)
  Payments on capital lease obligations .         (1,195,873)            (918,922)
                                              ----------------     ----------------
Net cash (used in) provided by
  financing activities. . . . . . . . . .         (1,376,386)              482,263
                                              ----------------     ----------------
NET (DECREASE)INCREASE IN CASH. . . . . .           (559,522)               88,233
CASH, beginning of year . . . . . . . . .           1,801,288            1,713,055
                                              ----------------     ----------------
CASH, end of year . . . . . . . . . . . .     $     1,241,766      $     1,801,288
                                              ================     ================

SUPPLEMENTAL DISCLOSURES OF
  CASH FLOW INFORMATION:
  Interest paid . . . . . . . . . . . . .     $       532,497      $       560,574
                                              ================     ================
  Income taxes paid . . . . . . . . . . .     $       293,258      $        99,155
                                              ================     ================
SUPPLEMENTAL DISCLOSURES OF NON-CASH
  INVESTING AND FINANCING ACTIVITIES:
  Conversion of convertible debt
    to common stock, net . . . . . .  . .     $        69,191      $     1,193,642
                                              ================     ================
  Equipment acquired and financed
    by capital lease obligations. . . . .     $     1,244,799      $        47,473
                                              ================     ================
  Equipment acquired and financed
    by notes payable. . . . . . . . . .       $            -       $        12,223
                                              ================     ================
  Beneficial conversion feature
    of convertible notes . . . . . . .        $       201,191      $             -
                                              ================     ================
   Warrants issued in connection
    with convertible notes . . . . . .        $       164,774      $             -
                                              ================     ================
  Common stock issued
    for services . . . . . . . . . . . .      $        86,750      $        38,030
                                              ================     ================
  Common stock redeemed
    by issuing notes. . . . . . . . . . .     $             -      $       142,501
                                              ================     ================
  Notes issued in settlement
    of a contingent liability . . . . . .     $             -      $       105,000
                                              ================     ================
  Assets sold by settling
    a contractual liability . . . . . . .     $       250,000      $             -
                                              ================     ================
  Retire discount on debt converted
     to common stock . . . .. . . . . . .     $             -      $       179,753
                                              ================     ================
</TABLE>
              See notes to consolidated financial statements.

                                     F-7
<PAGE>


                 CREATIVE HOST SERVICES, INC. AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                    YEARS ENDED DECEMBER 31, 2002 AND 2001

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

                  ORGANIZATION AND BASIS OF PRESENTATION:

Creative Host Services, Inc. and subsidiaries ("the Company") operates food
and beverage concessions at airports and provides 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 the Company's
wholesale food preparation activities.  As of December 31, 2002, the Company
operates 142 concession facilities at 28 airports throughout the country, two
of which are franchised.

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 transactions and accounts have been eliminated in consolidation.

                            REVENUE RECOGNITION:

Concession revenues are recorded as the sales are made and revenues from
in-flight catering are recorded upon delivery.  Royalties from franchised
concession locations are recorded as revenue when earned.

                               USE OF ESTIMATES:

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

                            RECLASSIFICATIONS:

Certain prior year amounts have been reclassified to conform to the current
year presentation.


                                    F-8

<PAGE>

               CREATIVE HOST SERVICES, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                   YEARS ENDED DECEMBER 31, 2002 AND 2001

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED

                        FINANCIAL INSTRUMENTS:

The following disclosure of the estimated fair value of financial instruments
is made in accordance with the requirements of SFAS No. 107, "Disclosures
about Fair Value of Financial Instruments" and SFAS No. 119, "Disclosures
about Derivative Financial Instruments and Fair Value of Financial
Instruments".  The estimated fair value amounts have been determined by the
Company using available market information and valuation methodologies
described below.  Considerable judgment is required, however, in interpreting
market data to develop the estimates of fair value.  Accordingly, the
estimates presented herein may not be indicative of the amounts that the
Company could realize in a current market exchange.  The use of different
market assumptions or valuation methodologies may have a material effect on
the estimated fair value amounts.

The carrying values of cash and cash equivalents, receivables, accounts
payable, and accrued expenses approximate fair values due to the short-term
maturities of these instruments.  The carrying amount of the Company's line
of credit is estimated to approximate fair value as the interest rate is tied
to a short-term index.  The carrying amounts of the Company's capital lease
obligations are estimated to approximate fair value as the interest rates are
consistent with rates estimated to be currently available for similar
instruments.  The Company also has a long-term note receivable with a related
party that, due to its recent issuance, has a carrying value that
approximates fair value. The carrying amounts and estimated fair values of
the Company's notes payable at December 31, 2002 total $1,277,936 and
$1,304,318, respectively.  The fair value of notes payable was determined
using quoted market prices, where applicable, or estimated by discounting
future cash flows using rates estimated to be currently available for debt of
similar terms and remaining maturities.

                                INVENTORY:

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

                            PROPERTY AND EQUIPMENT:

Property and equipment are recorded at cost, including interest on funds to
finance the construction of concession locations. For financial statement
purposes, depreciation or amortization 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 - the useful lives of the improvements, or terms of
the leases, whichever is shorter.

                                    F-9
<PAGE>


               CREATIVE HOST SERVICES, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                 YEARS ENDED DECEMBER 31, 2002 AND 2001

                            CAPITALIZED INTEREST:

Interest costs capitalized during the construction period of concession
locations were approximately $54,878 and $0 during 2002 and 2001,
respectively.

   IMPAIRMENT OF LONG-LIVED ASSETS AND INTANGIBLES SUBJECT TO AMORTIZATION:

The Company continually reviews whether events and circumstances subsequent
to the acquisition of any long-lived assets, or intangible assets subject to
amortization, have occurred that indicate the remaining estimated useful
lives of those assets may warrant revision or that the remaining balance of
those assets may not be recoverable.  If events and circumstances indicate
that the long-lived assets should be reviewed for possible impairment, the
Company uses projections to assess whether future cash flows on a non-
discounted basis related to the tested assets are likely to exceed the
recorded carrying amount of those assets, to determine if a write-down is
appropriate.  Should impairment be identified, a loss would be reported to
the extent that the carrying value of the impaired assets exceeds their fair
values as determined by valuation techniques appropriate in the circumstances
that could include the use of similar projections on a discounted basis.

                                  GOODWILL:

Goodwill is tested for impairment at least annually to determine whether the
carrying value of goodwill exceeds its implied fair value.  The fair value of
a reporting unit is based on discounted projected cash flow but the Company
also considers factors such as market capitalization and comparable industry
price multiples.  The Company employs cash flow projections that are believed
to be reasonable under current and forecasted circumstances, the results of
which form the basis for making judgments about carrying values of the
reported net assets of the Company's reporting units.  Actual results may
differ from these estimates under different assumptions or conditions.

                         DEFERRED FINANCING FEES:

Deferred financing fees are capitalized and amortized over the respective terms
of the debt.


                                     F-10
<PAGE>



               CREATIVE HOST SERVICES, INC. AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                   YEARS ENDED DECEMBER 31, 2002 AND 2001


(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED

                               INCOME TAXES:

The provision for income taxes is based on the income reported in the
financial statements.   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.

                          STOCK-BASED COMPENSATION:

SFAS No. 123, "Accounting for Stock-Based Compensation" as amended by SFAS
No. 148, "Accounting for Stock Based Compensation - Transition and
Disclosure" an amendment of SFAS No. 123, provides accounting guidance
related to stock-based employee compensation. SFAS No. 123, as amended,
encourages, but does not require, companies to record compensation cost for
stock-based employee compensation plans at fair value. The Company has chosen
to continue to account for stock-based compensation using the intrinsic value
method prescribed in Accounting Principles Board ("APB") Opinion No. 25,
"Accounting for Stock Issued to Employees", and related interpretations for
all periods presented. Accordingly, compensation cost for stock options is
measured as the excess, if any, of the fair value of the Company's stock at
the date of the grant over the amount an employee must pay to acquire the
stock.

Pro forma information regarding net income and net income per share under the
fair value method as prescribed under SAFS No. 123 as amended by SFAS No.
148, is as follows:
<TABLE>
                                                 Year ended          Year ended
                                              December 31, 2002   December 31, 2001
                                              -----------------   -----------------
<S>                                           <C>                  <C>
Net income . . .  . . . . . . . . . . . . .   $       1,257,805    $        586,261
Pro forma expense associated with
stock options under SFAS No. 123 . . . . . .            226,769             211,291
                                              -----------------   -----------------
Pro forma net income . . . . . . . . . . . .  $       1,031,036    $        374,970
                                              =================   =================
Net income per share
  Basic and diluted pro forma                 $            0.13    $           0.05
                                              =================   =================
  Basic and diluted as reported               $            0.16    $           0.08
                                              =================   =================

</TABLE>
                                    F-11
<PAGE>

                CREATIVE HOST SERVICES, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                  YEARS ENDED DECEMBER 31, 2002 AND 2001


(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED

The fair value of each option is estimated on the date of grant using the
Black-Scholes option-pricing model. The weighted-average fair value of the
options on the grant date was $1.43 and $1.17 per share for 2002 and 2001,
respectively. The following assumptions were used for grants in 2002 and
2001: risk free interest rates ranging from 1.34% to 1.75%, and 3.91% to 6.01%
respectively, expected lives of five to ten years; dividend yield of 0%; and
expected volatility of 382% and 298%, respectively.  The estimated fair value
of options granted is subject to the assumptions made, and if the assumptions
changed, the estimated fair value amounts could be significantly different.


                             NET INCOME PER SHARE:

Basic net income per share is computed by dividing net income by the weighted
average number of shares of common stock outstanding during each period.
Diluted net income per share reflects the potential dilution that could occur
if securities or other contracts to issue common stock (convertible notes,
warrants, and options to purchase common stock) were exercised or converted
into common stock.  Potential common shares in the diluted computation are
excluded when their effect would be anti-dilutive.

A reconciliation of basic and diluted net income per share in accordance with
SFAS No. 128 is as follows:

                                                    2002         2001
                                                   ------       ------
     Numerator:
        Net income before extraordinary
         item for basic and diluted
         net income per share                  $ 1,257,805   $  458,000
                                                ==========    =========
     Denominator:
       Basic:
         Weighted average common
         shares outstanding                      7,913,223    7,386,478
       Diluted:
          Effect of dilutive securities -
            Common stock options                    68,326       21,289
            Warrants                                 6,270        5,644
                                                ----------    ---------
     Dilutive potential common shares            7,987,819    7,413,411
                                                ==========    =========
     Net income before extraordinary
       item per share:
        Basic                                  $      0.16   $     0.06
                                                ==========    =========
        Diluted                                $      0.16   $     0.06
                                                ==========    =========

                                    F-12
<PAGE>

                 CREATIVE HOST SERVICES, INC. AND SUBSIDIARIES
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                    YEARS ENDED DECEMBER 31, 2002 AND 2001


(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED


For 2002 and 2001, options to purchase 207,500 and 385,103 shares of common
stock, respectively, were excluded from the computation of diluted net income
per share, as the inclusion of such shares would be anti-dilutive.

For 2002 and 2001, warrants to purchase 718,982 and 718,946 shares of common
stock, respectively, were excluded from the computation of diluted net income
per share, as the inclusion of such shares would be anti-dilutive.

For 2002, notes convertible into 709,524 shares of common stock were excluded
from the computation of diluted net income per share, as the inclusion of
such shares would be 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.


                      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, 2002 and 2001, the Company has no
items that represent other comprehensive income and, therefore, has not
included a schedule of comprehensive income in the financial statements.


                       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.


                          SEGMENT INFORMATION:

The Company currently considers its business to consist of one operating
segment.

                                     F-13
<PAGE>



                CREATIVE HOST SERVICES, INC. AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                  YEARS ENDED DECEMBER 31, 2002 AND 2001

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED


                 RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS:


In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible
Assets." 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.  SFAS No.
142 also addresses how goodwill and other intangible assets should be
accounted for after they have been initially recognized in the financial
statements.  The statement was effective January 1, 2002.  The Company
stopped amortizing goodwill effective January 1, 2002 and completed both the
transitional impairment test in the second quarter of 2002 and the annual
impairment test as of January 1, 2003, which indicated no impairment of
existing goodwill.

In June 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, the company would
capitalize the cost, thereby increasing the carrying amount of the related
asset. The Company depreciates the capitalized asset's 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. The Company does
not expect the adoption of SFAS No. 143 to have a material impact on the
Company's financial position or results of operations.

On January 1, 2002, the Company adopted SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." SFAS No. 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 addresses reporting the effects of a disposal
of a segment of a business. The adoption of this new standard did not have a
material impact on the Company's financial position or results of operations.

In April 2002, the FASB issued SFAS No. 145, "Rescission 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.
SFAS No. 145 requires that gains and losses from the extinguishment of debt
be classified as extraordinary items only if they meet the criteria in
Accounting Principles Board Opinion No. 30.

                                    F-14
<PAGE>



                CREATIVE HOST SERVICES, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                    YEARS ENDED DECEMBER 31, 2002 AND 2001


(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED


In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities", which addresses financial accounting and
reporting for costs associated with exit or disposal activities and
supersedes EITF Issue No. 94-3, Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (including Certain
Costs Incurred in a Restructuring). SFAS No. 146 requires that a liability
for a cost associated with an exit or disposal activity be recognized when
the liability is incurred. Under EITF Issue No. 94-3, a liability for an exit
cost as defined in EITF No. 94-3 was recognized at the date of an entity's
commitment to an exit plan. SFAS No. 146 also establishes that the liability
should initially be measured and recorded at fair value. The Company will
adopt the provisions of SFAS No. 146 for exit or disposal activities that are
initiated after December 31, 2002.

In November 2002, the FASB issued FASB Interpretation No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others ", which elaborates on the disclosures
to be made by a guarantor about its obligation under certain guarantees
issued.  It also clarifies that a guarantor is required to recognize, at the
inception of a guarantee, a liability for the fair value of the obligation
undertaken in issuing the guarantee.  The interpretation expands on the
accounting guidance of SFAS No. 5, "Accounting for Contingencies, " SFAS No.
57, "Related Party Disclosures," and SFAS No. 107 " Disclosures about Fair
value of Financial Instruments."  It also incorporates without change the
provisions of FASB Interpretation No. 34, "Disclosure of Indirect Guarantees
of Indebtedness of Others."  Companies must implement the initial recognition
and measurement provision of Interpretation No. 45 for guarantees issued or
modified after December 31, 2002.  The disclosures of Interpretation No. 45
are effective for financial statements of interim and annual reports ending
after December 31, 2002.  The Company does not believe the adoption of
Interpretation No. 45 will have a material impact of the Company's financial
statements.

In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation-Transition and Disclosure, an Amendment of FASB Statement No.
123." SFAS No. 148 provides alternative methods of transition for a voluntary
change to the fair-value based method of accounting for stock-based employee
compensation.  In addition, SFAS No. 148 amends the disclosure requirements
of SFAS No. 123 to require prominent disclosures in both annual and interim
financial statements about the method of accounting for stock-based
compensation and the effect of the method used on reported results.  The
voluntary transition and amended disclosure requirements are effective for
the Company for the year ended December 31, 2002.  The interim reporting
requirements are effective for the Company's interim reporting periods


                                     F-15
<PAGE>


                CREATIVE HOST SERVICES, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                    YEARS ENDED DECEMBER 31, 2002 AND 2001


(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED

beginning January 1, 2003.  The Company currently accounts for stock-based
employee compensation under the intrinsic value method in accordance with APB
No. 25.  The Company does not plan to voluntarily change its method of
accounting, but has implemented the amended disclosure requirements for the
year ended December 31, 2002.

In January 2003, the FASB issued FASB Interpretation No. 46, "Consolidation
of Variable Interest Entities, an Interpretation of ARB No. 51."
Interpretation No. 46 provides guidance for identifying a controlling
financial interest established by means other than voting interests. It
requires consolidation of a variable interest entity by an enterprise that
holds such a controlling financial interest.  The Interpretation is effective
for all newly formed variable interest entities after January 31, 2003.  The
Interpretation is effective for fiscal years or interim periods beginning
after June 15, 2003, for variable interest entities in which a company holds
a variable interest that it acquired before February 1, 2003.  The Company
does not believe that the adoption of FASB Interpretation No. 46 will have a
material impact on its financial statements.


(2) RECEIVABLES

<TABLE>
 Receivables at December 31, 2002 consist of the following:

                         Gross carrying       Allowances for          Receivables,
                             amount          doubtful accounts            net
                         ---------------     -----------------       --------------
   <S>                   <C>                 <C>                     <C>
   Receivables from
   concession sales
   to airlines           $       355,294     $       (153,694)       $      201,600

   Insurance claims               98,638                    -                98,638

   Other                         101,721                    -               101,721
                         ----------------    -----------------       ---------------
                         $       555,653     $       (153,694)       $      401,959
                         ================    =================       ===============
</TABLE>

                                     F-16
<PAGE>



               CREATIVE HOST SERVICES, INC. AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                  YEARS ENDED DECEMBER 31, 2002 AND 2001



(3) PROPERTY AND EQUIPMENT:

A summary of property and equipment at December 31, 2002 is as follows:

         Food and beverage concession equipment           $   17,268,524
         Leasehold improvements                                5,375,229
         Office equipment                                        225,056
         Construction in progress                                554,096
                                                            ------------
                                                              23,422,905
         Less accumulated depreciation and amortization        6,349,154
                                                            ------------
         Property and equipment, net                     $    17,073,751
                                                            ============

Assets associated with capital lease obligations of approximately $4,748,227
are included in food and beverage concession equipment in the table above.
Accumulated depreciation as of December 31, 2002 of $1,205,995 related to
these assets.

Depreciation and amortization expense on property and equipment totaled
$2,070,914 and $1,799,519 for the years ended December 31, 2002 and 2001,
respectively.


(4) OTHER ASSETS

                                GOODWILL
                                --------

Effective January 1, 2002, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible
Assets." SFAS No. 142, among other things, specifies that goodwill and
certain intangible assets with indefinite lives no longer be amortized, but
instead be subject to periodic impairment testing. Previously recognized
goodwill is to be initially tested for impairment as of the beginning of
2002. At December 31, 2002, the Company had goodwill of $4,303,119, all of
which was related to the acquisition of Gladco Enterprises, Inc. and related
entities in October 2000.  Until adoption of SFAS No. 142, the Company
amortized goodwill using the straight-line method over its estimated useful
life of twenty years.  As required by SFAS No. 142, the Company completed the
transitional impairment test for goodwill during the second quarter of 2002
and its annual impairment test as of January 1, 2003. The Company identified
one reporting unit for these purposes. There was no impairment indicated as a
result of the transitional impairment tests.


                                     F-17
<PAGE>


                 CREATIVE HOST SERVICES, INC. AND SUBSIDIARIES
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                    YEARS ENDED DECEMBER 31, 2002 AND 2001



(4) OTHER ASSETS, CONTINUED

The following sets forth a reconciliation of net income and income per share
information for the years ended December 31, 2002 and 2001 adjusted for the
non-amortization provisions of SFAS No. 142.

                                                      2002         2001
                                                   ----------   ----------
Reported net income                               $ 1,257,805   $  586,261
Add back: goodwill amortization,
   net of tax effect                                        -      181,560
                                                   ----------   ----------
Adjusted net income                               $ 1,257,805   $  767,821
                                                   ==========   ==========
Basic net income per share:
Reported net income                               $      0.16   $     0.08
Goodwill amortization,
   net of tax effect                                        -         0.02
                                                   ----------   ----------
Adjusted net income                               $      0.16   $     0.10
                                                   ==========   ==========
Diluted net income per share:
Reported net income                               $      0.16   $     0.08
Goodwill amortization,
   net of tax effect                                        -         0.02
                                                   ----------   ----------
Adjusted net income                               $      0.16   $     0.10
                                                   ==========   ==========

                                OTHER ASSETS
                                ------------

A summary of the components of other assets at December 31, 2002 is as
follows:

                  Franchise  costs                 $     335,909
                  Loan  fees                             730,133
                  Other                                  234,185
                                                     -----------
                                                       1,300,227
                  Less  accumulated  amortization        475,315
                                                    ------------
                                                   $     824,912
                                                    ============

Amortization expense amounted to $37,668 and $36,308 for the years ended
December 31, 2002 and 2001, respectively.


                                    F-18
<PAGE>


                  CREATIVE HOST SERVICES, INC. AND SUBSIDIARIES
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                    YEARS ENDED DECEMBER 31, 2002 AND 2001


(5) ACCOUNTS PAYABLE

Purchases from one supplier amounted to approximately $4,902,313 for the year
ended December 31, 2002.  Approximately $220,371 accounts payable was due to
this supplier at December 31, 2002.


(6) ACCRUED EXPENSES

A summary of the components of accrued expenses at December 31, 2002 is as
follows:

                  Accrued compensation                  $    752,250
                  Accrued sales and other taxes              205,511
                  Accrued rent                               156,494
                  Other                                      257,763
                                                         -----------
                                                        $  1,372,018
                                                         ===========


(7) NOTES PAYABLE

A summary of notes payable as of December 31, 2002 is as follows:

<TABLE>
<S>                                                              <C>
Subordinated  convertible notes payable, interest at 9%,
   per annum due quarterly, through December 31, 2006,
  (net of discount of $260,953)                                         $   484,047
Note payable to a bank, interest at 9%, due July 2004,
  paid January 2003                                                         633,183
Notes payable to former shareholders, interest at 9%,
  due in monthly installments of $4,797 through December 2003,
  paid January 2003                                                          54,921
Note payable to a finance company, interest at 13.1%, due in monthly
  installments of $413 through April 2004, paid January 2003                  6,025
Note payable to a corporation, interest at 8%, due in monthly
 installments of $1,784 through May 2006, paid January 2003                  63,797
Note payable to a finance company, interest at 6.9%, due in
 monthly installments of $7,317 through May 2003, paid January 2003          35,963
                                                                          ---------
                                                                        $ 1,277,936
                                                                          =========
</TABLE>

As discussed in Note 17, in January 2003, the Company entered into a new
long-term credit agreement.  A portion of the proceeds from the new financing
was used to pay off all of the notes summarized in the above table except for
the subordinated convertible notes payable; therefore, such amounts have been
classified as long-term in the Company's balance sheet at December 31, 2002.
Principal payments on the subordinated convertible notes payable are due in
December 2006.


                                    F-19
<PAGE>

                  CREATIVE HOST SERVICES, INC. AND SUBSIDIARIES
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                    YEARS ENDED DECEMBER 31, 2002 AND 2001


(7) NOTES PAYABLE, CONTINUED


                      SUBORDINATED CONVERTIBLE DEBENTURES
                      -----------------------------------

In September 2000, the Company issued $2,000,000 out of a total of $2,500,000
convertible debentures with interest at 7% per annum at a 5% discount rate
and a warrant to purchase 100,000 shares of the Company's common stock at an
exercise price of $6.86 per share.

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, which required the write-
off of unamortized discount totaling $179,753.

In August 2001, the Company paid-off the remaining convertible debenture
balance of $941,915, for $1,200,000 cash, including principal and interest,
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 in the Statement of Operations and the Statement
of Cash Flows net of related unamortized loan origination costs of $60,069
and unamortized discount of $230,833, giving rise to a net gain of $128,261)
and required cash of $258,085 as the negotiated cost of the early retirement,
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.

In a private placement during the three months ended March 31, 2002, the
Company issued 18.9 Units, with each Unit consisting of one $50,000 principal
amount Series A 9% Subordinated Convertible Note and 37,500 warrants for
common stock exercisable at $2.00 per share until November 21, 2006. The
notes were convertible into a total of 900,000 shares of the Company's common
stock. Interest is due quarterly and the notes are fully due and payable on
December 31, 2006.

Two investors subsequently rescinded their investment in two of the Units,
because they were unwilling to sign the subordination agreement required
under the terms of the private placement. In November 2002, the Company
refunded the total investment without interest of $100,000, and the discount
allocated to the warrants and the beneficial conversion feature associated
with this investment was reversed.


                                    F-20
<PAGE>


                  CREATIVE HOST SERVICES, INC. AND SUBSIDIARIES
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                    YEARS ENDED DECEMBER 31, 2002 AND 2001


(7) NOTES PAYABLE, CONTINUED

The notes and the warrants were recorded at their relative fair values, with
the portion allocated to the warrants accounted for as paid-in capital, which
resulted in a beneficial conversion feature on the notes that was recognized
as an additional discount on the notes. The discount will be amortized as
interest expense over the term of the notes.

On August 20, 2002, $100,000 of the Convertible Notes were converted into
95,238 shares of the Company's common stock. At December 31, 2002, $484,047,
net of unamortized discount of $260,953, is included in notes payable related
to this offering.

Additionally, the Company issued warrants to the brokers to purchase Units
equal to 10% of the Units issued to the investors in the private placement at
an exercise price of $50,000 per Unit for a period of five years from January
29, 2002. If these warrants are exercised, the Units purchased by the broker
will have the same rights as the Units issued to the investors.  The value of
these warrants at December 31, 2002 was $20,100 and is included in Other
Long-term Liabilities in the accompanying consolidated balance sheet.


(8) LINE OF CREDIT

At December 31, 2002, the Company had a revolving line of credit with a bank
expiring October 31, 2003. The line of credit originated on November 13,
2000, with maximum borrowing capacity of $2,500,000.  The maximum borrowing
allowed was reduced by $125,000 each quarter. The line of credit's interest
rate was 0.25% under the bank's reference rate.  The line was collateralized
by inventory, furniture, equipment and intangible property. The amount
outstanding on the line of credit at December 31, 2002 was $1,310,984.

The revolving line of credit contained various covenants including a debt to
worth ratio, current ratio, debt service coverage ratio, capital expenditures
limit, and acquisition limit.  At December 31, 2002, the Company was not in
compliance with respect to one of the covenants of the line of credit
agreement.

As discussed in Note 17, in January 2003, the Company entered into a new
long-term credit agreement.  A portion of the proceeds from the new financing
was used to pay off this bank line of credit; therefore, the balance of
$1,310,984 has been classified as long-term in the Company's balance sheet at
December 31, 2002.


(9) CAPITAL LEASE OBLIGATIONS

Equipment leases payable to a finance company with an approximate average
interest rate of 13.7%, are due in monthly installments through the year
2006, and are collateralized by food and beverage concession equipment.

                                    F-21
<PAGE>


                CREATIVE HOST SERVICES, INC. AND SUBSIDIARIES
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                    YEARS ENDED DECEMBER 31, 2002 AND 2001

(9) CAPITAL LEASE OBLIGATIONS, CONTINUED

The following is a summary of the principal amounts payable under capital
leases over the next five years as of December 31, 2002:

                    2003                                  $ 1,364,053
                    2004                                    1,055,847
                    2005                                      199,430
                    2006                                       28,520
                                                              -------
                    Total  minimum  lease  payments         2,647,850
                    Less  amount  representing  interest      253,405
                                                           ----------
                    Present value of net minimum
                    lease payments                          2,394,445
                    Less  current  maturities               1,174,395
                                                            ---------
                                                          $ 1,220,050
                                                            =========

(10) INCOME TAXES:

The components of the income tax expense (benefit) for 2002 and 2001 are as
follows:
                                               2002           2001
                                             --------       --------
Federal expense/(benefit)
    Current                                 $ 691,307      $       -
    Deferred                                 (648,929)      (120,053)

State expense/(benefit)
    Current                                   207,517         98,300
    Deferred                                 (181,414)             -
                                             --------       --------
Total income tax expense/(benefit)          $  68,481      $ (21,753)
                                             ========       ========


The income tax effects of temporary differences and credit carryforwards
which comprise the Company's deferred tax assets and liabilities at December
31, 2002 are as follows:
                                                              2002
                                                           ----------
Current deferred tax asset (liability) arising from:
  Accrued vacation . . . . . . . . . . . . . . . . . .     $  121,572
  State income taxes . . . . . . . . . . . . . . . . .        (48,818)
  Allowance for doubtful accounts. . . . . . . . . . .         65,843
  Deferred revenue . . . . . . . . . . . . . . . . . .          6,832
                                                            ---------
                                                           $  145,429
                                                            =========
Long-term deferred tax asset arising from:
  Depreciation and amortization. . . . . . . . . . . .     $  684,914
                                                            =========
                                   F-22
<PAGE>

                CREATIVE HOST SERVICES, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                   YEARS ENDED DECEMBER 31, 2002 AND 2001

(10) INCOME TAXES, CONTINUED

A reconciliation of the income tax expense (benefit) to the federal statutory
rate is as follows.
                                                    2002         2001
                                                 ---------     ---------
     Federal income tax expense
      at statutory rate                          $ 450,937     $ 148,324
     Amortization of goodwill not deductible
      for income tax purposes . . .  . . .               -        77,303
     Other adjustments - net                        62,877       (15,793)
     State income taxes. . . . . . . . . . .        17,228        78,300
     Net operating loss carryforward . . . .             -      (289,887)
     Reversal of valuation allowance . . . .      (462,561)      (20,000)
                                                 ---------     ---------
                                                 $  68,481     $ (21,753)
                                                 =========     =========


During 2001, the Company had an extraordinary gain on extinguishment of debt
in the net amount of $128,261.  There was no tax expense associated with this
extraordinary item as the transaction did not give rise to taxable income.


(11) COMMITMENTS AND CONTINGENCIES

OPERATING LEASES
----------------

The Company leases its office facility and concession locations under various
operating lease agreements expiring through 2010. These leases require the
Company to pay the greater of a percentage of monthly sales or a pro-rata
portion of a minimum annual guarantee. Rental expense under operating leases,
totaled $3,398,862 and $4,523,047 for 2002 and 2001, respectively. As of
December 31, 2002, future minimum rental payments required under operating
leases, at the minimum annual guarantee amount, exclusive of rental payments
based on concession sales and number of enplanements, are as follows:

Year ending December  31,
          2003                                   $     3,055,607
          2004                                         3,031,251
          2005                                         2,949,969
          2006                                         2,595,706
          2007                                         2,310,466
          Thereafter                                   5,169,779
                                                       ---------
                                                 $    19,112,778
                                                      ==========

                                    F-23
<PAGE>


              CREATIVE HOST SERVICES, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                   YEARS ENDED DECEMBER 31, 2002 AND 2001


(11) COMMITMENTS AND CONTINGENCIES, CONTINUED

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 currently plans to make capital improvements at six of its
locations. Some of the concession agreements require the Company to make
midterm refurbishments to the concession locations.  The total cost the
Company is required to spend in 2003 is $528,500.  The estimated cost of
additional capital improvements is $300,000 excluding capitalized interest.
Generally the Company's sub-contractor will provide the construction bonds
for the planned capital improvements. No construction bonds are outstanding
in the name of the Company.  The construction is expected to be completed in
2003.


EMPLOYMENT AGREEMENTS
---------------------

The Company has an employment agreement with its Chief Executive Officer
providing for total compensation of $1,498,000 through the year 2007. The
Company also has an employment agreement with the President of GladCo
Enterprises, Inc. providing for total compensation of $487,322 through August
21, 2005.


LEGAL CONTINGENCIES
-------------------

The Company is 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.


(12) COMMON STOCK

In 2002, $100,000 of the convertible notes was converted into 95,238 shares
of common stock.  In 2001, $1,193,642 of a convertible debenture and the
associated accrued interest were converted into 1,345,003 shares of common
stock.

In connection with its acquisition of GladCo Enterprises, Inc., in 2000, the
Company had a contingent obligation to permit sellers to elect to require the

                                    F-24
<PAGE>

                CREATIVE HOST SERVICES, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                   YEARS ENDED DECEMBER 31, 2002 AND 2001


(12) COMMON STOCK CONTINUED

Company to repurchase 69,638 shares of the Company's common stock when they
were freely tradable at a price equal to the per share issuance price times
the number of shares repurchased.  In December 2001, 39,694 of these shares
were redeemed for $142,502 cash and by issuing notes for $142,501.  At
December 31, 2001, 29,944 of these shares remained outstanding, and
accordingly were excluded from stockholders' equity.  During 2002, this
contingent consideration was relieved and as a result, $80,249 was
reclassified to shareholders' equity.

(13) STOCK OPTIONS

The Company has a 1997 Stock Option Plan (the "1997 Plan"), which provides
for the issuance of 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, or less than 110% of the fair market value in the case of a ten
percent shareholder, and have a term of not more than ten years.

In 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.
Options granted under the 2001 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, or less than 110% of the fair market value of stock in the
case of a ten percent shareholder, and have a term of ten years, or five
years in the case of a ten percent shareholder.

The number and weighted average exercise prices of options granted under both
plans, for the years ended December 31, 2002 and 2001 are as follows:

                                             2002             2001
                                        ---------------  ---------------
                                               Weighted         Weighted
                                                Average          Average
                                                Exercise        Exercise
                                        Number  Price     Number   Price
                                       -------  -------  -------  ------
Outstanding at beginning of the year   417,000  $  2.93  218,000  $4.31
Granted during the year. . . . . . .   180,000     1.61  205,000   1.17
Exercised during the year. . . . . .    10,000     1.05        -      -
Expired during the year. . . . . . .   101,000     3.55    6,000   4.07
                                       -------           -------
Outstanding at end of the year . . .   486,000     2.11  417,000   2.93
                                       =======           =======
Exercisable at end of the year . . .   360,166     2.32  260,666   3.19
                                       =======           =======

                                    F-25
<PAGE>

               CREATIVE HOST SERVICES, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                   YEARS ENDED DECEMBER 31, 2002 AND 2001


(13) STOCK OPTIONS, CONTINUED

<TABLE>
<CAPTION>

The following table summarizes information about stock options outstanding at
December 31, 2002.
<S>            <C>                <C>           <C>        <C>                 <C>
                                  Weighted
                                  Average       Weighted                       Weighted
Range of       Number             Remaining     Average    Number              Average
Exercise       Outstanding at     Contractual   Exercise   Exerciseable at     Exercise
Prices         December 31, 2002  Life          Price      December 31, 2002   Price
-------------  -----------------  ------------  ---------  ------------------  ---------
0.01 - $1.00             15,000    6.80 years   $   0.93              15,000   $    .93
-------------  -----------------  ------------  ---------  ------------------  ---------
1.01 - $2.00            373,500    7.87 years   $   1.38             268,500   $   1.33
-------------  -----------------  ------------  ---------  ------------------  ---------
2.01 - $3.00              2,500    3.02 years   $   2.13                 833   $   2.13
-------------  -----------------  ------------  ---------  ------------------  ---------
3.01 - $4.00             20,000    4.81 years   $   3.88              20,000   $   3.88
-------------  -----------------  ------------  ---------  ------------------  ---------
4.01 - $5.00             15,000    3.94 years   $   4.46              13,333   $   4.41
-------------  -----------------  ------------  ---------  ------------------  ---------
5.01 - $7.00             60,000    2.01 years   $   6.33              60,000   $   6.33
-------------  -----------------  ------------  ---------  ------------------  ---------
                        486,000    6.06 years   $   2.18             377,666   $   2.32
               =================  ============  =========  ==================  =========

</TABLE>

(14) WARRANTS

At December 31, 2002, the Company had warrants outstanding that allow the
holders to purchase up to 1,382,732 shares of common stock at exercise prices
ranging from $.91 to $13.20, expiring through March 2007.

The number and weighted average exercise prices of the warrants for the years
ended December 31, 2002 and 2001 are as follows:

                                             2002              2001
                                     ------------------  ----------------
                                                Average            Average
                                                Exercise           Exercise
                                      Number    Price     Number   Price
                                      --------  -------  ---------  -----
Outstanding at January 1 . . . . . .   748,982   $6.44     623,575  $7.37
Granted during the year. . . . . . .   633,750    2.00     295,000   1.76
Exercised during the year. . . . . .       -         -     169,593   1.63
                                     ---------             -------
Outstanding at December 31 . . . . . 1,382,732    4.39     748,982   6.44
                                     =========             =======


                                    F-26
<PAGE>

               CREATIVE HOST SERVICES, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                  YEARS ENDED DECEMBER 31, 2002 AND 2001


(15) 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 Company contributions
were made to the plan for the years ended December 31, 2002 and 2001.

(16) RELATED PARTY TRANSACTIONS

In April 2002, the Company loaned $55,000 to the Company's Chief Executive
Officer at 8.5% interest, due in monthly payments of $2,500, through April
2004.  As of December 31, 2002, the outstanding balance on this note
receivable was $36,433.

In conjunction with the purchase of GladCo Enterprises, Inc., the Company
assumed a lease for office space.  The building is owned by the president of
GladCo.  The lease term is five years, ending in December of 2003, with
annual rent payments of $36,000.

In January 2002, the Company sold its location in Atlantic City, New Jersey
to the spouse of the President of GladCo for $250,000 cash.  There were
existing contractual liabilities, related to the acquisition of GladCo, owed
to the President of GladCo at the time of the sale, and the $250,000 sales
proceeds were offset against the contractual liabilities.  The $250,000 sales
price represents the estimated fair market value of the Atlantic City, New
Jersey location at the date of the sale. A gain of $80,487 was recorded on
this transaction during the year ended December 31, 2002.


(17) SUBSEQUENT EVENTS

In January 2003, the Company entered into a senior secured financing with an
investment company pursuant to the terms of a credit agreement. The credit
agreement provides for a total financing commitment of $13,000,000 consisting
of two separate facilities, a term loan facility and an expansion facility.
These loans are secured by virtually all of the Company's assets. The term
loan facility provides for financing in an amount up to $7,400,000 to be used
to refinance the Company's existing debt, finance the price of an acquisition
made on the closing date of the loan and lender-approved acquisitions after
the closing date, to finance build-outs of the Company's concession
locations, and pay fees and expenses associated with the financing and the
closing date acquisitions.  The Company used approximately $4,316,000 of this
facility to refinance approximately $2,499,000 of existing debt, finance the
purchase price of the Sanford acquisition of approximately $1,100,000 made on
the closing date of the loan, and pay fees and expenses associated with the
financing and the closing date acquisition of approximately $717,000.


                                    F-27
<PAGE>


               CREATIVE HOST SERVICES, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                  YEARS ENDED DECEMBER 31, 2002 AND 2001


(17) SUBSEQUENT EVENTS, CONTINUED

The expansion facility, in an amount up to $5,600,000, may be used to finance
the cash purchase price for approved acquisitions, to finance build outs of
concession locations, to provide ongoing working capital needs of the Company
and to provide a letter of credit sub-facility of $4,000,000. Availability
under the expansion facility will be reduced by outstanding letters of
credit. The expansion facility matures on December 31, 2008, with certain
principal payments due on December 31, 2007, March 31, 2008 and June 30, 2008
equal to the greater of (i) fifteen percent of the reduced commitment amount
or (ii) $800,000, with the remaining amount due on December 31, 2008.

The term loan of the credit facility bears interest at a rate of 10% per
annum plus 2% per annum paid in kind (PIK) rate. Interest accruing on the PIK
rate will be paid annually in cash, or at the Company's option, such interest
will accrue on the principal amount.  The interest on the expansion facility
is based, at the option of the Company, upon either a Eurodollar rate plus
3.50% or the higher of Prime plus 1% or the Fed Funds Rate plus .5% per
annum.  A commitment fee is charged on the unused portion of the term loan
and the expansion facility at rates of 0.75% and 0.50% per annum,
respectively.  The term loan is due December 31, 2007.

As a condition of the financing, the Company was required to close an
acquisition transaction at the same time as the financing, using proceeds
from the term loan facility to finance the purchase price for the
acquisition. The Company used $1,075,542 of the financing proceeds to acquire
the assets and concession leases of three locations at the Sanford
International Airport in Orlando, Florida in satisfaction of that condition.

As additional consideration for the financing, the Company issued warrants to
purchase 452,050 shares of common stock. The warrants have an exercise price
of $1.87 per share, which was equal to the closing price of the Company's
common stock on January 16, 2003 and expire on January 17, 2012.  Terms and
conditions of the warrants include, among others, shelf and piggyback
registration rights, anti-dilution protection and "tag-along" rights. The
warrants are recorded at fair value, as debt issuance costs and additional
paid-in-capital and will be amortized over the term of the debt agreement.

In February 2003, the Company was awarded a contract for a concession
location at the San Antonio International Airport in San Antonio, Texas.  The
Contract term is for a period of 7 years and expires in May 2010.

In February 2003, the Company was awarded a contract for a concession
location at the Santa Barbara Airport in Santa Barbara, California.  The
contract term is for a period of five years and expires in May 2008.




                                    F-28
<PAGE>

Item 8.  Changes in and Disagreements with Accountants on Accounting and
         Financial Disclosure.

Incorporated herein by this reference is the discussion under Item 4 of the
Company's Current Report on Form 8-K, filed on May 20, 2002 and its Form 8-
K/A filed on June 25, 2002, reporting a change in certifying accountants.
There were no disagreements related to that change in accountants.



                                 PART III

Item 9.  Directors, Executive Officers, Promoters and Control Persons;
         Compliance with Section 16(a) of the Exchange Act.


DIRECTORS AND EXECUTIVE OFFICERS:

The following table sets forth the names and ages of the Company's current
directors and executive Officers, their principal offices and positions and
the date each such person became a director. The Company's 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 a majority of independent directors on its board of
directors.

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


                                            Present Positions        Director
     Name                       Age     With the Company              Since
-----------------------------------------------------------------------------

Sayed Ali                        55       Chairman of the Board of     1986
                                          Directors, President and
                                          Chief Executive Officer

Booker T. Graves (1)(2)          66       Director                     1997

John P. Donohue, Jr. (1)(2)      74       Director                     1997

Charles B. Radloff (2)           75       Director                     1999

Tasneem Vakharia                 41       Executive Vice President      N/A
                                          and Secretary

Lynnette McCullough              34       Chief Financial Officer       N/A

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

                                     -30-
<PAGE>

BUSINESS EXPERIENCE:

SAYED ALI is the founder, Chairman of the Board of Directors, President and
Chief Executive Officer of the Company. Mr. Ali has served as Chairman of the
Board of Directors and President since 1986. Mr. Ali also served as Chief
Financial Officer from December 1986 to February 1997, and from August 1997
to January 2003. 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 DBP Microwave, 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.

TASNEEM VAKHARIA has served as the Secretary of the Company since December
1996 and has been the Executive Vice President of the Company since January
1997.  Ms. Vakharia has been with Creative Host for over ten years, and has
been instrumental in managing the growth of the Company, administering the
opening of several new airport locations.  During those ten years, she has
supervised the administration, accounting, human resources and computer
operations of the Company.  Ms. Vakharia has a Master of Science degree in
Management Information Systems and a Bachelors Degree in Accounting and
Finance.

                                     -31-
<PAGE>

LYNNETTE McCULLOUGH joined the Company in January 2003 as Chief Financial
Officer.  She is a Certified Public Accountant. Prior to joining Creative
Host, Ms. McCullough served as Vice President of Finance for Wireless
Knowledge, Inc. a subsidiary of Qualcomm, Inc., a public company.  Prior to
that, she served as the Director of Finance for the North American retail
operations of Blockbuster, Inc. (NYSE: BBI). Prior to that position, she was
the Director of Internal Audit for Chart House Enterprises, Inc. (NASDAQ:
LNDY).  Ms. McCullough began her career with Arthur Andersen, LLP in Los
Angeles. She holds a B.A. in Accounting from Baylor University in Waco,
Texas.


SIGNIFICANT EMPLOYEES:

LOUIS COCCOLI, JR. serves as the President of the Company's wholly-owned
subsidiary, GladCo Enterprises, Inc.  GladCo was acquired by the Company in
October 2000.  Prior to Creative Host's acquisition of GladCo, Mr. Coccoli
served as president of that company for the preceding seven years.  Before
his tenure at GladCo, Mr. Coccoli served as a Regional Vice President for the
Marriott Corporation and as Vice President of Galdieux Corporation.


Involvement in Certain Legal Proceedings:  No director or executive officer,
or person nominated or chosen to become a director or executive officer, was
involved in any legal proceeding requiring disclosure.


Compliance with Section 16(a) of the Securities Exchange Act of 1934

Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and each beneficial owner of more than ten percent of
the Common Stock of the Company, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission.  Officers, directors
and greater than ten-percent shareholders are required by SEC regulations to
furnish the Company with copies of all Section 16(a) forms they file.

Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons that no Forms 5 were
required to be filed, the Company believes that during fiscal 2002 all filing
requirements applicable to its officers, directors, and greater than ten-
percent beneficial owners were complied with.


Item 10.   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.

                                     -32-
<PAGE>

The following table and notes provide information concerning compensation
awarded to, earned by or paid to the Chief Executive Officer of the Company
and to any other qualifying Executive Officers and employees who earned more
than $100,000 for all services rendered to the Company and its subsidiary for
fiscal years ended December 31, 2002, 2001 and 2000.

<TABLE>
<CAPTION>
                              SUMMARY COMPENSATION TABLE
                                                                        Long-Term
                                    Annual Compensation                Compensation
                                    -------------------                ------------
                                                                         Awards
                                                                         ------
                                                                       Securities
Name and Principal                                     Other Annual    Underlying
Position                  Year     Salary     Bonus    Compensation    Options/SARs
-------------------      ------   -------     ------   -------------   ------------
<S>                       <C>     <C>         <C>          <C>           <C>
Sayed Ali                 2002    $225,000    $30,000      $-0-          75,000(1)
President and Chief       2001    $200,000    $30,000      $-0-               -
Executive Officer         2000    $148,759    $15,000      $-0-          60,000(2)

Louis Coccoli, Jr.        2002    $161,461    $20,000      $-0-          15,000(3)
President;                2001    $160,000    $15,000      $-0-          10,000(4)
GladCo Enterprises, Inc.  2000    $150,000    $     -      $-0-          15,000(5)
------------------------
</TABLE>

(1) On February 26, 2002, Mr. Ali was granted 15,000 options to purchase
    15,000 shares of the Company's common stock at an exercise price of
    $1.43, which was 110% of the closing price of the Company's common stock
    on the date of grant. 7,500 options vested on the date of grant and 7,500
    options vested on January 1, 2003. On November 4, 2002, Mr. Ali was
    granted 60,000 options to purchase 60,000 shares of the Company's common
    stock at an exercise price of $1.925, which was 110% of the closing price
    of the Company's common stock on the date of grant. 20,000 options vested
    on the date of grant, 20,000 shares will vest on November 4, 2003 and
    20,000 will vest on November 4, 2004. The exercise period for both
    grants of options is five years from the date of grant.

(2) Consists of 60,000 options granted to Mr. Ali under the Company's 1997
    Stock Option Plan to purchase 60,000 shares of the Company's common stock
    at an exercise price of $6.325 per share, which was 110% of the closing
    market price of the Company's common stock on the date of grant.  The
    options vested according to the following schedule: 20,000 on the date of
    grant, January 1, 2000; 20,000 on January 1, 2001; and 20,000 on January
    1, 2002.  The exercise period is five years from the date of grant.

(3) Mr. Coccoli serves as President of the Company's wholly-owned subsidiary,
    GladCo Enterprises, Inc.  The Company acquired GladCo in October 2000. On
    October 29, 2002, Mr. Coccoli was granted 15,000 options to purchase
    15,000 shares of the Company's common stock at an exercise price of $1.80
    per share, which was the closing market price of the Company's common
    stock on the date of grant.  The options were vested on the date of grant
    and expire on October 29, 2007.

                                     -33-
<PAGE>

(4) On October 29, 2001, Mr. Coccoli was granted 10,000 options to purchase
    10,000 shares of the Company's common stock at an exercise price of $1.05
    per share, which was the closing market price of the Company's common
    stock on the date of grant.  The options were vested on the date of grant
    and were exercised in August 2002.

(5) As part of the acquisition of GladCo, Mr. Coccoli received warrants to
    purchase 15,000 shares of the Company's common stock at an exercise price
    of $4.75 per share.  The warrants expire on October 1, 2005.


The following table sets forth information concerning individual grants of
stock options made during the fiscal year ended December 31, 2002 to each of
the named executive officers.

<TABLE>
<CAPTION>
                  OPTION/SAR GRANTS IN LAST FISCAL YEAR
                          (Individual Grants)

                          Number of Secu-       Percent of Total
                         rities Underlying        Options/SARs
                           Options/SARs           Granted to         Exercise of
   Name                       Granted             Employees in        Base Price      Expiration
                                (#)                Fiscal Year          ($/Sh)            Date
--------------------     -----------------      ----------------     ------------      ----------
<S>                            <C>                   <C>              <C>              <C>
Sayed Ali                      15,000(1)             12.0%            $1.43/Sh         2/26/07
Sayed Ali                      60,000(2)             48.0%            $1.925/Sh        11/4/07
Louis Coccoli, Jr.             15,000(3)             12.0%            $1.80/Sh         10/29/07
--------------------
</TABLE>

(1) On February 26, 2002, Mr. Ali was granted 15,000 options to purchase
    15,000 shares of the Company's common stock at an exercise price of
    $1.43, which was 110% of the closing price of the Company's common stock
    on the date of grant. 7,500 options vested on the date of grant and 7,500
    options vested on January 1, 2003.  The options expire five years from
    the date of grant

(2) On November 4, 2002, Mr. Ali was granted 60,000 options to purchase
    60,000 shares of the Company's common stock at an exercise price of
    $1.925, which was 110% of the closing price of the Company's common stock
    on the date of grant. 20,000 options vested on the date of grant, 20,000
    shares will vest on November 4, 2003 and 20,000 will vest on November 4,
    2004. The options expire five years from the date of grant.

(3) On October 29, 2002, Mr. Coccoli was granted 15,000 options to purchase
    15,000 shares of the Company's common stock at an exercise price of $1.80
    per share, which was the closing market price of the Company's common
    stock on the date of grant.  The options were vested on the date of grant
    and expire on October 29, 2007.

                                     -34-
<PAGE>

           AGGREGATE OPTIONS/SAR EXERCISES IN THE LAST FISCAL YEAR
                    AND FISCAL YEAR END OPTION/SAR VALUES


The following table contains information concerning each exercise of stock
options (or tandem SARs) and freestanding SARs during the last completed
fiscal year by each of the named executive officers and the fiscal year-end
value of unexercised options and SARs.
<TABLE>
<CAPTION
                                               Number of Securities
                    Shares                    Underlying Unexercised    Value of Unexercised
                    Acquired on    Value          Options/SARs as of      In-the-Money Options/
Name                Exercise      Realized       December 31, 2002      at December 31, 2002
----                -----------   --------  ------------------------   ----------------------
                                            Exercisable/Unexercisable  Exercisable/Unexercisable
                                            -------------------------  -------------------------
<S>                 <C>           <C>            <C>                       <C>
Sayed Ali                    -    $    -         87,500/47,500             $ 3,525/$3,525(1)

Louis Coccoli, Jr.  10,000        $5,600         30,000/0(2)               $ 1,500/$0(1)
--------------
</TABLE>
(1) Based on the closing price of the Company's Common Stock on December 31,
    2002 of $1.90 per share.

(2) Includes 15,000 warrants and 15,000 options.


EMPLOYMENT AGREEMENTS

Sayed Ali, the Company's Chairman of the Board and President, has an
employment agreement with the Company which commenced effective January 1,
2000.  That agreement, as amended, expires in December 2007.  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,
$300,000 in 2005, $325,000 in 2006 and $350,000 in 2007.  Upon termination of
the agreement, except for cause by the Company, Mr. Ali would be entitled to
the cumulative total of his salary and accrued but unpaid bonus (if any)
payable through the end of the agreement, but in no event less than $350,000
and in no event more than 300% of his annual taxable compensation for the
calendar year in which the termination occurs.  Any termination payments to
which Mr. Ali may be entitled, will be paid over a period of one year from
the date of termination in equal semi-monthly installments.  Pursuant to the
agreement, Mr. Ali is also eligible to receive annual cash bonuses as well as
stock option grants at the discretion of the Board of Directors.

For his services as President of GladCo, Louis Coccoli, Jr. also has an
employment contract with Creative Host.  The term of the agreement is from
the closing date of the acquisition of GladCo on October 1, 2000 until August
21, 2005.  The agreement provides for $150,000 in base annual salary with
cost of living increases and such merit raises as may be approved by the
Board of Directors. Mr. Coccoli is also eligible to receive annual cash
bonuses as well as option grants at the discretion of the Board of Directors.
If the agreement is terminated by Creative Host, not for cause, or Mr.
Coccoli terminates for good reason as defined in the agreement, Mr. Coccoli
is entitled to receive termination payments consisting of his remaining base
salary, measured from the highest annual level, for the remainder of the
agreement.

                                     -35-
<PAGE>

DIRECTOR COMPENSATION

Prior to December 31, 2002, directors received no cash compensation for their
services to us as directors.  Effective February 2003, directors who are not
employees will receive annual compensation of $6,000, plus $1,500 for each
meeting of the Board of Directors attended and $750 for each meeting of any
committee of the Board of Directors attended.  Directors are also 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 the Company's 1997 Stock
Option Plan and 2001 Stock Option Plan.

STOCK OPTION PLANS

In January 2001, the Company's Board or Directors adopted the 2001 Stock
Option Plan for the Company's directors, executive officers, employees
and key consultants, which was ratified by the Company's shareholders in
2001. 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 285,000 stock options had been granted
under the 2001 plan to certain of our officers, directors and employees as of
December 31, 2002.  The Company expects to grant stock options under the plan
to directors, executive officers and other qualified recipients in 2003 and
in future years.  The Company's 1997 Stock Option Plan, which was also
approved by the Company's shareholders, provides for a total of 280,000
options to purchase 280,000 shares of common stock.  As of December 31, 2002,
271,000 options to purchase common stock had been granted to certain officers
directors and employees under that plan.


Item 11.    Security Ownership of Certain Beneficial Owners and Management

The following table sets forth certain information known to the Company as of
March 25, 2003 with respect to the beneficial ownership of the Company's
Common Stock as of March 25, 2003 by (i) each person known by the Company to
own beneficially more than 5% of the Company's Common Stock, (ii) each of the
Company's directors and executive officers, and (iii) all officers and
directors of the Company as a group.

Name and Address of                 Amount and Nature            Percent of
Beneficial Owner(1)                of Beneficial Owner(2)         Class (3)
-------------------                ----------------------        ----------
John Stewart Jackson, IV                2,803,898(4)                 34.4%
c/o Jackson Burglar Alarm
100 East 20th Avenue
Denver, CO 80205-3102

Officers and Directors:
Sayed Ali                                1,005,000(5)                12.4%
John P. Donohue                           120,000(6)                  1.4%
Booker T. Graves                          107,800(7)                  1.3%
Charles B. Radloff                         65,000(8)                  0.8%
Tasneem Vakharia                          108,000(9)                  1.3%
Lynnette McCullough                             -(10)                 0.0%
Louis Coccoli, Jr.                         59,944(11)                 0.7%

All officers and directors              1,464,944                    17.1%
  as a group (7 persons)
---------------------------

                                     -36-
<PAGE>

(1) The address of each of the directors and executive officers is c/o
    Creative Host Services, Inc., 16955 Via Del Campo, Suite 110, San Diego,
    California 92127

(2) Unless otherwise indicated, and subject to applicable community property
    laws, each person has sole voting and investment power with respect to
    the shares beneficially owned. 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.

(3) Based on 8,006,210 shares of Common Stock outstanding as of March 25,
    2003. 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. Does not include 1,834,784 shares which
    could be issued upon the exercise of outstanding warrants and 709,524
    shares which could be issued upon the conversion of long-term debt.

(4) 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.

(5) Includes 80,000 shares which Mr. Ali has the right to acquire upon the
    exercise of options issued under the Company's 1997 Stock Option Plan and
    15,000 shares upon the exercise of vested options issued under its 2001
    Stock Option Plan.  Does not include 40,000 shares for options which are
    not vested.  Other than his options, Mr. Ali's shares are held in two
    family trusts over which he has voting control.

(6) Includes 15,000 shares which Mr. Donohue has the right to acquire upon
    exercise of options issued under the Company's 1997 Stock Option Plan and
    80,000 shares upon the exercise of vested options issued under its 2001
    Stock Option Plan.  Does not include 5,000 shares for options which are
    not vested.

(7) Includes 20,000 shares which Mr. Graves has the right to acquire upon
    exercise of options issued under the Company's 1997 Stock Option Plan,
    and 80,000 shares upon the exercise of vested options issued under its
    our 2001 Stock Option Plan.  Does not include 5,000 shares for options
    which are not vested.

(8) Includes 65,000 shares which Mr. Radloff has the right to acquire upon
    exercise of vested options issued under our 2001 Stock Option Plan. Does
    not include 5,000 shares for options which are not vested.

                                     -37-
<PAGE>

 (9) Includes 45,000 shares which Ms. Vakharia has the right to acquire
    upon exercise of options issued under our 1997 Stock Option Plan and
    53,000 shares upon the exercise of vested options issued under our 2001
    Stock Option Plan.

(10) Does not include 75,000 options to purchase 75,000 shares which do not
     begin to vest until January 2004.

(11) Includes 15,000 shares which Mr. Coccoli has the right to acquire
     through the exercise of warrants and 15,000 shares which he has the
     right to acquire upon the exercise of options.


There are no arrangements which may result in a change in control of Creative
Host.


SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS.

The following table sets forth information as of December 31, 2002, with
respect to compensation plans (including individual compensation
arrangements) under which equity securities of the Company are authorized for
issuance, aggregated as follows:


                   Equity Compensation Plan Information


Plan Category        Number of       Weighted-average    Number of securities
                    securities to     exercise price     remaining available
                      be issued       of outstanding     for future issuance
                    upon exercise        options,           under equity
                    of outstanding     warrants and      compensation plans
                       options,           rights            (excluding
                     warrants and                           securities
                       rights                               reflected in
                                                             column (a))
-----------------------------------------------------------------------------
                         (a)                (b)                 (c)
-----------------------------------------------------------------------------
Equity compensation
plans approved by
security holders       730,000            $ 3.02               174,000
-----------------------------------------------------------------------------
Equity compensation
plans not approved
by security holders      None               N/A                 None
-----------------------------------------------------------------------------

     Total             730,000            $ 3.02               174,000
-----------------------------------------------------------------------------

                                     -38-
<PAGE>

Item 12. Certain Relationships and Related Transactions

On October 9, 2000, the Company completed its acquisition of GladCo
Enterprises, Inc. and it became a wholly-owned subsidiary of Creative Host.
As part of the acquisition agreement, the Company agreed to employ Louis
Coccoli, Jr. as President of its GladCo subsidiary.  In January 2002, the
Company sold its Atlantic City, New Jersey location, which it acquired as
part of the GladCo acquisition, to the wife of Mr. Coccoli for $250,000,
which was used to settle a contractual liability that the Company owed to Mr.
Coccoli.  The sales price represented the estimated fair market value of the
Atlantic City location. At the time of the sale, Mr. Coccoli's share
ownership in Creative Host was less than 1%.

In conjunction with the Company's acquisition of GladCo, the Company assumed
a lease for office space.  The office building is owned by Mr. Coccoli. The
lease term is for five years, expiring in December 2003, with annual rent
payments of $36,000.

In April 2002, the Company loaned $55,000 to the Company's Chief Executive
Officer at 8.5% interest, due in monthly payments of $2,500, through April
2004.  As of December 31, 2002, the outstanding balance on this note
receivable was $36,433.  Pursuant to the provisions of Section 402 of the
Sarbanes-Oxley Act, the Company is aware that this loan cannot be extended or
otherwise modified.



Item 13.  Exhibits and Reports on Form 8-K

(a) Listing of Exhibits by Table Number
    -----------------------------------

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

   3.1        Amended and Restated Articles of Incorporation (1)

   3.2        Bylaws (1)

   4.1        Specimen Certificate for Common Stock (1)

   4.3        Warrant Agreement (including form of Warrant Certificate) (1)

   4.4        The Company's 2001 Stock Option Plan for Directors,
              Executive Officers, Employees and Key Consultants (1)

   4.5        Warrant Certificate dated January 17, 2003. (8)

   4.6        Warrant Purchase Agreement dated January 17, 2003, between
              Creative Host Services, Inc. and ING Capital LLC. (8)

   4.7        Registration Rights Agreement dated January 17, 2003, between
              Creative Host Services, Inc. and ING Capital LLC. (8)

   10.1       1997 Stock Option Plan (1)

   10.2       Employment Agreement between the Company and Sayed Ali (1)

                                     -39-
<PAGE>

   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. (1)

   10.4       Food And Beverage Concession Agreement And Lease dated as of
              October 4, 1996 between the Company and Richland-Lexington
              Airport District. (1)

   10.5       Agreement between the Company and Delta Airlines. (1)

   10.6       Concession and Lease Agreement dated as of May 24, 1996 between
              the Company and Lehigh-Northhampton Airport Authority. (1)

   10.7       Food And Beverage Concession Agreement And Lease
              Bluegrass Airport between the Company and Lexington-
              Fayette Urban County Airport Board. (1)

   10.8       Food And Beverage Concession Agreement dated as of July 26,
              1995 between the Company and Outagamie County. (1)

   10.9       Food And Beverage Lease And Concession Agreement dated
              as of May 17, 1996 between the Company and Roanoke
              Regional Airport Commission. (1)

   10.10      Food And Beverage Concession Agreement dated as of October 24,
              1995 between the Company and the County of Dane. (1)

   10.11      Food And Beverage Concession Lease Agreement dated as of June
              10, 1994 between the Company and the Port of Portland. (1)

   10.12      Concession Agreement dated as of March 25, 1995
              between the Company and City of Los Angeles. (1)

   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. (1)

   10.14      Food Court Agreement dated as of November 14, 1996 between the
              Company and City and County of Denver. (1)

   10.15      Agreement between the Company and the City and County of Denver
              as of November 19, 1996. (1)

   10.16      Agreement dated as of February 8, 1996 between the Company and
              the County of Orange. (1)

   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. (2)

   10.18      Concession Agreement between the City of Los Angles Department
              of Airports and the Company Covering the Operation and
              Management of the Food and Beverage Package #3 Concession at
              Ontario International Airport. (2)

                                     -40-
<PAGE>

   10.19      Concession Agreement and Lease between the Piedmont Triad
              Airport Authority and the Company. (2)

   10.20      Form of Franchise Agreement. (1)

   10.21      TCBY Franchise Agreement dated October 29, 1996 between TCBY
              Systems, Inc., and St. Clair Development Corporation. (1)

   10.22      Industrial Real Estate Lease between the Company and
              WHPX-S Real Estate Limited Partnership. (1)

   10.23      Employment Agreement between the Company and Sayed Ale, Dated
              January 1, 2000. (3)

   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. (4)

   10.25      Securities Purchase Agreement, dated as of September 26, 2000,
              between Creative Host Services, Inc. and GCA Strategic
              Investment Fund Limited. (4)

   10.26      Convertible Debenture, dated as of September 26,2000, issued by
              Creative Host Services, Inc. to GCA Strategic Investment Fund
              Limited. (4)

   10.27      Warrant, dated as of September 26, 2000, issued by Creative
              Host Services, Inc. to GCA Strategic Investment Fund
              Limited. (4)

   10.28      Registration Rights Agreement, dated as of September 26,2000,
              between Creative Host Services, Inc. and GCA Strategic
              Investment Fund Limited. (4)

   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. (4)

   10.30      Sysco Corporation Master Distribution Agreement dated January
              3, 2000. (5)

   10.31      Form of Convertible Promissory Note dated January 29, 2002 and
              due December 31, 2006 (6)

   10.32      Form of Purchase Warrant Agreement for shares exercisable at
              $2.00 per share. (6)

   10.33      Credit Agreement dated January 17, 2003 between Creative Host
              Services, Inc. and ING Capital LLC. (7)

   16         Letter from Stonefield Josephson, Inc. dated June 25,
              2002. (9)

   21         Subsidiaries: GladCo Enterprises, Inc. (Incorporated in
              Pennsylvania on July 27, 1990).

   23.1       Consent of Deloitte & Touche LLP

                                     -41-
<PAGE>

   23.2       Consent of Stonefield Josephson, Inc.

   99.1       Certification of Chief Executive Officer Pursuant to 18 U.S.C.
              Section 1350 as Adopted Pursuant to Section 906 of the
              Sarbanes-Oxley Act of 2002.

   99.2       Certification of Chief Financial Officer Pursuant to 18 U.S.C.
              Section 1350 as Adopted Pursuant to Section 906 of the
              Sarbanes-Oxley Act of 2002.

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

(1) 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.

(2) 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.

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

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

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

(6) Incorporated by reference from the exhibits included in the Company's
Form SB-2 (333-87328) filed with the SEC on May 1, 2002.

(7) Incorporated by reference from the exhibits included in Company's
Form 8-K filed with the SEC on January 23, 2003.

(8) Incorporated by reference from the exhibits included with the Company's
Form S-3 Registration Statement (333-102869) filed with the SEC on January
31, 2003.

(9) Incorporated by reference from the exhibit included with the Company's
Current Report on Form 8-K/A filed with the SEC on June 25, 2002.


(b)  Reports on Form 8-K
     -------------------

No Reports on Form 8-K were filed by the Company during the last quarter of
the fiscal year ended December 31, 2002. The Company did file a report of
Form 8-K on January 23, 2003.

    Date of Earliest
     Event Reported               Item No. 5               Description
    ----------------             ------------            -----------------
    January 17, 2003             Other Events            Closing of Senior
                                                         Secured Financing


                                     -42-
<PAGE>


Item 14.  Controls and Procedures

(a) Evaluation of disclosure controls and procedures.

The management of the Company, including the Chief Executive Officer and
Chief Financial Officer, have conducted an evaluation of the effectiveness of
the Company's disclosure controls and procedures (as defined in Exchange Act
Rules 13a-14 and 15d-14) as of a date within 90 days prior to the filing of
this Annual Report on Form 10-KSB (the "Evaluation Date").  Based upon that
evaluation, the Chief Executive Officer and Chief Financial Officer concluded
that, as of the Evaluation Date, the Company's disclosure controls and
procedures are effective in timely alerting them to material information
relating to the Company, including its consolidated subsidiaries, required to
be included in the Company's periodic SEC filings.

(b) Changes in internal controls.

Subsequent to the date of the evaluation, there have been no significant
changes in the Company's internal controls or in other factors that could
significantly affect internal controls, nor were there any corrective actions
required with regard to significant deficiencies and material weaknesses.

                                     -43-
<PAGE>




                                    SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.


                                            CREATIVE HOST SERVICES, INC.
                                                    (Registrant)

Date: April 11, 2003                      by /s/ Sayed Ali
                                             ----------------------------
                                             Sayed Ali, President and
                                             Chief Executive Officer

Date: April 11, 2003                      by  /s/ Lynnette McCullough
                                              ---------------------------
                                              Lynnette McCullough
                                              Chief Financial Officer


Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed below by the following persons on behalf
of the registrant and in the capacities and on the dates indicated.


Date: April 11, 2003                       /s/ Sayed Ali
                                           ----------------------------------
                                           Sayed Ali, Director and Chairman


Date: April 11, 2003                       /s/ Booker T. Graves
                                           ----------------------------------
                                           Booker T. Graves, Director


Date: April 11, 2003                       /s/ John P. Donohue, Jr.
                                           ----------------------------------
                                           John P. Donohue, Jr., Director


Date: April 11, 2003                      /s/ Charles B. Radloff
                                          -----------------------------------
                                          Charles B. Radloff, Director

                                     -44-
<PAGE>



                     CERTIFICATION PURSUANT TO SECTION 302
                      OF THE SARBANES-OXLEY ACT OF 2002

I, Sayed Ali, certify that:

1.  I have reviewed this annual report on Form 10-KSB of Creative Host
Services, Inc.;

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

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

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

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

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

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

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

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

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

6.  The registrant's other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions
with regard to significant deficiencies and material weaknesses.

Date:  April 11, 2003                              /s/ Sayed Ali
                                                   ----------------------
                                                   Sayed Ali, President,
                                                   Chief Executive Officer

                                     -45-
<PAGE>

                    CERTIFICATION PURSUANT TO SECTION 302
                      OF THE SARBANES-OXLEY ACT OF 2002

I, Lynnette McCullough, certify that:

1.  I have reviewed this annual report on Form 10-KSB of Creative Host
Services, Inc.;

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

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

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

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

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

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

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

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

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

6.  The registrant's other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions
with regard to significant deficiencies and material weaknesses.

Date:  April 11, 2003                             /s/ Lynnette McCullough
                                                  -----------------------
                                                  Lynnette McCullough
                                                  Chief Financial Officer

                                     -46-