SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

          /X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
          EXCHANGE ACT OF 1934.

          FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2002

                                       OR

          / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
          SECURITIES EXCHANGE ACT OF 1934

          FOR THE TRANSITION PERIOD FROM _________ TO ___________

                         COMMISSION FILE NUMBER 0-24543


                                COST-U-LESS, INC.
             (Exact name of registrant as specified in its charter)

          Washington                              91-1615590
(State or other jurisdiction of      (I.R.S. Employer Identification No.)
incorporation or  organization)

                    8160 304th Avenue S.E., Bldg. 3, Suite A
                            PRESTON, WASHINGTON 98050
               (Address of principal executive office) (Zip Code)

                                 (425) 222-5022
              (Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities and 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. /X/YES / /NO.

The registrant had 3,606,376 common shares, par value $0.001, outstanding at May
10, 2002.
<PAGE>

                                COST-U-LESS, INC.

                               INDEX TO FORM 10-Q


PART I. FINANCIAL INFORMATION

        Item 1.   Financial Statements (Unaudited)
                  Condensed Consolidated Statements of Operations............. 3
                  Condensed Consolidated Balance Sheets....................... 4
                  Condensed Consolidated Statements of Shareholders' Equity... 5
                  Condensed Consolidated Statements of Cash Flows............. 6
                  Notes to Condensed Consolidated Financial Statements........ 7

        Item 2.   Management's Discussion and Analysis of Financial
                  Condition and Results of Operations........................ 10

        Item 3.   Quantitative and Qualitative Disclosures About Market
                  Risk....................................................... 17


PART II.OTHER INFORMATION

        Item 6.   Exhibits and Reports on Form 8-K........................... 18


                                       2
<PAGE>

                         PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS (UNAUDITED)


                                COST-U-LESS, INC.

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                 (in thousands, except share and per share data)

                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                                13 Weeks Ended
                                                                                                --------------
                                                                                            March 31,       April 1,
                                                                                              2002            2001
                                                                                              ----            ----
                                                                                                           (Restated)
<S>                                                                                        <C>            <C>
Net sales ..............................................................................   $    44,998    $    43,978
Merchandise costs ......................................................................        37,799         36,887
                                                                                           -----------    -----------
Gross profit ...........................................................................         7,199          7,091

Operating expenses:
     Store .............................................................................         5,488          5,236
     General and administrative ........................................................         1,548          1,440
     Store openings ....................................................................            10             23
     Store closings ....................................................................            --             (3)
                                                                                           -----------    -----------
Total operating expenses ...............................................................         7,046          6,696
                                                                                           -----------    -----------

Operating income .......................................................................           153            395

Other income (expense):
     Interest expense, net .............................................................           (94)          (171)
     Other .............................................................................            58            (96)
                                                                                           -----------    -----------
Income before income taxes .............................................................           117            128

Income tax provision ...................................................................            45             85
                                                                                           -----------    -----------
Net income .............................................................................   $        72    $        43
                                                                                           ===========    ===========

Earnings per common share:
     Basic .............................................................................   $      0.02    $      0.01
                                                                                           ===========    ===========
     Diluted ...........................................................................   $      0.02    $      0.01
                                                                                           ===========    ===========

Weighted average common shares outstanding, basic ......................................     3,606,376      3,606,376
                                                                                           ===========    ===========
Weighted average common shares outstanding, diluted ....................................     3,608,512      3,608,014
                                                                                           ===========    ===========
</TABLE>


The accompanying Notes to the Condensed Consolidated Financial Statements are an
integral part of these statements.


                                       3
<PAGE>

                                COST-U-LESS, INC.

                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (in thousands)

                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                             March 31,  December 30,
                                                                                               2002         2001
                                                                                               ----         ----
                                        ASSETS
                                        ------
<S>                                                                                          <C>          <C>
Current assets:
     Cash and cash equivalents ...........................................................   $ 2,137      $ 2,660
     Receivables, net ....................................................................     1,823        2,117
     Inventories, net ....................................................................    21,319       19,360
     Other current assets ................................................................     1,685        1,104
                                                                                             -------      -------
          Total current assets ...........................................................    26,964       25,241

Property and equipment, net ..............................................................    15,102       15,464
Deposits and other assets ................................................................       905          901
                                                                                             -------      -------

          Total assets ...................................................................   $42,971      $41,606
                                                                                             =======      =======

                          LIABILITIES AND SHAREHOLDERS' EQUITY
                          ------------------------------------

Current liabilities:
     Line of credit ......................................................................   $ 5,771      $ 2,173
     Accounts payable ....................................................................    15,067       15,885
     Accrued expenses and other liabilities ..............................................     2,553        3,824
     Accrued store closure reserve .......................................................       405          524
     Current portion of long-term debt ...................................................       267          267
                                                                                             -------      -------
          Total current liabilities ......................................................    24,063       22,673

Deferred rent ............................................................................       512          515
Long-term debt, less current portion .....................................................     3,011        3,077
                                                                                             -------      -------
          Total liabilities ..............................................................    27,586       26,265

Shareholders' equity: ....................................................................    15,385       15,341
                                                                                             -------      -------

          Total liabilities and shareholders' equity .....................................   $42,971      $41,606
                                                                                             =======      =======
</TABLE>


The accompanying Notes to the Condensed Consolidated Financial Statements are an
integral part of these statements.


                                       4
<PAGE>

                                COST-U-LESS, INC.

            CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                        (in thousands, except share data)

                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                              Accumulated
                                                           Common       Common                   Other
                                                           Stock--      Stock--    Retained  Comprehensive
                                                           Shares       Amount     Earnings       Loss       Total
                                                           ------       ------     --------       ----       -----
<S>                                                       <C>           <C>         <C>          <C>        <C>
Balance at December 31, 2000 (Restated).................. 3,606,376     $12,446     $3,001       $ (653)    $14,794
     Net earnings (Restated).............................        --          --         43           --          43
     Foreign currency translation adjustments (Restated) .       --          --         --           24          24
                                                                                                            -------
         Comprehensive earnings (Restated)...............                                                        67
                                                           --------     -------     ------       ------     -------
Balance at April 1, 2001 (Restated)...................... 3,606,376     $12,446     $3,044       $ (629)    $14,861
                                                          =========     =======     ======       ======     =======


Balance at December 30, 2001............................. 3,606,376     $12,446     $3,557       $ (662)    $15,341
     Net earnings........................................        --          --         72           --          72
     Foreign currency translation adjustments............        --          --         --          (28)        (28)
                                                                                                            -------
         Comprehensive earnings..........................                                                        44
                                                           --------     -------     ------       ------     -------
Balance at March 31, 2002................................ 3,606,376     $12,446     $3,629       $ (690)    $15,385
                                                          =========     =======     ======       ======     =======
</TABLE>


The accompanying Notes to the Condensed Consolidated Financial Statements are an
integral part of these statements.


                                       5
<PAGE>

                                COST-U-LESS, INC.

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)

                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                March 31,   April 1,
                                                                  2002        2001
                                                                  ----        ----
                                                                           (Restated)
<S>                                                              <C>        <C>
OPERATING ACTIVITIES:
     Net income ..............................................   $    72    $    43
     Adjustments to reconcile net income to net cash used by
        operating activities:
          Depreciation and amortization ......................       473        471
          Deferred tax provision (benefit) ...................       (27)        50
     Cash used by changes in operating assets and liabilities:
          Receivables ........................................       294        943
          Inventories ........................................    (1,959)    (3,092)
          Other current assets ...............................      (554)      (533)
          Deposits and other assets ..........................        (4)       207
          Accounts payable ...................................      (818)     1,222
          Accrued expenses and other liabilities .............    (1,271)      (551)
          Accrued store closure reserve ......................      (119)      (285)
          Deferred rent ......................................        (3)         5
                                                                 -------    -------
               Net cash used by operating activities .........    (3,916)    (1,520)

INVESTING ACTIVITY:
     Cash used to purchase property and equipment ............      (111)      (267)

FINANCING ACTIVITIES:
     Net borrowings under line of credit .....................     3,598        893
     Principal payments on long-term debt ....................       (66)       (67)
                                                                 -------    -------
               Net cash provided by financing activities .....     3,532        826

     Foreign currency translation adjustments ................       (28)        73
                                                                 -------    -------

Net decrease in cash and cash equivalents ....................      (523)      (888)

Cash and cash equivalents:
     Beginning of period .....................................     2,660      2,525
                                                                 -------    -------
     End of period ...........................................   $ 2,137    $ 1,637
                                                                 =======    =======

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
     Cash paid during the period for:
          Interest ...........................................   $    95    $   187
          Income taxes .......................................   $    70    $    62
</TABLE>


The accompanying Notes to the Condensed Consolidated Financial Statements are an
integral part of these statements.


                                       6
<PAGE>

                                COST-U-LESS, INC.

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                   (Unaudited)

1. Nature of Business and Summary of Significant Accounting Policies

Nature of Business

     Cost-U-Less, Inc. (the "Company") operates mid-sized warehouse club-style
stores in the United States Territories ("U.S. Territories"), foreign island
countries in the Pacific and the Caribbean, the Hawaiian Islands and Sonora,
California. At March 31, 2002, the Company operated eleven stores located in
Hawaii, California, the U.S. Virgin Islands, Netherlands Antilles, Guam,
American Samoa and the Republic of Fiji (Fiji). In February 2001, the Company
closed its Nadi, Fiji store. The Company continues to operate its other store in
Fiji, located in the city of Suva.

Restatement of Financial Information

     The Company has determined that the previous accounting treatment
historically afforded its foreign currency translation adjustment associated
with New Zealand was not consistent with paragraph 14 of Statement of Financial
Accounting Standard No.52 (SFAS 52).

     In June 2000 the Company discontinued all major business activity in New
Zealand upon the closure of its two stores and its Auckland buying office.
Although the Company had discontinued store and corporate buying activities in
June 2000, for the remainder of 2000 and through the first three quarters of
2001, it continued to base its conclusion that the New Zealand operations were
not substantially liquidated on the fact that the Company was still purchasing
inventory through the New Zealand subsidiary and negotiating final lease terms
on the closed store leases. The Company now believes that, because the level of
the ongoing New Zealand activities was so small relative to activities prior to
the closures, that "substantial liquidation", as interpreted in paragraph 14 of
SFAS 52, had in fact occurred in June 2000, and therefore the New Zealand
foreign currency translation account should have been written off at that time.

     As a result, the New Zealand foreign currency translation adjustments,
which were previously recorded within Other Comprehensive Income (Loss), were
written off at June 25, 2000, and included in Store Closure Expense in fiscal
2000.

     Concurrent with this reassessment, other related foreign currency
translation adjustments have also been restated to reclassify that portion of
intercompany transactions that represent transactions and balances that are not
considered to be part of the net investment in the foreign entity, and
accordingly, related transaction gains and losses are recorded for that portion
representing non-permanent investments. The restatement resulted in foreign
currency transaction losses of $98,000 to be included in Other Income (Expense)
of $96,000 in the first quarter of fiscal 2001. Refer to the Company's Form
10-K/A for the year ended December 31, 2000, filed with the Securities and
Exchange Commission (SEC) on March 29, 2002, for further discussion of the
impact of the restatement.

Basis of Presentation

     The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with accounting principles generally accepted in the
United States of America for interim financial reporting and pursuant to the
rules and regulations of the SEC. In the opinion of management, the financial
information includes all adjustments that the Company considers necessary for a
fair presentation of the financial position at such dates and the operations and
cash flows for the periods then ended. The balance sheet at December 30, 2001
has been derived from the audited financial statements at that date. Certain
information and footnote disclosures normally included in the financial
statements prepared in accordance with accounting principles generally accepted
in the United States have been condensed or omitted pursuant to SEC rules and
regulations on quarterly reporting. Operating results for the 13 weeks ended
March 31, 2002, are not necessarily indicative of results that may be expected
for the entire year. All quarterly periods reported consist of 13 weeks. For
further information, refer to the financial statements and footnotes included in
the Company's Form 10-K filed with the SEC on April 1, 2002.


                                       7
<PAGE>

                                COST-U-LESS, INC.

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(continued)

                                   (Unaudited)


Fiscal Year

     The Company reports on a 52/53-week fiscal year, consisting of four
thirteen-week periods and ending on the Sunday nearest to the end of December.
Fiscal 2002, ending on December 29, 2002, and Fiscal 2001, which ended on
December 30, 2001, are 52-week years.

Principles of Consolidation

     The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries in the U.S. Virgin Islands, Netherlands
Antilles, Guam, American Samoa, Nevada, Fiji and New Zealand. All significant
inter-company accounts and transactions have been eliminated in consolidation.

Foreign Currency Translations and Comprehensive Income

     The U.S. dollar is the functional currency for all locations, except for
Fiji and Netherlands Antilles, where the local currency is the functional
currency. Prior to the closure of the New Zealand stores in June 2000, the
functional currency for New Zealand was its local currency. Assets and
liabilities denominated in foreign currencies are translated at the applicable
exchange rate on the balance sheet date. Net sales costs and expenses are
translated at the average rates of exchange prevailing during the period.
Adjustments resulting from this process are reported, net of taxes, as
Accumulated Other Comprehensive Income (Loss), a component of Shareholders'
Equity. Realized and unrealized gains on foreign currency transactions are
included in Other Income (Expense). The cumulative translation adjustment
resulting from a net investment in a country is recognized as income or expense
in the period the Company has substantially liquidated operations in that
country.

Use of Estimates

     The preparation of financial statements in accordance with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date
of the financial statements, and the reported amounts of revenues and expenses
during the reporting period. Estimates are used for, but not limited to:
allowance for doubtful accounts; depreciable lives of assets; reserves for store
closure expenses; and tax valuation allowances. Future events and their effects
cannot be determined with certainty. Accordingly, the accounting estimates
require the exercise of judgment. The accounting estimates used in the
preparation of the consolidated financial statements may change as new events
occur, as more experience is acquired, as additional information is obtained and
as the Company's operating environment changes. Actual results could differ from
those estimates.

Reclassifications

     Certain reclassifications of prior years' balances have been made for
consistent presentation with the current year.

New Accounting Pronouncements

     During 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) Nos.141, "Business
Combinations", 142 "Goodwill and Other Intangible Assets", 143 "Accounting for
Asset Retirement Obligations", and 144 "Accounting for Impairment or Disposal of
Long-lived Assets and for Long-Lived Assets to be Disposed of". The adoption of
SFAS Nos. 141, 142 and 144 did not have a material impact on the Company's
consolidated financial statements. The Company believes the adoption of SFAS No.
143 will not have a material impact on the Company's consolidated financial
statements.


                                       8
<PAGE>

                                COST-U-LESS, INC.

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(continued)

                                   (Unaudited)


2. Earnings Per Share

     Basic earnings per share is computed using the weighted average number of
common shares outstanding during the period and excludes any dilutive effects of
stock options and warrants. Diluted earnings per share are computed using the
weighted average number of common shares and potentially dilutive shares
outstanding during the period. Potentially dilutive shares are excluded from the
computation if their effect is anti-dilutive.

     The following table sets forth the computation of basic and diluted
earnings per common share (in thousands, except share and per share data):

<TABLE>
<CAPTION>
                                                                                                13 Weeks Ended
                                                                                                --------------
                                                                                             March 31,    April 1,
                                                                                               2002         2001
                                                                                               ----         ----
                                                                                                         (Restated)
<S>                                                                                         <C>          <C>
Numerator:
     Net income .........................................................................   $       72   $       43
                                                                                            ==========   ==========
Denominator:
     Denominator for basic earnings per share--weighted
        average shares ..................................................................    3,606,376    3,606,376
Effect of potentially dilutive shares:
     Stock options and warrants .........................................................        2,136        1,638
                                                                                            ----------   ----------
     Denominator for diluted earnings per share--adjusted
        weighted average shares and assumed conversion of
        stock options and warrants ......................................................    3,608,512    3,608,014
                                                                                            ==========   ==========

Basic earnings per common share .........................................................   $     0.02   $     0.01
Diluted earnings per common share .......................................................   $     0.02   $     0.01
</TABLE>


                                       9
<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

Certain Factors That May Affect Future Results of Operations

     This discussion and analysis should be read in conjunction with our
unaudited condensed consolidated financial statements and the related notes
thereto appearing in Item 1 of this report. In addition to historical
information, this Form 10-Q contains and may incorporate by reference
statements, which may constitute forward-looking statements which involve known
and unknown risks, uncertainties and other factors that could cause actual
results to differ materially from those expressed or implied by such
forward-looking statements. Forward-looking statements may be identified by the
use of forward-looking terminology such as "may," "will," "expect," "estimate,"
"anticipate," "continue," or similar terms, variations of such terms or the
negative of those terms, but the absence of such terms does not mean that a
statement is not forward-looking. Factors that could affect our actual results
include, but are not limited to: (i) transportation difficulties; (ii)
competition; (iii) isolation of store operations from corporate management; (iv)
weather and other risks associated with island operations, (v) dependence on,
and uncertainties associated with, expansion outside the U.S.; (vi) dependence
on key personnel and local managers; (vii) reliance on information and
communication systems provided by third-party vendors; (viii) risks associated
with significant growth; (ix) risks associated with a small store base; (x)
ability to maintain existing credit and obtain additional credit; and (x)
ability to utilize tax benefits. The recent terrorist attacks on the United
States, possible responses by the U.S. government, the effects on consumer
demand, the financial markets, product supply and distribution and other
conditions increase the uncertainty inherent in forward-looking statements.
Forward looking statements reflect the expectations of our management at the
time that they are made and do not represent an opinion about what may happen in
the future. More information about factors that could affect our financial
results is included in the "Risk Factors that May Affect Future Results" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" sections of our Form 10-K for the year ended December 30, 2001,
which was filed on April 1, 2002 with the Securities Exchange Commission.

     The following management's discussion and analysis of financial condition
and results of operations should be read in conjunction with management's
discussion and analysis of financial condition and results of operations
included in our Form 10-K for the year ended December 31, 2001.

     As used in this quarterly report on Form 10-Q, unless the context otherwise
requires, the terms "we," "us," "our," "the Company," and "Cost-U-Less" refer to
Cost-U-Less, Inc., a Washington corporation, and its subsidiaries.

Overview

     During the first fiscal quarter ended March 31, 2002, we operated eleven
retail stores located in Guam (2), American Samoa (1), Hawaiian Islands (2);
U.S. Virgin Islands (2); Fiji (1); Netherlands Antilles (2) and California (1).
In February 2001, we closed our Nadi, Fiji store, due primarily to the impact
that the political turmoil in Fiji was having on the tourist industry. The
resulting economic downturn severely impacted the performance of our store in
Nadi. Our remaining store in Fiji is located in the city of Suva, which is the
capital and the primary population center of Fiji.

     Our stores are patterned after the warehouse club concept, although the
stores (i) are smaller (averaging approximately 30,000 square feet vs. large
format warehouse clubs of approximately 115,000 square feet), (ii) generally
target niche markets, mainly foreign island countries (and U.S. Territories and
U.S. island states), where demographics do not support large format warehouse
clubs, (iii) carry a wide assortment of local and ethnic food items and (iv) do
not charge a membership fee. Although we do not have large seasonal fluctuations
in sales, the fourth quarter is typically the highest sales quarter due to
additional holiday sales.

     We are continuing our focus on our core island store operations by
reviewing our merchandising strategies, both those that apply to all stores and
those specific to each store in light of the different conditions in each
market. Currently, we have no plans to open new stores during 2002, but we are
in the process of analyzing opportunities for future expansion. While we believe
these actions can improve profitability, there can be no assurance that these
actions will be successful.

     In March 2002, we announced that we had re-evaluated whether our New
Zealand operations were "substantially liquidated" in connection with the store
closures in New Zealand in June 2000. Based on our re-evaluation, we now believe
that "substantial liquidation," as defined in Statement of Financial Accounting
Standards No. 52 (SFAS 52), occurred in June 2000, and therefore our accounting
for New Zealand foreign currency translation required adjustment retroactive to
June 2000 and for each subsequent quarter through the third quarter of fiscal
2001. The restatement was a result of our re-evaluation of the accounting
interpretation and application of SFAS 52, and not the result of any improper
conduct by our personnel or lack of internal controls.


                                       10
<PAGE>

     As a result, the New Zealand foreign currency translation adjustments,
which were previously recorded within Other Comprehensive Income (Loss), have
been written off at June 25, 2000, and are included in Store Closure Expense in
fiscal 2000.

     Concurrent with this reassessment, other related foreign currency
translation adjustments have also been restated to reclassify that portion of
intercompany transactions that represent transactions and balances that are not
considered to be part of the net investment in the foreign entity, and
accordingly, related transaction gains and losses are recorded for that portion
representing non-permanent investments. The restatement resulted in foreign
currency transaction losses of $98,000 to be included in Other Income (Expense)
of $96,000 in the first quarter of fiscal 2001. Refer to our Form 10-K/A for the
year ended December 31, 2000, filed with the SEC on March 29, 2002, for further
discussion of the impact of the restatement.

     The management's discussion and analysis of financial condition and results
of operations presented below reflects the restatement of our condensed
consolidated financial statements for the quarter ended April 1, 2001, as
discussed above and in Note 1 to the condensed consolidated financial
statements.

Results of Operations

     We reported net income of $72,000 for the fiscal first quarter ended March
31, 2002, compared to a net income of $43,000 for the same period in fiscal
2001. The improvement in net income was primarily due to increased sales, lower
interest expense, lower foreign currency translation expenses, and a decrease in
our effective tax rate. This improvement was partially offset by higher store
expenses and higher general and administrative expenses.

Comparison of the 13 Weeks Ended March 31, 2002 to the 13 Weeks Ended April 1,
2001

     Net Sales: Net sales of $45.0 million for the first quarter of fiscal 2002,
increased 2.3% as compared to net sales of $44.0 million for the first quarter
of fiscal 2001. Comparable-store sales (stores open for a full 13 months)
increased 0.8%. A majority of our stores experienced increased sales in the
first quarter of 2002 as compared to 2001 due to an improvement in
merchandising. These increases, coupled with an increase in business sales, more
than offset the impact of lower sales in our stores in Guam and St. Thomas,
which were impacted by a competitor opening membership warehouse club stores in
these locations, and the loss of sales due to the February 2001 closure of our
store in Nadi, Fiji.

     Gross Profit: Gross profit of $7.2 million, or 16.0% of sales, for the
first quarter of fiscal 2002, was relatively flat as compared to gross profit of
$7.1 million, or 16.1% of sales, in the first quarter of fiscal 2001.

     Store expenses: Store expenses of $5.5 million for the first quarter of
fiscal 2002 increased $0.3 million compared to expenses of $5.2 million for the
first quarter of fiscal 2001. As a percentage of sales, store expenses increased
to 12.2% of sales for the first quarter of fiscal 2002 compared to 11.9% for
same period in the prior year primarily due to higher store personnel related
costs.

     General and administrative expenses: General and administrative expenses
for the first quarter of fiscal 2002 increased slightly to $1.5 million, or 3.4%
of sales, as compared to $1.4 million, or 3.3% of sales, for the first quarter
of fiscal 2001. The increase in general and administrative expenses was due to
higher payroll costs as positions that were vacant in the prior year have been
filled and increased fees related to tax consulting services.

     Store opening expenses: Store opening expenses were $10,000 in the first
quarter of fiscal 2002 compared to $23,000 in the first quarter of fiscal 2001.
Store opening expenses in both periods relate to costs associated with the
evaluation of potential new store locations. We expect store opening expenses in
fiscal 2002 to remain comparable to those incurred in fiscal 2001.

     Interest expense, net: Interest expense, net decreased to $94,000 in the
first quarter of fiscal 2002 compared to $171,000 in the first quarter of fiscal
2001, due primarily to a reduction in interest rates.

     Other income (expense): Other income (expense) in both the first quarter of
fiscal 2002 and fiscal 2001 was primarily attributable to gains and losses on
foreign currency transactions, including translation of intercompany amounts
that represent transactions and balances that exceed the permanent investments
in those countries.

     Income tax provision: The tax provisions for the first quarter of fiscal
2002 and fiscal 2001, represent taxes associated with income generated in the
U.S. and U.S. Territories. Our effective tax rate is higher than the expected
federal statutory rate because no tax benefits were provided on foreign losses,
as we have no assurance that we will be able to generate an adequate amount of
taxable income in the future to utilize such benefits.


                                       11
<PAGE>

     Net income: Net income was $72,000, or $0.02 per share, for the first
quarter of fiscal 2002 compared to a net income for the first quarter of fiscal
2001 of $43,000, or $0.01 per share. Weighted average diluted common shares
outstanding were 3,608,512 for first quarter of 2002 as compared to 3,608,014 in
the same period in the prior year.

Liquidity and Capital Resources

     We have financed our operations with proceeds raised from our initial
public offering and concurrent private placement, various credit facilities, and
internally generated funds.

     Net cash used by operations was $3.9 million for the first quarter of
fiscal 2002 as compared to $1.5 million in the first quarter of fiscal 2001. The
increase in cash used by operations in the first quarter of fiscal 2002, as
compared to the same period in the prior year, was primarily due to the
replenishment of inventory stock levels following strong seasonal sales and the
build-up of inventory in expectation of promotions and carnival celebrations
early in the second quarter of 2002.

     Net cash used in investing activities was $0.1 million for the first
quarter of fiscal 2002 as compared to $0.2 million in the first quarter of
fiscal 2001. We have no plans to open new stores during fiscal 2002, but we are
in the process of analyzing opportunities for new stores in the future.

     Net cash provided by financing activities increased to $3.5 million for the
first quarter of fiscal 2002 as compared to $0.8 million in the first quarter of
fiscal 2001. This increase was due to increased borrowings under our existing
line of credit, which were utilized to finance the replenishment of inventory
levels. The additional borrowings were used to pay down our accounts payable to
71% of inventory at March 31, 2002 versus 79% of inventory at April 1, 2001. Our
current ratio has improved to 1.12 at March 31, 2002 versus 1.04 at April 1,
2001.

     On July 31, 2001, we extended the term of our $8.0 million line of credit
with a financial institution to August 1, 2002. Of the $8.0 million line of
credit, $0.5 million is utilized for standby letters of credit, leaving $7.5
million available for operations. At March 31, 2002, we had $5.8 million in
borrowings outstanding on its line of credit. Borrowings under the line of
credit bear interest at variable rates established daily at our option based on
the financial institution's prime rate (4.75% at March 31, 2002), or at its one
to six month LIBOR or IBOR rate plus 1.75% (3.74% at March 31, 2002). Collateral
for the line of credit consists of inventories and equipment. The line of credit
contains certain covenants, including the requirement that we maintain minimum
tangible net worth and minimum ratios of current assets to current liabilities,
and debt to tangible net worth. We must obtain the consent of the lender to (i)
pay dividends, (ii) purchase or sell assets or incur indebtedness, other than in
the ordinary course of business, (iii) make loans to, or investments in, any
other person, (iv) enter into a merger or other business combination, or (v)
make capital expenditures in excess of a specified limit as of and for the year
ended December 30, 2001. We are currently in compliance with all such covenants.

     During the first quarter of fiscal 2002, a significant portion of our cash
flow was generated by our operations. If our operating results deteriorate
during 2002, as a result of a decrease in customer demand or severe pricing
pressures from our customers or our competitors, our ability to generate
positive cash flow from operations may be jeopardized. In that case, we may be
forced to use our cash and cash equivalents to fund our operations. We believe
that amounts available under our various credit facilities, existing cash
available for working capital purposes, and cash flow from operations will most
likely be sufficient to fund our operations through the next 12 months. We
intend to extend the term of our existing line of credit beyond August 1, 2002.
There can be no assurance that we will be able to obtain additional financing
when needed, or that any available financing will be on terms acceptable to us.
If we are not able to extend the term of our existing credit line beyond August
1, 2002, or obtain additional financing on terms favorable to us, there would be
a material adverse effect on our business, financial condition and results of
operation.

Critical Accounting Policies

     We have chosen accounting policies that we believe are appropriate to
report accurately and fairly our operating results and financial position, and
we apply those accounting policies in a consistent manner. The significant
accounting policies are summarized in footnote 1 to the consolidated financial
statements included in our Annual Report on Form 10-K for the year ended
December 31, 2001.

     The preparation of financial statements in accordance with accounting
principles generally accepted in the United States requires us to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
the disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. We base our estimates on historical experience and other
factors believed to be reasonable under the


                                       12
<PAGE>

circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results could differ from those estimates.

     We believe that the following accounting policy is the most critical in the
preparation of our financial statements because it involves the most difficult,
subjective or complex judgments about the effect of matters that are inherently
uncertain.

Income Taxes

     Income tax expense includes U.S. and foreign income taxes. We account for
income taxes under the liability method. Under the liability method, deferred
tax assets and liabilities are determined based on differences between financial
reporting and tax basis of assets and liabilities, and are measured using the
enacted tax rates and laws that will be in effect when the differences are
expected to reverse. We apply judgment in determining whether it is more likely
than not that the deferred tax assets will be realized, and valuation allowances
are established when necessary. Our effective tax rate is currently higher than
the expected federal statutory rate because valuation allowances have been
established regarding the tax benefits of foreign losses, as we have no
assurance that we will be able to generate an adequate amount of taxable income
in the future to utilize such benefits. We are developing and implementing
certain tax planning strategies, which may effect our ability to recognize some
of the deferred tax assets that are currently allowed for and may ultimately
change our estimate of the valuation allowance.

Recent Accounting Pronouncements

     During 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards Nos.141, "Business Combinations", 142 "Goodwill
and Other Intangible Assets", 143 "Accounting for Asset Retirement Obligations",
and 144 "Accounting for Impairment or Disposal of Long-lived Assets and for
Long-Lived Assets to be Disposed of". The adoption of SFAS Nos. 141, 142 and 144
did not have a material impact on our consolidated financial statements. We
believe that the adoption of SFAS No. 143 will not have a material impact on our
consolidated financial statements.

Risk Factors that May Affect Future Results

     You should carefully consider the following factors that may affect future
results and other information included in this quarterly report on Form 10-Q and
in our annual report on Form 10-K for the fiscal year ended December 30, 2001.
The risks and uncertainties described below are not the only ones we face.
Additional risks and uncertainties not presently known to us or that are
currently deemed immaterial also may impair our business operations or could
cause actual results to differ from historical results or those anticipated. If
any of the following risks actually occur, our business, financial condition and
operating results could be materially adversely affected.

     Small Store Base. We opened our first store in 1989 and opened a total of
21 stores through December 2001, and presently operates eleven stores. Our
closure of ten stores has adversely affected our operating results. Should (i)
any new store be unprofitable, (ii) any existing store experience a decline in
profitability, or (iii) our general and administrative expenses increase to
address our expanded operations, the effect on our operating results would be
more significant than would be the case if we had a larger store base, and could
have a material adverse effect on our business, financial condition and
operating results. Although we intend to carefully plan for the implementation
of additional stores, there can be no assurance that such plans can be executed
as envisioned or that the implementation of those plans will not have a material
adverse effect on our business, financial condition and operating results. In
addition, our ability to acquire products at a lower cost than competitors or
obtain volume-based pricing can be adversely affected because of our small store
base.

     Competition. The warehouse club and discount retail businesses are highly
competitive. We have historically faced significant competition from warehouse
clubs and discount retailers, such as Wal-Mart, and Costco in Hawaii, and from
Kmart in the U.S. Virgin Islands and Guam. Our competition also consists of
discount retailers and other national and international grocery store chains.
Some of our competitors have substantially greater resources, buying power and
name recognition than we have. The cost of doing business in island markets is
typically higher than on the U.S. mainland because of ocean freight and duty
costs and higher facility costs. While we expect that the size of many of the
markets in which we operate or expects to enter will delay or deter entry by
many of our larger competitors, there can be no assurance that our larger
competitors will not decide to enter these markets or that other competitors
will not compete more effectively against us. Our gross margin and operating
income are generally lower for those stores in markets where traditional
warehouse clubs and discount retailers also operate stores, due to increased
price competition and reduced market share. We may be required to implement
price reductions and other actions in order to remain competitive in our
markets. PriceSmart opened a store in May 2001 on St. Thomas, where we have an
established market share. To remain competitive in St. Thomas, we implemented a
customer rewards program, which presents customers with merchandise certificates
based on the achievement of specified levels of customer purchases.
Additionally,


                                       13
<PAGE>

PriceSmart opened a store in Guam in March of 2002. In response, we remodeled
our Dededo store and have increased our price competitiveness and marketing
activities in Guam. Moreover, our ability to expand into and operate profitably
in new markets, particularly small markets, may be adversely affected by the
existence or entry of competing warehouse clubs or discount retailers.

     Ability to Manage Growth. The success of our future growth strategy will
depend to a significant degree on our ability to do the following:

     o    Operate our stores on a profitable basis;
     o    Expand our operations through the opening of new stores;
     o    Properly identify and enter new markets;
     o    Locate suitable store sites;
     o    Negotiate acceptable lease terms;
     o    Locate local developers to construct facilities to lease;
     o    Construct or refurbish sites; and
     o    Obtain necessary funds on satisfactory terms

     We have not opened stores in foreign island markets at a rapid pace and
have no store openings planned for 2002. We do not have operating experience in
many of the markets in which we may open new stores. In fact, in June 2000, we
closed the two stores that we had opened in New Zealand in 1999, as they had
performed below expectations, due in part to competitive and merchandising
challenges that are different from our other stores. Additionally, we closed one
of our two Fiji stores, due primarily to the impact that the political turmoil
in Fiji was having on the tourist industry. The resulting economic downturn
severely impacted the performance of our store in Nadi, which was closed in
February 2001. New markets may present operational, competitive, regulatory and
merchandising challenges that are different from those we currently encounter.
There can be no assurance that we will be able to adapt our operations to
support our future expansion plans or that our new stores will be profitable.
Any failure on our part to mange our growth could have a material adverse effect
on our business, financial condition and operating results.

     Additionally, we rely significantly on the skill and expertise of our
on-site store managers. We will be required to hire, train and retain skilled
managers and personnel to support its growth, and may experience difficulties
locating store managers and employees who possess the training and experience
necessary to operate our new stores, including our management information and
communications systems, particularly in island markets where language, education
and cultural factors may impose additional challenges. Further, we have
encountered, and may continue to encounter, substantial delays, increased
expenses or loss of potential sites due to the complexities, cultural
differences, and local political issues associated with the regulatory and
permitting processes in the island markets in which we may locate our stores.
There can be no assurance that we will be able to open new stores according to
our business plans, or that we will be able to continue to attract, develop and
retain the personnel necessary to pursue our growth strategy. Failure to do so
could have a material adverse effect on our business, financial condition and
operating results.

     We may not be able to fully pursue our future growth strategy by expanding
into new island markets. We believe that there are certain attributes of
appropriate markets into which we may expand our operations through the opening
of new stores, including:

     o    Acceptance and demand for U.S. goods;
     o    Familiarity with the warehouse concept;
     o    Absence of large warehouse club competition;
     o    Stable political and regulatory environment; and
     o    Favorable pricing structure to provide adequate return on investment

     We believe the number of new island markets with these attributes is
limited in number and is decreasing as a result of, among other things, the
entry by many of our larger competitors into these markets. If we are unable to
expand into new island markets ahead of large warehouse club competitors, our
business, financial condition and results of operations may be adversely
affected.

     We also will need to continually evaluate the adequacy of its existing
systems and procedures, including store management, financial and inventory
control and distribution systems. As we grow, we will need to continually
analyze the sufficiency of our distribution depots and inventory distribution
methods and may require additional facilities in order to support its planned
growth. There can be no assurance that we will anticipate all the changing
demands that our expanding operations will impose on such systems. Failure to
adequately update our internal systems or procedures as required could have a
material adverse effect on our business, financial condition and operating
results.


                                       14
<PAGE>

     Risks Associated With Island and International Operations. Our net sales
from island operations represented approximately 87% of our total net sales for
the fiscal first quarter ended March 31, 2002. We expect that our island and
international operations together will continue to account for nearly all of our
total net sales. The distance, as well as the time-zone differences, involved
with island locations impose significant challenges to our ability to manage our
operations. Logistical challenges are presented by operating individual store
units in remote locations, whether in terms of information flow or
transportation of goods.

     Isolation of Store Operations From Corporate Management; Increased
Dependence on Local Managers. Our headquarters and administrative offices are
located in Preston, Washington; however, ten of our eleven stores and a majority
of our employees are located on islands. Although we invest resources to hire
and train our on-site managers, the inability of our executives to be physically
present at our current and planned store sites on a regular basis may result in
the following:

     o    Isolation of store operations from corporate management and an
          increased dependence on store managers;
     o    Diminished ability to oversee employees, which may lead to decreased
          productivity or other operational problems;
     o    Construction delays or difficulties caused by inadequate supervision
          of the construction process; and
     o    Communication challenges

     We may need to invest significant resources to update and expand its
communications systems and information networks and to devote a substantial
amount of time, effort and expense to national and international travel in order
to overcome these challenges; failure to do so could have a material adverse
effect on our business, financial condition and operating results.

     Uncertainties Associated With Expansion Outside U.S. Territories.
Currently, eight of our stores are located in the U.S. Territories and foreign
island countries throughout the Pacific and Caribbean. Our remaining three
stores are in Hawaii and California. Our future expansion plans may involve
entry into additional foreign countries, which may involve additional or
heightened risks and challenges that are different from those we currently
encounter, including risks associated with being further removed from the
political and economic systems in the United States. We do not currently engage
in currency hedging activities. On February 15, 2001, we closed one of the two
stores we operated in Fiji due primarily to the impact that the political
turmoil in Fiji was having on the tourist industry, with the resulting economic
downturn severely impacting our store in Nadi. Our remaining store in Fiji is
located in the city of Suva, which is the capital of Fiji and the primary
population center. There can be no assurance that further political and economic
changes in Fiji will not have a material adverse effect on our business,
financial condition and operating results. The failure to adequately address the
additional challenges involved with international operations, and specifically
those associated with our store in Fiji, could have a material adverse effect on
our business, financial condition and operating results.

     Difficult Transportation Environment. Our island locales require the
transportation of products over great distances on water, which results in the
following:

     o    Substantial lags between the procurement and delivery of product, thus
          complicating merchandising and inventory control methods;
     o    Possible loss of product due to potential damage to, or destruction
          of, ships or containers delivering the Company's goods;
     o    Tariff, customs and shipping regulation issues; and
     o    Substantial ocean freight and duty costs.

     Moreover, only a limited number of transportation companies service our
regions, none of which has entered into a long-term contract with us. The
inability or failure of one or more key transportation companies to provide
transportation services to us, changes in the regulations that govern shipping
tariffs or any other disruption in our ability to transport our merchandise
could have a material adverse effect on our business, financial condition and
operating results.

     Governmental Regulations. Governmental regulations in foreign countries
where we plan to expand our operations might prevent or delay entry into the
market or prevent or delay the introduction, or require modification, of certain
of our operations. Additionally, our ability to compete may be adversely
affected by foreign governmental regulations that encourage or mandate the
employment of citizens of, or purchase of supplies from vendors in a particular
jurisdiction. We may also be subject to taxation in these foreign jurisdictions,
and the final determination of our tax liabilities may involve the
interpretation of the statutes and requirements of the various domestic and
foreign taxing authorities. We may also be subject to currency repatriation
restrictions. There can be no assurance that any of these risks will not have a
material adverse effect on our business, financial condition and operating
results.


                                       15
<PAGE>

     Weather and Other Risks Associated With Island Operations. Our operations
are primarily located on islands subject to volatile weather conditions and
natural disasters, which could result in delays in construction or result in
significant damage to, or destruction of, our stores. In addition, island
operations involve uncertainties arising from such as:

     o    Local business practices, language and cultural considerations,
          including the capacity or willingness of local business and government
          officials to provide necessary services;
     o    Ability to acquire, install and maintain modern capabilities such as
          dependable and affordable electricity, telephone, computer, Internet
          and satellite connections often in undeveloped regions;
     o    Political, military and trade tensions;
     o    Currency exchange rate fluctuations and repatriation restrictions;
     o    Local economic conditions;
     o    Longer payment cycles;
     o    Difficulty enforcing agreements or protecting intellectual property;
          and
     o    Collection of debts and other obligations in foreign countries

     There can be no assurance that we will be able to devote the resources
necessary to meet the challenges posed by island operations, or that losses from
business interruption will be adequately compensated by insurance; any failure
to do so would have a material adverse effect on our business, financial
condition and operating results.

     Dependence on Key Personnel. Our success depends in large part on the
abilities and continued service of our executive officers and other key
employees. In addition, we do not currently carry key-man life insurance. There
can be no assurance that we will be able to retain the services of such
executive officers and other key employees, the loss of any of whom could have a
material adverse effect on our business, financial condition and operating
results.

     Impact of General Economic Conditions. The success of our operations
depends to a significant extent on a number of factors relating to discretionary
consumer spending, including employment rates, business conditions, interest
rates, inflation, population and Gross Domestic Product levels in each of its
island markets, taxation, consumer spending patterns and customer preferences.
There can be no assurance that consumer spending in our markets will not be
adversely affected by these factors, thereby affecting our growth, net sales and
profitability. A decline in the national or regional economies of the United
States and the U.S. Territories where we currently operate or any foreign
countries in which we currently or will operate could have a material adverse
effect on our business, financial condition and operating results.

     Dependence on Systems. As we expand, we will need to upgrade or reconfigure
its management information systems. While we have taken a number of precautions
against certain events that could disrupt the operation of our management
information systems, we may experience systems failures or interruptions, which
could have a material adverse effect on our business, financial condition and
operating results. Our business is highly dependent on communications and
information systems, primarily systems provided by third-party vendors. Any
failure or interruption of our systems or systems provided by third-party
vendors could cause delays or other problems in our operations, which could have
a material adverse effect on our business, financial condition and operating
results. We have experienced no negative impact from Year 2000 systems issues.

     Utilization of Tax Benefits. Our ability to utilize various tax benefits
and credits is dependent on our ability to generate adequate taxable income in
the United States and in foreign jurisdictions. As of December 30, 2001, we had
recognized an aggregate foreign tax benefit of $2.4 million on foreign operating
losses and a corresponding valuation allowance of $1.8 million. Approximately
one-half of the Net Operating Losses ("NOL's") will begin expiring in the year
2006. The remaining NOL's were generated in Curacao, St. Maarten and Australia
and are not subject to expiration time limits. Additionally, during fiscal 2001
and fiscal 2000, we recorded foreign tax credits of $0.4 million and $0.3
million, respectively, with corresponding valuation allowances for the entire
amount of the credits. Utilization of the tax benefit and foreign tax credits is
dependent on our generating future taxable income. There can be no assurance
that we will be able to produce adequate future taxable income to utilize this
tax benefit, and failure to generate such income may have a material adverse
effect on our business, financial condition and operating results.

     Anti-takeover Considerations. Pursuant to our Restated Articles of
Incorporation, our Board of Directors has the authority, without shareholder
approval, to issue up to 2,000,000 shares of Preferred Stock and to fix the
rights, preferences, privileges and restrictions of such shares without any
further vote or action by our shareholders. Our restated articles and bylaws
also provide for a classified board and special advance notice provisions for
proposed business at annual meetings. These provisions, among others, may have
the effect of making it more difficult for a third party to acquire, or
discouraging a third party from attempting to acquire, control of our company,
even if shareholders may consider such a change in control to be in their best
interests. In addition, Washington law contains certain provisions that may have
the effect of delaying, deferring or preventing a hostile takeover of our
company.


                                       16
<PAGE>

     On February 23, 1999, our Board of Directors declared a dividend
distribution of preferred share purchase rights (the "Rights") pursuant to a
Shareholder Rights Plan. The Rights initially trade with shares of our common
stock and have no impact upon the way in which shareholders can trade our common
stock. However, ten days after a person or group acquires 15% or more of our
common stock, or such date, if any, as the Board of Directors may designate
after a person or group commences or publicly announces its intention to
commence a tender or exchange offer which could result in that person or group
owning 15% or more of the common stock (even if no purchases actually occur),
the Rights will become exercisable and separate certificates representing the
Rights will be distributed. The Rights would then begin to trade independently
from our shares at that time. The Rights are designed to cause substantial
dilution to a person or group that attempts to acquire our company without
approval of the Board of Directors, and thereby make a hostile takeover attempt
prohibitively expensive for the potential acquirer. As of March 31, 2002, no
rights have become exercisable.

     Decreases in Sales. Fluctuations in Comparable Store Sales. Although
comparable store sales increased 0.8% for the first quarter of fiscal 2002 as
compared to the comparable period in 2001, we experienced comparable sales
declines in both fiscal 2001 and fiscal 2000. Additionally, total sales declined
4.5% in fiscal 2001 as compared to fiscal 2000. Total sales increased 11.5% in
fiscal 2000 over fiscal 1999, increased 24.8% in fiscal 1999 over 1998, and
increased 7.2% in 1998 over 1997. Total sales in fiscal 1997 declined 7.4%
compared to fiscal 1996. The decline in fiscal 2001 was primarily due to the
impact of deteriorating economies in Guam, Samoa and Curacao, Netherlands
Antilles, as well as the impact of the opening of a membership warehouse club in
St. Thomas. The decline in 1997 was primarily due to store closures in the
continental United States and to a slight decline in comparable store (stores
open at least 13 months) sales, largely attributable to the Hawaii market. The
fiscal 2000 increase was primarily due to sales from the St. Maarten store
opened in June 2000, an increase in business sales, the benefit of an additional
week of sales in fiscal 2000 as compared to fiscal 1999 and sales from the New
Zealand stores that opened in November 1999 and were closed in June 2000. The
increase in fiscal 1999 and fiscal 1998 was primarily due to additional stores.
Comparable store sales decreased 4.7% in fiscal 2001, 2.2% in fiscal 2000 and
0.5% in fiscal 1997. Comparable store sales increased 6.8% in fiscal 1999 and
9.9% in fiscal 1998.

     A variety of factors affect our comparable store sales, including, among
others, actions of competitors (including the opening of additional stores in
our markets), the retail sales environment, general economic conditions, weather
conditions and our ability to execute our business strategy effectively. In
addition, our future expansion may result in opening additional stores in
markets where we already does business. We have experienced a reduction in sales
at an existing store when we open a new store in the same market. These factors
may result in future comparable store sales declines. Moreover, there can be no
assurance that comparable store sales for any particular period will not
decrease in the future.

     Ability to Maintain Existing Credit and Obtain Additional Credit. During
the first quarter of fiscal 2002, a significant portion of our cash flow was
generated by our operations. If our operating results deteriorate during 2002,
as a result of a decrease in customer demand or severe pricing pressures from
our customers or our competitors, our ability to generate positive cash flow
from operations may be jeopardized. In that case, we may be forced to use our
cash and cash equivalents to fund our operations. We believe that amounts
available under our various credit facilities, existing cash available for
working capital purposes, and cash flow from operations will most likely be
sufficient to fund our operations through the next 12 months. We intend to
extend the term of our existing line of credit beyond August 1, 2002. There can
be no assurance that we will be able to obtain additional financing when needed,
or that any available financing will be on terms acceptable to us. If we are not
able to extend the term of our existing credit line beyond August 1, 2002, or
obtain additional financing on terms favorable to us, there would be a material
adverse effect on our business, financial condition and results of operation.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     We operate stores in foreign countries and have market risks associated
with foreign currencies. However, sales are primarily made in U.S. cash or
foreign currencies with minimal trade credit extended and no borrowings exist in
foreign currencies. Cash deposited from sales are remitted back to the U.S. bank
account, routinely. Because of the minimal trade credit, our exposure to foreign
currency market risk is not considered significant and is not concentrated in
any single currency. Although we experienced foreign currency translation losses
in conjunction with the closure of our New Zealand stores in 2000, we do not
believe that we experience any significant market risk from foreign currencies
in our existing markets.

     We also assessed our vulnerability to interest rate risk associated with
our financial instruments, including, cash and cash equivalents, lines of credit
and long term debt. Due to the nature of these financial instruments, we believe
that the risk associated with interest rate fluctuations does not pose a
material risk. Our line of credit and long-term debt can be expected to vary in
the future as a result of future business requirements, market conditions and
other factors.

     We do not have any derivative financial instruments as of March 31, 2002.


                                       17
<PAGE>

                           PART II - OTHER INFORMATION

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibits

     None

(b)  Reports on Form 8-K

     On March 28, 2002, we filed a report on Form 8-K regarding our March 21,
     2002 press release which announced that we intended to restate our
     financial statements for the second quarter of fiscal year 2000 and the
     fiscal year ended December 31, 2000.


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<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.

                                        COST-U-LESS, INC.
                                        (Registrant)


Date May 14, 2002                       /s/  J. Jeffrey Meder
     --------------------------------   ----------------------------------------
                                        J. Jeffrey Meder
                                        President and
                                        Chief Executive Officer



Date May 14, 2002                       /s/ Martin P. Moore
     --------------------------------   ----------------------------------------
                                        Martin P. Moore
                                        Chief Financial Officer