U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                  Form 10-KSB

[X]   ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
      ACT OF 1934   (FEE REQUIRED)

For the fiscal year ended June 1, 2000
                                             OR

[ ]   TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
      ACT OF 1934 (NO FEE REQUIRED)

For the transition period from __________________ to ___________________

Commission file number             0-1744
                       -------------------------

Ambassador Food Services Corporation
----------------------------------------------------
(Name of small business issuer in its charter)

Delaware                                       44-0656199
-------------------------------------------------------------
(State or other jurisdiction of         (IRS Employer Identification No.)
 incorporation or organization)

5-30 54th Avenue; Long Island City, New York 11101
------------------------------------------------------------
(Address of principal executive offices)          (Zip Code)

Issuer's telephone number:   718-361-2512
                             ------------
Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:
                             Common Stock (Par Value $1)
                             ---------------------------
                                  (Title of Class)

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

  YES          NO   X
     -----       -----
Check if there is no disclosure of delinquent  filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure  will be contained,  to
the  best  of  Registrant's   knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part III of this Form  10-KSB or any
amendment to this Form 10-KSB. [X]

Issuer's revenues for its most recent fiscal year are $ 17,135,249.

At May 11, 2001, there were 735,356 shares of the Registrant's common stock
outstanding. Based on the average of the highest bid and lowest asked prices
reported on the national over-the-counter market (NASDAQ Symbol AMBF), the
aggregate market value of the shares held by non-affiliates of the Registrant
was $ 367,800.

                                       1
<PAGE>

Exhibit Index is on page 37.

Transitional Small Business Disclosure Format:  YES          NO   X
                                                    -----       -----


                                     PART I



Item 1.   Description of Business

  (a)     Business Development

          The Registrant  (hereinafter  "Company" or "Ambassador") is a Delaware
          corporation incorporated in 1963. It is engaged, through divisions and
          a  subsidiary,  in the food service and  janitorial  industries in New
          York and New Jersey.

          During  fiscal  year 2000,  the  principal  business  activity  of the
          Company  was  the  servicing  of  its  customer  accounts,   primarily
          factories,  offices, schools, and social service agencies, through the
          use of vending machines, cafeterias, and prepared meals delivered from
          Company commissaries. Subsequent to June 1, 2000, the Company sold all
          operating assets of its Kansas City, Missouri location and the Company
          sold all operating assets of its Des Moines, Iowa and Lawton, Oklahoma
          locations.  As a result,  the Company operates in the food service and
          janitorial  industries in New York and New Jersey only.  The principal
          business  activity of the  Company is the  servicing  of its  customer
          accounts that are primarily social service  agencies.  Through the use
          of cafeterias and prepared meals delivered from Company  commissaries.
          The Company no longer services its customer  accounts  through the use
          of vending machines.

          In March 2001, the Company sold its corporate headquarters building in
          Kansas City and moved its principal  executive offices to its New York
          location at 5-30 54th Avenue, Long Island City, New York 11101.

          On  August  1,  1989,  the  name  of  the  Company  was  changed  from
          Automatique, Incorporated to Ambassador Food Services Corporation.

  (b)     Business of Issuer

          (1) Description of Business Done by the Registrant in its Food Segment

          (i and ii)The vending and cafeteria segment of  the Company's business
                    consists of  contracting  to  distribute  beverages and food
                    products  to customer  locations  consisting  of  factories,
                    offices,  and  schools.  The  Company  conducts  surveys  of
                    potential customer  locations,  determines  profitability of
                    the location, and submits a proposal offering to provide the
                    vending and/or cafeteria service for the customer  location.
                    As of January 12, 2001,  the Company no longer  services its
                    customer  accounts  through  the  use of  vending  machines.
                    Business with local government social service agencies

                                       2

<PAGE>


                    and not-for-profit  agencies is obtained through competitive
                    bidding  and is  serviced  by  producing  meals in a central
                    commissary and delivering them to various  designated points
                    for consumption.

          (iii)     No new products  have been  developed by this  segment.  The
                    Company,  in  general,  markets  products  developed  by its
                    suppliers.

          (iv)      The vending  food service  business,  made up of a few large
                    companies  and many  small  independently  owned  local  and
                    regional enterprises, is highly competitive. The practice in
                    the industry is to operate under written agreements with the
                    locations  served.  In the market areas where the Company is
                    located, it has national,  regional,  and local competition,
                    some of which have  substantially  greater  total  sales and
                    assets.  Competition  for  locations  in  the  food  service
                    industry  normally  comes  in the  form  of  pricing  and in
                    quality of service and product.

          (v)       Raw   materials,   consisting   of  packaged   products  and
                    commodities,  are purchased from manufacturers and purveyors
                    and are  warehoused or processed by the Company in the local
                    market.  There is an adequate  supply of raw materials  from
                    normal sources;  these include Ancona Midwest Food Services,
                    Inc., Pepsi-Cola General Bottlers, and Jones Distributing.

          (vi)      During  the year ended June 1,  2000,  this  segment  had no
                    single customer whose sales were equal to 10 percent or more
                    of the Company's consolidated revenues.

                    Because the Company's  customers are primarily the employees
                    and students of the various  schools,  colleges,  factories,
                    and  offices  at  which  it has its  vending  and  cafeteria
                    services,   the  Company  normally  experiences  a  seasonal
                    decline  in  sales  during  the  summer  months  and  around
                    holidays,   during  which  times  many  of  these  customers
                    vacation and many locations close completely.

          (vii)     The  distinctive  logo  associated with the Company has been
                    registered  under the laws of the United States  relating to
                    trade names and trademarks. The Company regards such logo as
                    valuable and will  maintain the  registration  in effect for
                    continuing use in connection with the Company's business. In
                    addition,  the  segment  is a party to the  following  labor
                    agreements:


                 Bargaining Unit            Market            Expiration Date
                 Teamsters Local #838       Kansas City           1/1/03
                 Teamsters Local #90        Des Moines            4/30/02
                 United Service Employees
                 Union #377                 New York             12/31/03


                                       3

<PAGE>


          (viii)    The Company does not have a material portion of its business
                    subject to  renegotiation  or termination at the election of
                    the Government.

          (ix)      The  Company  does not  believe  that  existing  or probable
                    government   regulations  have  a  material  effect  on  its
                    operation.



  (b) (2)           Description of Business Done by the Registrant in its
                    Janitorial Segment

          (i and ii)The  janitorial  and  maintenance  service  division  of the
                    Company's business consists primarily of contracting various
                    types  of  routine  cleaning  services  for  customers  on a
                    weekly,  monthly,  or as-needed basis.  Customers  currently
                    include  grocery stores and public housing  complexes in New
                    York and New Jersey.

          (iii)     No new products have been introduced by this segment.

          (iv)      The janitorial  segment is limited to the New Jersey and New
                    York   metropolitan   areas.   Competition   for  janitorial
                    contracts  comes  in the  form of  pricing  and  quality  of
                    service.  Competition  in general is from regional and local
                    companies.

          (v)       The  sources  and  availability  of raw  materials  for this
                    segment are adequate. Sources of raw materials include Graco
                    Manufacturing and Malone Chemical.

          (vi)      During  fiscal  2000,  this  segment had no single  customer
                    whose  sales  were  equal  to 10  percent  or  more  of  the
                    Company's consolidated revenues.

                    This  segment is not  subject to  material  fluctuations  in
                    sales volume resulting from seasonality.

                    Sales  in  this  segment  are on open  accounts  receivable.
                    Inventory levels are not significant.

          (vii)     This segment is operating without  registered  trademarks or
                    patents.  The segment is a party to a labor  agreement  with
                    the  United  Service  Employees  Union #377 in New York that
                    expires December 31, 2003.

          (viii)    The Company does not have a material portion of its business
                    subject to  renegotiation  or termination at the election of
                    the Government.

          (ix)      The  Company  does not  believe  that  existing  or probable
                    government   regulations  have  a  material  effect  on  its
                    operations.


                                       4
<PAGE>


  (b)     (1 and 2)

          (x)       Through (xii) with Respect to the  Registrant's  Business in
                    General

          (x)       The Company has not  incurred  any expense for  research and
                    development activities during any of its last two (2) fiscal
                    years.

          (xi)      Compliance   with  federal,   state,   and  local  laws  and
                    regulations involving the protection of the environment will
                    not have a material effect.

          (xii)     As of June 1, 2000, the Company and its subsidiary  employed
                    approximately 195 persons.

Item 2.  Description of Properties

         The Company leased all real estate for office, warehouse, garage,
         repair shops, and commissaries in each of its market areas throughout
         fiscal 2000, except for the property located at 3269 Roanoke Road,
         which was purchased in July 1990. Annual rentals were approximately
         $295,300 less $31,800 of sublease income. The suitability of the leased
         properties is adequate; such properties are described below:

                                          Type of          Size       Expiration
Location                                  Property        (Sq. Ft.)      Date
3269 Roanoke Rd., Kansas City, MO         Office/Whse      13,600       Owned*

208 E. Aurora, Des Moines, IA             Office/Whse       9,200       Mo/Mo*

5-30 54th Ave., Long Island City, NY      Office/Whse       8,000       Mo/Mo
41-43 24th St., Long Island City, NY      Office/Whse       2,500       3/01
9100 Santa Fe Dr., Overland Park, KS      Restaurant-       1,800       2/04
                                          Discontinued
162 Closter Dock Rd., Closter, NJ         Office/Whse       1,200       Mo/Mo
36 Clark St., Des Moines, IA              Office/Whse      10,600       3/01*
      *Operations at this location sold subsequent to June 1, 2000.

         The major portion of the physical properties used by the Company is
         made up of automatic vending equipment and food service and production
         equipment. Most of the equipment used is owned by the Company. In
         several instances, cafeteria and vending equipment are owned by the
         account to which food services are rendered by the Company. The Company
         operates approximately 66 vehicles in the conduct of its business,
         approximately 10% of which are leased and the balance owned. The annual
         rentals on all such leased real estate properties, equipment, and
         vehicles approximate $510,000.

Item 3.  Legal Proceedings

         None.


                                       5
<PAGE>


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 of the Company.

                                    PART II

Item 5.  Market for Common Equity and Related Stockholder Matters

  (a)    Price Range of Common Stock

         The principal market in which the common stock of the Company is traded
         is the national over-the-counter market (NASDAQ symbol AMBF). The bid
         quotations for the Company's common stock for each quarter during
         fiscal years ended June 1, 2000 and June 3, 1999 are shown below:

                                     2000                     1999
                                 Bid Quotation            Bid Quotation
                                High        Low        High         Low
            First Quarter       $.875    $.3125        $1.25       $.625
            Second Quarter     $.3125      $.25     $1.03125       $.875
            Third Quarter      $.3125      $.28       $1.125       $.875
            Fourth Quarter      $.375      $.26     $1.15625       $.875


         The quotations above reflect interdealer prices without retail mark-up,
         mark-down, or commission and may not represent actual transactions.

  (b)    Number of Equity Security Holders

         As of May 11, 2001 there were 680 record holders of the Company's
         common stock.

  (c)    Dividends

         The Company has never paid cash dividends on its common stock. Payment
         of dividends will be within the discretion of the Company's Board of
         Directors and will depend, among other factors, on earnings, debt
         agreements, capital requirements, and the operating and financial
         condition of the Company.


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

         Results of Continuing Operations


         2000 Results

               Sales for fiscal 2000 were  $891,168 or 4.9% less than year ended
               June 3, 1999.

                                       6
<PAGE>


          The decline  was due  primarily  to the loss of vending and  cafeteria
          contracts  to  competitors  in Kansas City and the loss of  janitorial
          contracts in the New York area. Gross margins  deteriorated  over 2.3%
          in fiscal 2000  compared to fiscal 1999.  Intense  competition  and an
          unfavorable  change in sales  product  mix  adversely  affected  gross
          margins.  The decline in gross margins was the primary  reason for the
          loss incurred in fiscal 2000. Management continues to pursue increased
          pricing and lower cost of product.

          Operating  costs for fiscal  2000 were 37.4% of sales for Fiscal  2000
          compared to 42.0% of sales in Fiscal 1999.  The bulk of the  reduction
          was in labor.  Selling  and  administrative  costs were  approximately
          $300,000  or 12% less than the prior  year.  The prior year  contained
          approximately $230,000 of non-recurring charges.

          The carrying value of intangible  assets is  periodically  reviewed by
          the Company based on the  estimated  future  operating  income of each
          acquired  entity on an  undiscounted  cash flow basis.  Based upon its
          most recent analysis, the Company believes that no material impairment
          of  intangible  assets exists at June 1, 2000.  The carrying  value of
          certain assets of the Kansas City branch that were sold  subsequent to
          June 1, 2000 were  deemed to be  excessive  and the value was  written
          down $110,460. .

         1999 Results

               Sales  for  fiscal  1999 were  $1,178,661  or 6.1% less than year
          ended May 28,  1998.  The  decline  was due  primarily  to the loss of
          vending and cafeteria  contracts to competitors in Kansas City. Fiscal
          1998 included sales of $285,000 for an operation in Tyler, Texas which
          was  closed.  Gross  margins  deteriorated  over 2.0% in  fiscal  1999
          compared to fiscal 1998.  Intense  competition  and sales  product mix
          adversely affected gross margins. The decline in gross margins was the
          primary  reason for the  substantial  loss  incurred  in fiscal  1999.
          Management  continues  to pursue  increased  pricing and lower cost of
          product.

          Operating costs for fiscal 1999 were basically the same as fiscal 1998
          in dollars spent but were 2.8% higher as a percent of sales because of
          the sales decline.

          Administrative  costs  increased  due  primarily  to the  write-off of
          non-trade  receivables in excess of $100,000.  A sales tax and a union
          pension  liability from prior years of $130,000 was recorded in fiscal
          1999.

          Management  had taken  steps to reduce  operating  and  administrative
          costs  through staff  reductions  and control of  expenditures  in all
          areas.



          Liquidity and Capital Resources

          The  Company's  working  capital  deficit  declined by $408,000 from a
          deficit of  $1,557,000  at June 3, 1999 to a deficit of  $1,149,000 at
          June 1, 2000. Long term liabilities  increased  $127,000 during Fiscal
          2000. On August 19, 2000, the Company sold all operating assets of the
          Kansas City,  Missouri  location for  $310,000.  The proceeds of which
          were used to pay

                                       7
<PAGE>


          trade  creditors.  On January 12, 2001, the Company sold all operating
          assets of the Des Moines,  Iowa and  Lawton,  Oklahoma  locations  for
          $3,200,000.  Provisions  of  the  sale  agreement  consists  of a  15%
          holdback  for  the  retention  of  purchased  customer  accounts.  The
          holdback  amount of $480,000  will be paid less a  reduction  in sales
          caused  by the loss of  purchased  customer  accounts.  An  additional
          holdback  provided  for  $100,000  for each of three  years a specific
          major  account  is  retained.  The  proceeds  of the sale were used to
          retire debt and pay trade creditors.

          The Company sold its corporate  headquarters  building in Kansas City,
          Missouri in March 2001 for $280,000. The proceeds of the sale was used
          to pay trade creditors.

          Additionally,  the Company  refinanced  the  $1,400,000  note  payable
          resulting in a reduction  of the  interest  rate from 12% to 10% and a
          forgiveness  of  principal  in the  amount of  $350,000.  A payment of
          principal in the amount of $250,000 was made in January 2001  reducing
          the note payable to $800,000.

          The above events have substantially improved the financial strength of
          the Company. Cash flow from the remaining locations,  New York and New
          Jersey, will, in the opinion of management, be adequate.


                                       8
<PAGE>


Item 7.   Consolidated Financial Statements

         Index to Consolidated Financial Statements

                                                                       Page

Report of Independent Certified Public Accountants                           10

Consolidated Balance Sheets as of June 1, 2000 and June 3, 1999           11-12

Consolidated Statements of Operations for the Years Ended June 1, 2000
         and June 3, 1999                                                    13

Consolidated Statement of Changes in Stockholders' Equity (Deficit) for
         the Years ended June 1, 2000 and June 3, 1000                       14

Consolidated Statements of Cash Flows for the Years Ended June 1, 2000
         and June 3, 1999                                                 15-16

Notes to Consolidated Financial Statements                                17-32


                                       9
<PAGE>








     REPORT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS


Board of Directors
Ambassador Food Services Corporation and Subsidiary

We have audited the accompanying  consolidated balance sheets of Ambassador Food
Services  Corporation and Subsidiary as of June 1, 2000 and June 3, 1999 and the
related consolidated  statements of operations,  changes in stockholders' equity
(deficit),  and cash flows for the years then ended. These financial  statements
are the  responsibility of the Company's  management.  Our  responsibility is to
express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain  reasonable  assurance  about  whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material  respects,  the consolidated  financial position of Ambassador Food
Services  Corporation and Subsidiary as of June 1, 2000 and June 3, 1999 and the
consolidated results of their operations and their cash flows for the years then
ended in conformity with accounting  principles generally accepted in the United
States of America.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company will continue as a going concern. As shown in the financial  statements,
the Company  incurred a net loss of $179,859 during the year ended June 1, 2000,
and, as of that date,  the Company's  current  liabilities  exceeded its current
assets by  $1,148,951  and its total  liabilities  exceeded  its total assets by
$582,859.  These factors,  among others, as discussed in Note B to the financial
statements, raise substantial doubt about the Company's ability to continue as a
going concern.  Management's plans in regard to these matters are also described
in Note B. The financial  statements do not include any  adjustments  that might
result from the outcome of this uncertainty.

GRANT THORNTON LLP

Kansas City, Missouri
August 21, 2000, (except for Note P, as to
         which the date is January 15, 2001)


                                       10

<PAGE>

              Ambassador Food Services Corporation and Subsidiary

                          CONSOLIDATED BALANCE SHEETS

                         June 1, 2000 and June 3, 1999

<TABLE>
<CAPTION>

                                                                         2000             1999
                                                                      ----------       ----------
     ASSETS
CURRENT ASSETS
    <S>                                                               <C>              <C>
    Cash (including change funds of $169,478 in 2000
      and $186,405 in 1999) (note A10)                                $ 232,775        $ 238,410
    Trade accounts receivable, net of allowance for
      doubtful accounts of $32,500 in 2000 and
      $16,483 in 1999 (notes A11, D, and E)                           1,199,560          937,533
    Inventories (notes A4 and P)                                        537,655          580,563
    Prepaid expenses                                                    109,494           48,703
    Current portion of note receivable (note L)                          28,473           21,016
                                                                ----------------  ---------------
         Total current assets                                         2,107,957        1,826,225

PROPERTY AND EQUIPMENT (notes A5 and E)
    Vending equipment                                                 4,920,500        4,903,244
    Cafeteria and commissary equipment                                1,116,833        1,063,661
    Building and leasehold improvements                                 761,037          736,537
    Other                                                             1,008,990          909,569
                                                                ----------------  ---------------
                                                                      7,807,360        7,613,011
    Less accumulated depreciation and amortization                    6,196,111        5,761,792
                                                                ----------------  ---------------
         Net property and equipment                                   1,611,249        1,851,219

OTHER ASSETS
    Location contracts, net of accumulated amortization of
     $166,963 in 2000 and $152,001 in 1999 (notes A6, E, and P)         147,477          242,482
    Note receivable, less current portion (note L)                      263,339          291,812
    Unrecognized prior service costs (notes A7 and H)                         -          108,394
    Excess of purchase price over net assets acquired, net
      of accumulated amortization of $23,722 in 2000 and
      $22,704 in 1999 (notes A6 and P)                                    2,430           20,976
    Deferred expenses                                                    45,829           48,616
    Miscellaneous                                                        94,245           52,809
                                                                ----------------  ---------------
         Total other assets                                             553,320          765,089
                                                                ----------------  ---------------
                                                                    $ 4,272,526      $ 4,442,533
                                                                ================  ===============

</TABLE>

                                       11
<PAGE>

<TABLE>
<CAPTION>
                                                                    2000              1999
                                                               ---------------   ---------------
         LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
    <S>                                                            <C>               <C>
    Trade accounts payable                                         $1,549,304        $1,819,354
    Accrued expenses (note C)                                         439,342           665,348
    Current maturities of long-term debt (note E)                     497,293           480,554
    Line-of-credit agreement (note D)                                 770,969           417,490
                                                               ---------------   ---------------
         Total current liabilities                                  3,256,908         3,382,746


LONG-TERM LIABILITIES
    Projected benefit obligation (note H)                              89,641           292,069
    Subordinated note payable to stockholder (note F)                  47,395           168,558
    Long-term debt, less current maturities (note E)                1,420,856           946,240
    Accrued costs of discontinued restaurant operations (note J)       40,585            55,864
                                                               ---------------   ---------------
         Total long-term liabilities                                1,598,477         1,462,731


COMMITMENTS AND CONTINGENCIES
   (notes F, G, H, J, and M)                                                -                 -


STOCKHOLDERS' EQUITY (DEFICIT) (note F)
    Common stock, par value $1.00 per share; authorized,
    2,000,000 shares; issued, 1,009,230 shares                      1,009,230         1,009,230
    Additional paid-in capital                                        718,291           718,291
    Accumulated deficit                                            (1,980,869)       (1,801,010)
                                                               ---------------   ---------------
                                                                     (253,348)          (73,489)

    Less treasury stock - 273,774 shares in 2000
      and 273,674 shares in 1999                                      329,511           329,455
                                                               ---------------   ---------------
         Total stockholders' deficit                                 (582,859)         (402,944)
                                                               ---------------   ---------------
                                                                   $4,272,526        $4,442,533
                                                               ===============   ===============
</TABLE>

        The accompanying notes are an integral part of these statements.

                                       12
<PAGE>

               Ambassador Food Services Corporation and Subsidiary

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                    Years ended June 1, 2000 and June 3, 1999


                                                   2000              1999
                                              ---------------   ---------------

Net sales
    Food                                         $15,822,981       $16,326,818
    Janitorial                                     1,312,268         1,699,599
                                              ---------------   ---------------
                                                  17,135,249        18,026,417
Costs and expenses (note A8)
    Cost of food products sold                     7,832,824         7,828,748
    Operating (note K)                             6,402,466         7,563,302
    Selling and administrative                     2,282,089         2,597,004
    Depreciation and amortization                    493,332           530,553
    Interest                                         304,397           314,492
                                              ---------------   ---------------
         Total costs and expenses                 17,315,108        18,834,099
                                              ---------------   ---------------

NET LOSS                                          $ (179,859)       $ (807,682)
                                              ===============   ===============

Net loss per common share                            $ (0.24)          $ (1.10)
                                              ===============   ===============

Weighted average of common shares
 outstanding (note A9)                               735,536           737,496
                                              ===============   ===============


        The accompanying notes are an integral part of these statements.

                                       13
<PAGE>


              Ambassador Food Services Corporation and Subsidiary

      CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)

                   Years ended June 1, 2000 and June 3, 1999

<TABLE>
<CAPTION>



                                                                                                                        Total
                                                                                        Additional                   stockholders'
                                                                                         paid-in       Accumulated      equity
                                     Common stock                                        capital        deficit        (deficit)
                              ------------------------------------------------------   -----------   -------------  -------------
                                        Issued                     Treasury
                              ------------------------------------------------------
                                 Shares        Amount        Shares        Amount
                              ------------  ------------   -----------   -----------
<S>                             <C>          <C>              <C>         <C>            <C>          <C>            <C>
Balance at May 29, 1998         1,009,230    $1,009,230       267,074     $(321,436)     $718,291       $(993,328)    $ 412,757
   Net loss                             -             -             -             -             -        (807,682)     (807,682)
   Purchase of treasury stock           -             -         6,600        (8,019)            -               -        (8,019)
Balance at June 3, 1999         1,009,230     1,009,230       273,674      (329,455)      718,291      (1,801,010)     (402,944)
   Net loss                             -             -             -             -             -        (179,859)     (179,859)
   Purchase of treasury stock           -             -           100           (56)            -               -           (56)
Balance at June 1, 2000         1,009,230    $1,009,230       273,774     $(329,511)     $718,291     $(1,980,869)   $ (582,859)
                              ============  ============   ===========   ===========   ===========   =============  ============


</TABLE>

         The accompanying notes are an integral part of this statement.

                                       14
<PAGE>



               Ambassador Food Services Corporation and Subsidiary

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                   Years ended June 1, 2000 and June 3, 1999


                                                        2000           1999
                                                     ------------  -------------

Cash Flows From Operating Activities
    Net loss                                          $ (179,859)    $ (807,682)
    Adjustments to reconcile net loss to net cash
      used in operating activities
      Depreciation and amortization                      493,332        530,553
      Loss on impairment of long-lived assets (note O)   110,460              -
      (Gain) loss on sale of property and equipment      (10,314)         1,230
      Provision for bad debt                             (16,017)       (71,337)
      Forgiveness of note receivable (note N)             20,842              -
      Discount of note receivable                              -         28,070
      Gain on pension settlement (note H)                (46,777)             -
      Changes in operating assets and liabilities:
        Trade accounts receivable                       (246,010)       327,423
        Income taxes receivable                                -          3,277
        Other assets                                     (77,842)        28,864
        Inventories                                       30,019        (54,979)
        Prepaid expenses                                 (60,791)        44,673
        Trade accounts payable and
          accrued expenses                              (558,592)      (190,715)
                                                     ------------  -------------
          Net cash used in operating activities         (541,549)      (160,623)


                                       15

<PAGE>


              Ambassador Food Services Corporation and Subsidiary

               CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED

                   Years ended June 1, 2000 and June 3, 1999


                                                        2000           1999
                                                     ------------  -------------

Cash Flows From Investing Activities
    Purchase of property and equipment                  (219,031)      (493,569)
    Proceeds from sale of property and equipment          10,314          2,300
    Collections of notes receivable                       21,016        863,772
        Net cash provided by (used in) investing     ------------  -------------
        activities                                      (187,701)       372,503

Cash Flows From Financing Activities
    Proceeds from issuance of long-term debt           1,086,150        601,660
    Principal payments on long-term debt                (715,958)      (518,015)
    Purchase of treasury stock                               (56)        (8,019)
    Other financing activities                                 -        (16,366)
    Net proceeds (payments) under line-of-credit         353,479       (304,439)
     agree,emt                                       ------------  -------------
          Net cash provided by (used in) financing
          activities                                     723,615       (245,179)
                                                     ------------  -------------
Net Decrease in Cash                                      (5,635)       (33,299)
Cash, Beginning of Year                                  238,410        271,709
                                                     ------------  -------------
Cash, End of Year                                      $ 232,775      $ 238,410
                                                     ============  =============


Supplementary Disclosure of Cash Flow Information:
    Cash paid during the year for:
      Income taxes                                     $    -         $    -
      Interest                                           305,215        314,492


        The accompanying notes are an integral part of these statements.

                                       16

<PAGE>

              Ambassador Food Services Corporation and Subsidiary

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                   Years ended June 1, 2000 and June 3, 1999



A.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         A summary of the significant accounting policies consistently applied
         in the preparation of the accompanying consolidated financial
         statements follows.

         1.    Principles of Consolidation

               The  consolidated  financial  statements  include the accounts of
               Ambassador  Food  Services   Corporation  and  its   wholly-owned
               subsidiary,   Ambassador   Fast   Services,   Inc.   (hereinafter
               collectively  known as the  Company).  All material  intercompany
               balances and transactions have been eliminated.

         2.    Nature of Business

               The Company and its subsidiary are engaged in two segments:  food
               service (vending, cafeteria and catering) and janitorial service.
               Janitorial  service  sales  represent  less than 10% of total net
               sales.  The Company's  customers are located  principally  in the
               Midwest and Northeast.

         3.    Reporting Periods

               The  Company  has a fiscal  year (52 or 53  weeks)  ending on the
               Thursday  nearest May 31. Fiscal years 2000 and 1999 contained 52
               weeks.

         4.    Inventories

               Inventories are stated at the lower of cost (first-in,  first-out
               method) or market.

         5.    Property and Equipment

               Property  and  equipment  are  stated  at cost.  Depreciation  is
               provided in amounts  sufficient to relate the cost of depreciable
               assets to  operations  over their  estimated  useful lives on the
               straight-line  method.  The estimated  lives used in  determining
               depreciation are as follows:

                    Vending equipment                              4-8 years
                    Cafeteria and commissary equipment            3-10 years
                    Building and leasehold improvements           3-22 years
                    Other                                         3-10 years


                                       17
<PAGE>


               Ambassador Food Services Corporation and Subsidiary

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                    Years ended June 1, 2000 and June 3, 1999



A.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

         6.    Location Contracts and Excess of Purchase Price Over Net Assets
               Acquired

               Location  contracts and excess of purchase  price over net assets
               acquired  arise from the  purchase of various  companies  and are
               carried at cost. Location contracts represent the amount paid for
               customer  vending  relationships  in  existence  at the  time  of
               acquisition.  These  relationships  were generally  cancelable by
               either party with limited  notice.  Such amounts are amortized on
               the straight-line method over 5 to 40 years.

               The carrying value of intangible assets is periodically  reviewed
               by the Company based on the estimated  future operating income of
               each acquired  entity on an undiscounted  cash flow basis.  Based
               upon its most  recent  analysis  and  subsequent  sale of all the
               assets of the Kansas City location,  the Company believes that no
               other material  impairment of intangible assets exists at June 1,
               2000. (See Note P.)

         7.    Unrecognized Prior Service Costs

               Unrecognized prior service costs,  related to the defined benefit
               pension  plan  discussed  in Note H, are being  amortized  on the
               straight-line method over the average remaining service period of
               the participants included in the plan. During the year ended June
               1, 2000, a portion of the plan was settled, and all prior service
               costs were recognized.

         8.    Costs and Expenses

               Preopening  costs  associated  with  new  vending  and  cafeteria
               accounts are charged to expense as incurred.

         9.    Loss Per Common Share

               Loss per share has been  computed  using the weighted  average of
               common shares outstanding during the period.  Certain convertible
               debt and options were  outstanding  during the reporting  periods
               but were not considered in the net loss per share calculation, as
               the effect is antidilutive.

         10.   Statements of Cash Flows

               For purposes of reporting cash flows, cash includes cash on hand,
               in banks, and in change funds.


                                       18
<PAGE>
               Ambassador Food Services Corporation and Subsidiary

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                    Years ended June 1, 2000 and June 3, 1999


A.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

         11.   Concentration of Credit Risk

               Of the Company's accounts receivable,  substantially all are with
               customers located in the northeastern  United States. The Company
               grants  credit to  customers  such as  businesses,  schools,  and
               governmental agencies. Collateral is not required.

         12.    Use of Estimates

               In preparing consolidated financial statements in conformity with
               accounting  principles generally accepted in the United States of
               America, management is required 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  consolidated   financial  statements  and  revenues  and
               expenses during the reporting period. Actual results could differ
               from those estimates.

         13.   Financial Instruments

               Short-term  financial  instruments - The fair value of short-term
               financial instruments, including cash and cash equivalents, trade
               accounts receivable and payable and certain accrued  liabilities,
               approximates  their carrying amounts in the financial  statements
               because of the short maturity of such instruments.

               Notes payable and long-term  debt - The fair value of the line of
               credit  approximates  its carrying  amount  because the currently
               effective  rates reflect  market  rates.  The fair value of fixed
               rate notes payable  approximates its carrying amount based on the
               Company's  estimated  current  incremental   borrowing  rate  for
               similar obligations with similar terms.

         14.   Reclassifications

               Certain  reclassifications  have been made to the 1999  financial
               statements to conform to the 2000 presentation.

B.   REALIZATION OF ASSETS

     The accompanying  consolidated  financial  statements have been prepared in
     conformity  with  accounting  principles  generally  accepted in the United
     States of America, which contemplate continuation of the Company as a going
     concern.


                                       19

<PAGE>
               Ambassador Food Services Corporation and Subsidiary

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                    Years ended June 1, 2000 and June 3, 1999


B.   REALIZATION OF ASSETS - Continued

     Recoverability  of the recorded  asset  amounts  shown in the  accompanying
     consolidated  balance sheets is dependent upon continued  operations of the
     Company,  which in turn is dependent upon the Company's ability to continue
     to meet  its  financing  requirements,  obtain  additional  financing,  and
     succeed in its future operations.  These consolidated  financial statements
     do  not  include  any  adjustments   relating  to  the  recoverability  and
     classification  of recorded asset amounts or amounts and  classification of
     liabilities  that  might be  necessary  should  the  Company  be  unable to
     continue its existence.

     Management  has  taken the  following  steps to revise  its  operating  and
     financial  requirements,  which it believes are  sufficient  to provide the
     Company with the ability to continue in existence:

     -    Several  administrative  and regional  positions were eliminated.
     -    Steps to improve  margins  and reduce  costs were taken.
     -    Increasing  the growth and profit  of  current  operations  through
          internal  sales  efforts  is  the Company's focus.
     -    The Company sold the operating assets at certain locations and
          refinanced  certain  debt  agreements  in fiscal year 2001,  which
          may improve the profitability of the Company. (See Note P.)


C.   CURRENT LIABILITIES

     Accrued expenses consisted of the following:

                                                       2000           1999
                                                  ------------   ------------
Legal fees                                            $ 4,925       $ 32,302
Vacation pay                                           63,328         64,628
Taxes                                                  47,880         57,814
Salaries and commissions                              149,616        120,338
Current portion of projected benefit obligation
  (Note H)                                             43,850         26,822
Accrued costs of discontinued restaurant operations
  (Note J)                                             11,752         13,813
Accrued sales tax costs                                29,612        204,296
Medical insurance (Note M)                             73,472         59,656
Additional multiemployer pension liability                  -         81,816
Other                                                  14,907          3,863
                                                  ------------   ------------
                                                    $ 439,342      $ 665,348
                                                  ============   ============


                                       20
<PAGE>

               Ambassador Food Services Corporation and Subsidiary

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                    Years ended June 1, 2000 and June 3, 1999


D.   LINE-OF-CREDIT AGREEMENT

     At  June  3,  1999,  the  Company  had a  line-of-credit  agreement  with a
     financing company,  which was due on demand. The agreement carried interest
     at prime (8% at June 3, 1999) plus 3.5%.  The amount drawn could not exceed
     80% of eligible accounts receivable ($707,550 at June 3, 1999).  Borrowings
     were also limited to a maximum of $750,000.  The amount was  collateralized
     by the Company's accounts receivable.

     In December 1999, the Company entered a new line-of-credit  agreement which
     provides for a maximum  borrowing of $1,000,000.  Borrowings are limited to
     80% of eligible accounts  receivable.  Interest is payable monthly at prime
     (9.5% at June 1, 2000) plus 4%.  The  amount is  collateralized  by all the
     Company's assets except real estate and equipment.

     The agreement contains certain restrictive covenants,  certain of which the
     Company was in violation. The Company received a waiver of these violations
     from the lender.


E.   LONG-TERM DEBT

         Long-term debt consisted of the following:

                                                              2000        1999
                                                            ---------  ---------
Notes payable - equipment, payable in monthly installments
    of approximately $25,500, including interest at rates
    ranging from 9% to 19.3%, due through October 2002,
    collateralized by equipment                           $ 411,230    $ 422,216

Note payable to Bassman Vending, Inc. (BVI) payable in
    monthly installments of $5,150, including interest
    at 8.5%, due through March 2001, collateralized by
    certain location contracts and equipment                 49,525      104,578

Notepayable to officer, payable in quarterly interest
    installments of $7,875, including interest at 10.5%,
    due February 2002, repaid during the year ended
    June 1, 2000                                                 -       300,000

Note payable to vendors, payable in monthly installments of
    $1,429, including interest at 10%, due through
    December 2000                                            11,479         -



                                       21

<PAGE>

              Ambassador Food Services Corporation and Subsidiary

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                    Years ended June 1, 2000 and June 3, 1999

E.       LONG-TERM DEBT - Continued

                                                          2000           1999
                                                       ------------  -----------
Note payable to stockholders at 10%, payable in
    monthly installments of  $5,681, due through
    December 2000                                           45,915         -

Note payable to individual at 12%, payable in monthly
    installments of interest only through October 2000,
    at which time payments are $25,000 through October
    2001, at which time payments are $30,000 through
    October 2002, at which time payments are $34,539
    until fully paid, collateralized by subordinated
    interest in accounts receivable and a building.
    The note includes warrants to purchase 25,000
    shares of the Company's common stock at $1.25 per
    share during the term of the agreement. Additionally,
    by mutual consent, this agreement can be extended
    15 months anytime before its maturity in November
    2005 at a cost of 25,000 warrants with an excise
    price of $1.25 per share. (See Note P.)              1,400,000     600,000
                                                       ------------  -----------
                                                         1,918,149   1,426,794
    Less current maturities                                497,293     480,554
                                                       ------------  -----------
                                                        $1,420,856   $ 946,240
                                                       ============  ===========


     Aggregate  annual  principal  payments  applicable  to  long-term  debt due
     subsequent to June 1, 2000 are as follows:


                      Fiscal year
                        ending           Amount
                    --------------   -------------
                        2001          $   497,293
                        2002              267,378
                        2003              262,108
                        2004              324,992
                        2005              366,209

                      Thereafter          200,169
                                      -----------
                                      $ 1,918,149
                                      ===========

                                       22
<PAGE>
            Ambassador Food Services Corporation and Subsidiary

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                    Years ended June 1, 2000 and June 3, 1999


F.   SUBORDINATED NOTE PAYABLE AND CONSULTING AGREEMENT

     The Company has borrowed  $250,000 from a  stockholder.  The note calls for
     interest at 10%,  payable  quarterly with quarterly  principal  payments of
     $12,500  beginning  June 30, 2001,  with a final payment due June 30, 2006.
     The note is subordinate to all other indebtedness of the Company.

     From April 30, 1998 to May 1, 2006,  the note is  convertible  to shares of
     the  Company's  stock at a price of  $1.25  per  share.  In the  event  any
     payments are made on the note,  the Company will issue  warrants  entitling
     the  stockholder to purchase  equivalent  numbers of shares during the same
     period.

     During fiscal year 1999,  the Company  entered into a consulting  agreement
     with the  stockholder.  The agreement  calls for weekly  payments  totaling
     $100,482 per year beginning in May 1999 through May 2009.

     The  stockholder  agreed  to  delay  the  commencement  of  the  consulting
     agreement  until  January  2001 if certain  payments  were made on the note
     payable.  At June 1, 2000 and June 3, 1999, amounts outstanding on the note
     were  $47,395 and  $168,558,  respectively.  Warrants  for the  purchase of
     162,084  shares have been issued in  accordance  with the terms of the note
     and were  outstanding  as of June 1,  2000.  The  conversion  terms  may be
     adjusted upon certain events to prevent dilution of  stockholder-conversion
     rights.

G.   LEASES

     Future minimum lease payments under all  noncancelable  operating leases as
     of June 1, 2000 are as follows:


          Fiscal year       Real
             ending        estate       Equipment        Total
          -------------  ------------  -------------  ------------
              2001         $ 176,621      $ 207,724     $ 384,345
              2002            44,790        207,724       252,514
              2003             2,894        204,720       207,614
              2004             -            121,296       121,296
              2005             -                812           812
                         ------------  -------------  ------------
                           $ 224,305      $ 742,276     $ 966,581
                         ============  =============  ============

         Rental expense charged to operations was $493,715 in 2000 and $634,735
in 1999.


                                       23

<PAGE>

               Ambassador Food Services Corporation and Subsidiary

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                    Years ended June 1, 2000 and June 3, 1999


H.   EMPLOYEE BENEFIT PLANS

     The Company has a  nonqualified  defined-benefit  pension plan covering two
     former  officers and two key  employees of the Company.  Under the terms of
     the plan, each individual will receive,  for ten years after retirement,  a
     fixed  monthly  payment  that was set at the  inception  of the  plan.  The
     benefit does not vest until the employee  reaches age 65. If the individual
     dies,  either during  employment or after  retirement,  the  beneficiary is
     entitled to receive  benefits as  specified in the  agreement.  The plan is
     unfunded.

     On January 1, 2000,  the Company  implemented  a settlement of the plan for
     the two  key  employees  covered  under  the  plan.  The two key  employees
     relieved  the  Company  of any  obligation  for  past  and  future  pension
     benefits.  The  following  table sets forth the  computation  of settlement
     gain:

          Projected benefit obligations for the two key
            employees, beginning of year                         $142,484
          Service cost, June 4, 1999 through January 1, 2000        6,073
          Interest cost, June 4, 1999 through January 1, 2000       6,614
                                                                 ---------
          Projected benefit obligation at settlement date         155,171
          Unrecognized prior service asset at settlement date    (108,394)
                                                                 ---------
            Gain on pension settlement                            $46,777
                                                                 =========


     The  following  table sets forth the  change in benefit  obligation  in the
     Company's consolidated financial statements for 2000 and 1999:

                                                          2000           1999
                                                        ---------      ---------
       Projected benefit obligation, beginning of year  $ 318,891     $ 337,445
       Service cost                                         6,073         6,682
       Interest cost                                       18,174        29,810
       Benefits paid                                      (54,476)      (55,046)
       Settlement of projected benefit obligation        (155,171)           -
                                                        ---------      ---------
       Projected benefit obligation, end of year        $ 133,491     $ 318,891
                                                        =========      =========



                                       24

<PAGE>
               Ambassador Food Services Corporation and Subsidiary

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                    Years ended June 1, 2000 and June 3, 1999



H.   EMPLOYEE BENEFIT PLANS - Continued

     Net  accrued  pension  cost is included  in the  accompanying  consolidated
     financial statements as follows:

                                                   2000           1999
                                               ------------  -------------
     Current portion included in accrued
       expenses                                 $  43,850      $  26,822
     Long-term portion of obligation               89,641        292,069
                                               ------------  -------------
                                                $ 133,491      $ 318,891
                                               ============  =============


     The  weighted-average  discount  rate  used  was  8.0% in  determining  the
     actuarial  present  value of the projected  benefit  obligation in 2000 and
     1999.

     Net pension cost for 2000 and 1999 consisted of the following components:



                                                   2000           1999
                                               ------------  -------------
     Service cost - benefits earned
      during the period                         $   6,073      $   6,682
     Interest cost on projected benefit
      obligation                                   18,174         29,810
     Amortization of prior service cost              -            37,872
                                              ------------  -------------
     Net periodic pension cost                   $ 24,247       $ 74,364
                                              ============  =============


     The Company contributed  approximately  $51,600 and $40,000 in fiscal years
     2000 and 1999,  respectively,  to several  multiemployer  pension plans for
     employees covered by collective bargaining agreements.  These plans are not
     administered by the Company, and contributions are determined in accordance
     with provisions of negotiated labor contracts.

     The   Multiemployer   Pension  Plan   Amendments  Act  of  1980  (the  Act)
     significantly  increased  the  pension  responsibilities  of  participating
     employers.  Under the provisions of the Act, if the plans  terminate or the
     Company withdraws, the Company could be subject to a substantial withdrawal
     liability. Management has no intention of undertaking any action that could
     subject  the  Company  to  this   obligation;   however,   certain  of  the
     transactions discussed in Note P may create such an obligation.


                                       25
<PAGE>
               Ambassador Food Services Corporation and Subsidiary

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                    Years ended June 1, 2000 and June 3, 1999


H.   EMPLOYEE BENEFIT PLANS - Continued

     The  Company had a defined  contribution  plan that  covered all  permanent
     nonunion employees. Under the terms of the plan, employees could contribute
     up to a maximum of 15% of their gross  annual  salary.  The Company made no
     contributions to this plan during fiscal year 1999. The Plan was terminated
     as of September 30, 1998.


I.   INCOME TAXES

     Deferred  income taxes  consisted of the following  amounts of deferred tax
     assets and liabilities:

                                                   2000           1999
                                               ------------  -------------
          Deferred tax liability               $ 192,896      $ 239,360
          Deferred tax asset                    (957,841)      (959,037)
              Less:  valuation allowance         764,945        719,677
                                              ------------  -------------
          Deferred tax liability               $    -         $    -
                                              ============  =============



     The approximate tax effect of each temporary  difference giving rise to the
     deferred tax liability and asset was as follows at June 1, 2000 and June 3,
     1999:

                                                   2000           1999
                                               ------------  -------------
          Amortization of location contracts     $ 6,432        $ 5,360
          Accelerated depreciation               186,464        234,000
                                               ------------  -------------
Deferred tax liability                         $ 192,896      $ 239,360
                                               ============  =============

Accrued costs                                  $ (20,935)     $ (27,870)
Pension costs                                    (53,396)       (84,200)
Vacation accrual                                 (25,331)       (25,851)
Allowance for bad debts                          (13,000)        (6,593)
Other                                            (32,314)       (16,424)
Net operating loss carryforward                 (631,055)      (591,121)
AMT credit carryforward                         (106,504)      (106,504)
Investment tax credit carryforward               (75,306)      (100,474)
                                               ------------  -------------
Deferred tax asset                             $(957,841)    $ (959,037)
                                               ============  =============


                                       26
<PAGE>

               Ambassador Food Services Corporation and Subsidiary

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                    Years ended June 1, 2000 and June 3, 1999


I.   INCOME TAXES - Continued

     The valuation allowance was established to reduce the deferred tax asset to
     zero.  The  reduction is necessary  because of prior  operating  losses and
     uncertainty  about the  Company's  ability  to  utilize  tax credit and net
     operating loss carryforwards  before they expire.  The valuation  allowance
     was  increased  by  $45,268  and  $230,456  in fiscal  years 2000 and 1999,
     respectively.

               The income tax benefit  reflected in the consolidated  statements
               of  operations  differs  from the  amounts  computed  at  federal
               statutory  income tax rates.  The  principal  differences  are as
               follows:  [OBJECT  OMITTED] The Company had  available for income
               tax purposes the following  investment  credit  carryforwards  at
               June 1, 2000:

                                                         2000           1999
                                                     ------------  -------------
       Federal income tax benefit computed at
         statutory rate                              $ (61,152)    $ (274,600)
       State income tax benefit                        (10,792)       (48,000)
       Tax effect of nondeductible expenses              8,857         20,000
       Increase in valuation allowance                  45,268        230,456
       Expiration of investment tax credit carryforward 25,168         59,630
       Other, net                                       (7,349)        12,514
                                                     ------------  -------------
                                                     $    -         $    -
                                                     ============  =============

     The Company had available for income tax purposes the following  investment
     credit carryforwards at June 1, 2000:


               Year of expiration     Amount
               -------------------  ------------
                      2001             $ 49,551
                      2002               25,755
                                    ------------
                                       $ 75,306
                                    ============


                                       27
<PAGE>
               Ambassador Food Services Corporation and Subsidiary

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                    Years ended June 1, 2000 and June 3, 1999


I.   INCOME TAXES - Continued

     In addition, the Company had the following net operating loss carryforwards
     available at June 1, 2000:

                    Year of expiration     Amount
                    -------------------  ------------
                           2008          $  252,779
                           2009             138,822
                           2010              63,240
                           2011             156,463
                           2012              16,508
                           2013             107,773
                           2019             742,217
                           2020              99,835
                                         ------------
                                         $1,577,637
                                         ============



J.   ACCRUED COSTS OF DISCONTINUED RESTAURANT OPERATIONS

     In fiscal year 1988, management ceased restaurant operations. The estimated
     obligation under the property lease, net of anticipated  sublease  rentals,
     is accrued.

     The  accrual  is  included  in  the  accompanying   consolidated  financial
     statements as follows:

                                                         2000           1999
                                                     ------------  -------------
          Current portion included in accrued
            expenses                                   $ 11,752       $ 13,813
          Accrual included in long-term
            liabilities                                  40,585         55,864
                                                     ------------  -------------
                                                       $ 52,337       $ 69,677
                                                     ============  =============



                                       28
<PAGE>
               Ambassador Food Services Corporation and Subsidiary

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                    Years ended June 1, 2000 and June 3, 1999


K.   OPERATING EXPENSES

     Operating   expenses  in  the  accompanying   consolidated   statements  of
     operations consisted of the following:

                                              2000           1999
                                           ------------  -------------
          Payroll and related costs        $ 4,964,013    $ 5,793,600
          Equipment rental costs               260,396        370,736
          Other                              1,178,057      1,398,966
                                           ------------  -------------
                                           $ 6,402,466    $ 7,563,302
                                           ============  =============



L.   NOTE RECEIVABLE

     Note receivable consisted of the following:

                                                   2000           1999
                                                ------------  -------------
       Note receivable from BVI, due in
         monthly installments of $12,300,
         including interest at 8.5% through
         April 2001, collateralized by
         equipment and real estate being
         leased by the Company                  $ 291,812      $ 312,828
       Less current portion                        28,473         21,016
                                               ------------  -------------
                                                $ 263,339      $ 291,812
                                               ============  =============


M.   SELF-INSURANCE LIABILITIES

     The Company is partially  self-insured  for health claims for its employees
     and their  eligible  dependents.  The  Company  is liable  for claims up to
     $25,000 per participant per plan year. Accordingly, the Company has accrued
     estimated  claims of  $73,472  and  $59,656  as of June 1, 2000 and June 3,
     1999, respectively.


N.   RELATED PARTY DISCLOSURES

     During 2000, the Company forgave a note receivable in the amount of $20,842
     due from the Company's President.


                                       29

<PAGE>
               Ambassador Food Services Corporation and Subsidiary

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                    Years ended June 1, 2000 and June 3, 1999


O.   COMMON STOCK OPTIONS - Continued

     On June 1, 1998,  the  Company  granted  100,000  options to certain of the
     Company's  officers,   directors,  and  key  employees.  The  options  vest
     quarterly,  starting  September 1, 1998  through  June 1, 1999.  The option
     price is $1.37 and all the options will expire May 31, 2003.

     The Company  accounts for stock options in accordance  with APB Opinion No.
     25 and related  interpretations.  Accordingly,  no compensation expense has
     been recorded for the years ended June 1, 2000 and June 3, 1999.


                                                                Weighted-
                                                                average
                                   Number of shares             exercise
                               --------------------------        price
                               Outstanding   Exercisable       per share
                               -----------  -------------    -------------
Outstanding, May 29, 1998           -               -         $    -
Granted                            50,000         50,000           1.37
                               -----------  -------------    -------------
Outstanding, June 3, 1999          50,000         50,000           1.37
Granted                            50,000         50,000           1.37
                               -----------  -------------    -------------
Outstanding, June 1, 2000         100,000        100,000           1.37
                               ============  =============  =============

     Had compensation  cost for the plan been determined based on the fair value
     of the  options  at the grant  date,  the  Company's  net loss  would  have
     increased  by $31,250 in 2000 and $31,250 in 1999,  resulting in a net loss
     for the  years  ended  June 1,  2000 and  June 3,  1999 in the  amounts  of
     $211,109  and  $838,932,  respectively.  Net loss per share would have been
     $0.29  and  $1.14  for the  years  ended  June 1,  2000 and  June 3,  1999,
     respectively.

     The following table  summarizes  information  about options  outstanding at
     June 1, 2000 under the Stock Option Plan:



         Options outstanding                             Options exercisable
     ------------------------------------------------  -------------------------
                              Weighted-
                               average     Weighted-                 Weighted-
      Range of                remaining    average                    average
      exercise     Number     contractual  exercise      Number      exercisable
       prices     outstanding   life        price       exercisable    price
     ---------  -------------  ----------  ----------  -------------  ----------
       $ 1.37     100,000       3 years     $ 1.37        100,000      $ 1.37



                                       30
<PAGE>

               Ambassador Food Services Corporation and Subsidiary

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                    Years ended June 1, 2000 and June 3, 1999


O.   COMMON STOCK OPTIONS

     The fair value of the options  granted was  estimated  on the date of grant
     using  the   Black-Scholes   option-pricing   model   with  the   following
     weighted-average  assumptions:  dividend  yield of zero percent;  risk-free
     interest rate of 5%; assumed forfeiture of zero percent; and expected lives
     of 4 years.



P.   SUBSEQUENT EVENTS

     On August 19,  2000,  the Company sold all  operating  assets of the Kansas
     City, Missouri,  location. The result of the sale showed that an impairment
     of long-lived assets existed at June 1, 2000. The following table shows the
     purchase  price  allocation  of the  assets  sold  and  the  impairment  of
     long-lived assets:

                                               Carrying value    Impairment of
                             Purchase price     at August 19      long-lived
                              allocation            2000            assets
                             --------------  --------------  --------------
     Equipment and vehicles    $ 267,495       $ 267,495      $        -
     Intangibles                  14,711         112,282         (97,571)
     Inventory                    43,364          56,253         (12,889)
     Cash change funds            14,569          14,569               -
     Other assets                  2,794           2,794               -
                             --------------  --------------  --------------
                               $ 342,933       $ 453,393      $ (110,460)
                             ==============  ==============  ==============


     The  impairment of long-lived  assets of $110,460 was recognized at June 1,
     2000  and is  included  in  operating  expenses  in the  accompanying  2000
     consolidated statement of operations.

     On December 29, 2000, the Company sold its corporate  headquarters building
     in Kansas City,  Missouri,  for $280,000.  The  transaction is scheduled to
     close in March 2001. Management anticipates a gain will be recorded on this
     transaction during 2001.


                                       31
<PAGE>
               Ambassador Food Services Corporation and Subsidiary

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                    Years ended June 1, 2000 and June 3, 1999


P.   SUBSEQUENT EVENTS - Continued

     On January 12,  2001,  the  Company  sold all  operating  assets of the Des
     Moines, Iowa, and Lawton,  Oklahoma,  locations for $3,200,000.  Management
     anticipates  a gain  will be  recorded  on this  transaction  during  2001,
     including the effects of any withdrawal liability as discussed in Note H.

     On January 15, 2001, the Company  refinanced the $1,400,000 note payable to
     individual described in Note E. The refinancing consisted of a reduction in
     the  interest  rate from 12% to 10% and a  forgiveness  of principal in the
     amount of $350,000.  Management anticipates a gain will be recorded on this
     transaction during 2001.





                                       32


<PAGE>


                                    Part III


Item 9. Directors and Executive Officers of the Registrant; Compliance with 16
       (a) of the Exchange Act.

  (a), (b) The Executive Officers and Directors of the Company are as follows:

              Name                 Age  Principal Occupation            Director
                                                                          Since
       Robert A. Laudicina (1)     59 President, Treasurer (2)             1986
       Arthur D. Stevens (1)       75 Chairman of the Board (3)            1963
       Ann W. Stevens              58 Real Estate Broker                   1996
       Douglas M. Schosser, CPA    29 Director, Key Asset Management Co.   1997
       John A. Makula (1)          51 Assistant Secretary (4)              2000

      (1) Member of Executive Committee of Board of Directors


      (2) Mr. Laudicina was elected President in March 1998 and Treasurer in May
          1998. He served as Executive Vice President beginning in February 1989
          and Vice President prior to that time beginning in January 1982.

      (3) Mr.  Stevens has been Chairman of the Board of Directors of Ambassador
          since February 15, 1963. He was also the first President and Treasurer
          of  Ambassador  beginning  on  April  19,  1963,  relinquishing  those
          positions  in April  1978 and  October  1969,  respectively.  He again
          assumed the position of President on January 1, 1987,  serving in that
          capacity through March 1998. He was Chief Executive Officer from April
          11, 1963 through May 1998 and Treasurer  from January 26, 1972 through
          May 1998.


      (4) Mr.  Makula was  elected  Assistant  Secretary  on April 12,  2000 and
          elected Director in May 2000.


  (c)     Arthur D. Stevens, Chairman, and Ann W. Stevens, Director, are husband
          and wife.  No other  family  relationship  exists  between  any of the
          executive officers and directors listed above.

          Each  Officer  holds  his  office  at the  pleasure  of the  Board  of
          Directors until the next annual meeting of the Directors and until his
          successor is duly elected and qualified.

          The Executive Officers and Directors listed above were not involved in
          or part of any legal proceedings, as is described in Item 401(d).


                                       33
<PAGE>


Item 10. Executive Compensation

  (a),(b) The  following  table sets forth  information  as to the  remuneration
          accrued by Ambassador  Food Services  Corporation  and its  subsidiary
          during the fiscal  year ended  June 1,  2000,  for each  Director  and
          Officer whose aggregate remuneration for the year exceeded $100,000.


                    Names of Individuals,                   Fiscal        Base
                  Number of Persons in Group                 Year        Salary
                and Capacities in which Served
           Arthur D. Stevens,                                2000         $0.00
           Chairman of the Board of Ambassador and Director  1999       $51,868
           of its subsidiary                                 1998      $147,877



           Robert A. Laudicina,                              2000      $174,769
           President and Treasurer                           1999      $166,905
                                                             1998      $165,095


          Executive Retirement Program

          An executive  retirement  program,  which was adopted  during the 1990
          fiscal year to provide a target annual retirement benefit at age 65 or
          upon retirement,  was terminated by mutual agreement of the executives
          involved and the Company.


  d)      Stock Options

          Robert  Laudicina,  President and  Treasurer  hold options to purchase
          3,125 shares of Ambassador common stock at $1.37  exercisable  anytime
          before June 1, 2003, effective June 1, 1998.

          John  Makula,  Assistant  Secretary,  hold  options to purchase  3,125
          shares of Ambassador common stock at $1.37 exercisable  anytime before
          June 1, 2003, effective June 1, 1998.

  g)      Consulting Agreement


          During  fiscal  year  1999,  the  Company  entered  into a  consulting
          agreement with Arthur D. Stevens,  Chairman and former President.  The
          agreement  calls  for  weekly  payments  totaling  $100,482  per  year
          beginning in May 1999 through May 2009.

          Subsequent to June 3, 1999, Mr. Stevens agreed to defer the consulting
          agreement  until  January 2001 if  equivalent  payments were made on a
          certain note payable to him. At June 1, 2000 and June 3, 1999, amounts
          outstanding  on the note  were  $47,395  and  $168,558,  respectively.
          Warrants  for the  purchase  of  162,084  shares  have been  issued in
          accordance  with the terms of the note and are  outstanding as of June
          1, 2000. The  conversion  terms may be adjusted upon certain events to
          prevent dilution of the stockholder conversion rights.


                                       34

<PAGE>


Item 11. Security Ownership of Certain Beneficial Owners and Management

  (a)     Security Ownership of Certain Beneficial Owners

          The following  table sets forth,  as of June 1, 2000, the  information
          with  respect to common  stock  ownership  of each person known by the
          Company  to  own  beneficially  more  than  5% of  the  shares  of the
          Company's common stock, and of all Officers and Directors as a group.

                                                     Amount          Percent of
                                                     Beneficially    Outstanding
           Name and Address of Beneficial Owner(s)   Owned             Shares

           Arthur D. Stevens
           1901 W. 69th Street
           Mission Hills, KS  66205                   191,444     (1)    26.0%

           Thomas G. Berlin
           800 Superior Avenue, Suite 2100
           Cleveland, Ohio 44114                      124,218     (3)    16.8%

           George T. Terris
           104 S. Warbler
           Sarasota, FL 34236                         54,000      (2)    7.3%

           George F. Crawford
           10110 Fontana Lane
           Overland Park, KS  66207                   51,761             7.0%




         (1)   Does not include 60,000 shares beneficially owned by Mr. Stevens'
               adult  children,  in which  shares he  disclaims  any  beneficial
               interest. Additionally, does not include 200,000 shares which may
               be issued in the event of  conversion  of certain  debt under its
               conversion  provisions which are effective from April 30, 1998 to
               May 1, 2006.

         (2)   Does not include  4,000  shares  owned by Mr.  Terris'  immediate
               family, in which shares he disclaims any beneficial interest.

         (3)   Includes 12,800 shares owned by Mr. Berlin's wife.


                                       35
<PAGE>


  (b)      Security Ownership of Management

                                                   Shares of Stock
                                                  Beneficially Owned
                                                     June 1, 2000
                                                  -----------------
                                             Number               Percent
          Name                               of Shares            of Stock
          Arthur D. Stevens
          1901 W. 69th Street
          Mission Hills, KS  66205           191,444  (1)          26.0%

          Robert A. Laudicina
          303 Cedar Court
          Norwood, NJ  07648                  38,765  (2)           5.2%

          John Makula
          5 Pittsford Way
          Nanuet, NY 10954                    22,250  (3)           3.0%

          Ann W. Stevens
          1901 W. 69th Street
          Mission Hills, KS 66205              1,000                0.1%

          Douglas M. Schosser
          1050 Allston Road                    2,000                0.3%
          Cleveland Heights, OH  44121
          All Directors and Officers
             as a Group (5 persons)          255,459  (4)          33.6%

          (1)  Does not include 60,000 shares beneficially owned by Mr. Stevens'
               adult  children,  in which  shares he  disclaims  any  beneficial
               interest.  Additionally,  does not include 200,000 shares,  which
               may be issued in the event of  conversion  of certain  debt under
               its  conversion  provisions,  which are effective  from April 30,
               1998 to May 1, 2006.

          (2)  Includes  12,500 shares,  which Mr.  Laudicina could purchase for
               $1.37 per share under a stock option  exercisable  anytime before
               June 1, 2003.

          (3)  Includes 12,500 shares, which Mr. Makula could purchase for $1.37
               per share under a stock option exercisable anytime before June 1,
               2003.

         (4)   Includes  25,000  shares,  which  could be  purchased  by certain
               officers and directors under stock options.

  (c)     Changes in Control

          The  Company  knows of no  contractual  arrangements  which may,  at a
          subsequent date, result in a change in control of the Company.


                                       36
<PAGE>


Item 12. Certain Relationships and Related Transactions

  (a)     Certain Business Relationships

          There were no transactions with any member of management during fiscal
          2000, which exceeded $60,000.

Item 13. Exhibits and Reports on Form 8-K

  (a)    Exhibit No.:

               3A Articles of Incorporation of the Registrant               (1)

               3B By-Laws of the Registrant                                 (1)

                6 1984 Incentive Stock Option Plan Dated January 31, 1984   (2)

               10 Material Contracts Agreement with Paul F. Leathers        (1)

               22 Subsidiary of the Registrant                              (3)

         (1)   This exhibit was filed with Ambassador's 10-K for the fiscal year
               ended May 28,  1981.  A copy of the  Certificate  of Amendment of
               Certificate  of  Incorporation  changing the  Company's  name was
               filed as a  supplement  to said exhibit for the fiscal year ended
               June 1, 1989.

         (2)   This  exhibit  was filed with the  Company's  10-K for the fiscal
               year ended May 31, 1984.

         (3)   Exhibit attached as part of filing.

Exhibit No. 22

Subsidiary of the Registrant

Ambassador Food Services Corporation (a Delaware Corporation), the parent
Company, has the following subsidiary, which is included in the consolidated
financial statements.

                                                               % of Voting
Name of Subsidiary                  State of Incorporation     Securities Owned
------------------                  ----------------------     ----------------
Ambassador Fast Services, Inc.          New York                   100%
d/b/a Squire Maintenance Services

Note:The Company will provide, on the written request of any stockholder, a copy
     of any exhibit to this Form 10-KSB at a rate of $.15 per page.  The minimum
     fee  is  $5.00.  Requests  should  be  directed  to  Robert  A.  Laudicina,
     President,  Ambassador Food Services  Corporation,  5-30 54th Avenue;  Long
     Island City, New York 11101.


                                       37
<PAGE>


Signatures


Pursuant to the requirements of Section 13 or 15(d) 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.


                                         AMBASSADOR FOOD SERVICES CORPORATION
                                                  (Registrant)


                                         By______________________    Date_______
                                            Arthur D. Stevens
                                            Chairman of the Board



                                         By______________________    Date_______
                                           John A. Makula
                                            Assistant Secretary



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




                              Chairman of the Board              Date
-----------------------       --------------------------              ---------
Arthur D. Stevens


                              President and Chief
                              Executive Officer/Director         Date
-----------------------       --------------------------              ---------
Robert A. Laudicina           Title



                              Director                           Date
-----------------------       --------------------------              ---------
Ann W. Stevens                Title



                              Assistant Secretary, Diretor       Date
-----------------------       --------------------------              ---------
John A. Makula                Title


                                       38
<PAGE>




                              Director                           Date
-----------------------       --------------------------              ---------
Douglas M. Schosser           Title




                                                               % of Voting
Name of Subsidiary              State of Incorporation         Securities Owned
-----------------------       --------------------------       ----------------

Ambassador Fast Service, Inc.      New York                           100%
d/b/a Squire Maintenance Services



Note: The Company will provide, on the written request of any stockholder, a
copy of any exhibit to this Form 10-KSB at a rate of $.15 per page. The minimum
fee is $5.00. Requests should be directed to Robert A. Laudicina, President,
Ambassador Food Services Corporation, 5-30 54th Avenue, Long Island City, New
York 11101.


                                       39