HOST AMERICA CORP, 10KSB40, 1998-09-28

HOST AMERICA CORP
10KSB40, 1998-09-28
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________________

FORM 10KSB

[ x ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended JUNE 28, 1998

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

Commission File Number 0-16196

HOST AMERICA CORPORATION
(Exact Name of Registrant as specified in its Charter)

DELAWARE 06-1168423
------------------------------- --------------------------------
(State or Other Jurisdiction of (IRS Employer Identification No.)
Incorporation or Organization)

TWO BROADWAY
HAMDEN, CONNECTICUT 06518
---------------------------------------- ----------
(Address of Principal Executive Offices) (Zip Code)

Registrant's Telephone Number, including area code: (203) 248-4100

Securities registered pursuant to Section 12(b) of the Act:

COMMON STOCK, $.001 PAR VALUE
(Title of Class)

Securities registered pursuant to Section 12(g) of the Act: NONE

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

At September 21, 1998, 1,130,000 shares of Common Stock, $.001 par value,
were outstanding. The aggregate market value of the Common Stock held by
non-affiliates of the Registrant on that date was approximately $3,000,000.

DOCUMENTS INCORPORATED BY REFERENCE:

Proxy Materials for 1998 Annual Meeting of Shareholders to be held on
November 11, 1998 are incorporated by reference into Part III.

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ X ]

Page 1 of 43 pages Exhibits are indexed on page 24.

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PART I

Item 1. DESCRIPTION OF BUSINESS
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(a) GENERAL DEVELOPMENT OF BUSINESS. The Company is a regional
contract food service management company specializing in providing full
restaurant and employee dining, special event catering, vending and office
coffee service, home food replacement (fully cooked, home style meals,
typically made from scratch, suitable for take out) and management of
corporate dining rooms and cafeterias, in office complexes and
manufacturing plants. The diversity of services allows the Company's
clients to offer their employees full breakfast and lunch availability,
multi-level catering and a variety of complimentary food service options.
The Company currently has operations in Connecticut, New York and New
Jersey and, in the near future, the Company intends to expand to Illinois
and Florida.

The Company estimates that the United States food service industry had
annual revenues in excess of approximately $100 billion in 1996 and of
that, $40 billion is concentrated in corporate services, the primary market
niche in which the Company competes. The balance of annualized revenues
are concentrated in the areas of hospital/health care, correctional
facilities, military facilities and transportation facilities.
Additionally, the home-meal replacement industry is a rapidly growing
industry with annual sales estimated to range from $80 billion to $150
billion. Industry contracting revenues have continued rising since 1996
and are expected to continue to rise in 1998. The four largest nationals
(Marriott, Aramark, CompassUSA, and Sodexho) produced double-digit revenue
gains of 15% adding more than 1,500 accounts in 1996.

Since its formation as a Delaware corporation in 1986, the Company has
grown from providing food service to colleges and preparatory schools in
the New England area of the United States to a regional, full-service, food
service provider to major corporations that have in total over 10,000
employees. The Company maintains a number of large, multi-year contracts
among its twenty-two separate operations. Some of the larger contracts
include Pitney Bowes, Inc. of Stamford, Connecticut (currently 3 locations
with over 3,000 employees), Oxford Health Plans, Inc. of White Plains, New
York (currently 5 locations with over 4,000 employees), and Ft. James Paper
Co. of Norwalk, Connecticut (with over 1,000 employees).

Currently, the Company's revenues are derived primarily from sales
related to the management of corporate restaurants and catering in single
tenant and multi-tenant office buildings. The balance of revenues are
derived from the maintenance of vending machines, office coffee service and
catering special events at select facilities. The Company concentrates on
medium-size clients generating from $500,000 to $2 million per location in
annual food sales. Management believes that these middle market facilities
generally provide greater profit margins and need a variety of food related
services. The Company endeavors to be the exclusive food provider at the
facilities served thereby being able to control the quality of service and
product at each location.

In February 1998, the Company commenced food service operations for
Bloomingdale's By Mail, Ltd., located in Cheshire, Connecticut, which
handles the Bloomingdales' catalog sales division. Also, in April 1998,
the Company opened its largest account, the "New Leaf Cafe" located in the
atrium of the Metro Park Twin Towers in Edison, New Jersey. The facility
has

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over 3,000 people employed in the office complex and the agreement
encompasses all phases of the Company's food service operations, including
full service vending, office coffee, catering and a HOMEfood MARKET which
will open in August 1998.

The Company has recently implemented a home meal replacement program
(the "HOMEfood MARKET). This program provides employees at certain of its
facilities the ability to purchase fully cooked home style meals for
consumption at home without further preparation or re-heating. The
HOMEfood MARKET also offers evening employees at certain of its locations
such as Bloomingdales, the opportunity to have a quality meal on premises
in a cost-effective manner. Management believes that this additional food
service component was an important factor in acquiring the contracts with
Bloomingdales and the Metro Park Twin Towers.

The Company believes there are significant opportunities to expand its
business through the acquisition of companies in the contract food service
industry, particularly in the education and corporate dining markets. The
Company's Officers and Directors will be responsible for identifying,
pursuing and negotiating potential acquisition candidates and integrating
acquired operations. The Company believes it can integrate such companies
into the Company's management structure and diversified operations
successfully without a significant increase in general and administrative
expenses. In addition, future acquisitions are expected to enable the
Company to lower overhead costs through centralized geographical office
operations and to grow to a size so that it qualifies for bids on larger
volume quality accounts that require asset or purchase programs to meet the
higher standard.

On July 21, 1998, the Company completed a public offering of 1,000,000
shares of its Common Stock and 1,000,000 Common Stock Purchase Warrants.
The Common Stock and Warrants are separately traded and are separately
transferrable. Each Warrant entitles the holder thereof to purchase at
$5.50, one share of Common Stock. The Warrants are exercisable until July
21, 2003. The Company received net proceeds from the sale of approximately
$3,931,000.

The Company's corporate offices are located at Two Broadway, Hamden,
Connecticut 06518. The Company's telephone number is (203) 248-4100.

(b) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS. The Company's
activities are confined to contract food service management, hence the
Company has no other industry segments other than as stated herein. See
Financial Statements for additional information concerning the Company's
business.

GENERAL

The Company is a regional contract food service management company.
A majority of corporate revenues are from sales related to the management
of corporate cafeterias and restaurants, home meal replacement and catering
in single tenant and multi-tenant office buildings. The balance of
revenues are derived from the maintenance of vending machines and coffee
service at select facilities. The Company concentrates on small- to
medium-size clients generating from $500,000 to $2 million per location in
annual food sales. Management believes

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that these middle market facilities generally provide greater profit
margins and present the opportunity to provide a variety of food related
services. The Company endeavors to be the exclusive food provider at each
facility served, thereby being able to control the quality of food and
service at each location.

Various marketing and operating strategies are currently being used by
the Company to provide an umbrella of food services at each customer
facility ranging from basic corporate cafeteria dining, office coffee,
vending machines, special events catering and home meal replacement
programs. The Company believes this strategy has been important factor in
the Company's growth and in attracting large, corporate clients with
multiple needs. Through its on-site account managers and employees, the
Company endeavors to provide high quality food and client satisfaction
while controlling labor costs and overhead.

The Company will attempt to increase its revenues through acquisition
of small- to medium-sized food service providers currently operating in
different geographical locations and dining markets not currently being
served by the Company. The Company believes the increase in revenues will
be coupled with an overall reduction in per unit food costs and general and
administrative expenses. The Company has not, as of the date of this
Report, entered into any agreements in this regard and no assurance can be
given that the Company will be successful in seeking suitable acquisitions.

The Company currently has operations in Connecticut, New York and New
Jersey and, in the near future, intends to expand to Illinois and Florida.

HISTORY

The Company was formed as a Delaware corporation on February 6, 1986
under the name University Dining Services, Inc. Its initial business was
providing food service to colleges and preparatory schools in the New
England area. After several years, the Company determined it was more
profitable to provide food to larger, more densely populated customer
bases. Accordingly in 1992, it shifted its focus to becoming a full
service food management company specializing in employee dining in large
office complexes and providing special events catering. In 1997 a home
meal replacement program, the HOMEfood MARKET, was developed to meet the
demand from individuals for complete home meals, to enhance existing
corporate dining facilities and to increase revenues without significantly
increasing overhead costs at each location.

In February 1988, the Company conducted an initial public offering and
sold 5,000,000 shares of its Common Stock to the general public. In
February 1998, the Company effected a 100 to 1 reverse split of its then
outstanding shares and to insure continuity of management, in March 1998,
issued 700,000 shares of Series A Preferred Shares to its Officers and
Directors. In addition, the Company entered into five (5) year employment
agreements with its founders and key employees, Geoffrey W. Ramsey and
David J. Murphy.

On July 21, 1998, the Company completed a public offering of 1,000,000
shares of its Common Stock and 1,000,000 Common Stock Purchase Warrants.
The Company received net proceeds from the sale of approximately
$3,931,000. The Company anticipates utilizing the

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proceeds of the offering for sales and marketing, product development,
acquisitions and working capital.

INDUSTRY OVERVIEW

In 1996, the United States food service industry had annual revenues
in excess of approximately $100 billion and $40 billion in the corporate
services and educational markets. The balance of annualized revenues are
concentrated in the areas of hospital/health care, correctional facilities,
military facilities and transportation facilities. Additionally, the home-
meal replacement industry is rapidly growing with annual sales estimated to
range from $80 billion to $150 billion. Industry contracting revenues have
continued rising since 1996 and are expected to continue to rise in 1998.
The four largest nationals (Marriott, Aramark, CompassUSA, and Sodexho)
produced double-digit revenue gains of 15% adding more than 1,500 accounts
in 1996.

The United States food service market is characterized by a large
concentration of corporate and industry populations in a multitude of
strategic geographical locations. The Company's primary geographical area
of operations is located in the Southern New England, New York and northern
New Jersey marketplace. This area is believed to have the largest
financial segment of the industry, with a high population density, numerous
corporate office parks, industrial facilities and concentration of mid-size
and large corporations.

BUSINESS STRATEGY

The Company has developed a program known as "Food Serve 2000," which
is a comprehensive plan of evaluating all existing food operations, in an
attempt to maximize customer satisfaction. Management, on a monthly basis,
studies the basic elements of its food service at each location, including
traffic flows, waiting times, food presentation, menu variety, nutritional
assessment, work preparation and labor qualifications. In addition, on-site
food managers maintain strict cost containment policies, nutritional
programs for better health, custom designed menus to meet regional and
ethnic tastes and facilities enhancement with state-of-the-art equipment.
Each facility is then reviewed by management and the client to select the
best possible combination of food and service.

In addition to the acquisition strategy described below, the Company
anticipates adding new sales representatives in Metro New York, New Jersey
and Pennsylvania to actively promote the Company's innovative marketing
program including the home-meal replacement program, the "HOMEfood MARKET."
The Company believes the HOMEfood MARKET gives it a strategic time
advantage over its national competitors who have not developed home-meal
programs tied to their client contracts. To increase the existing client
base, the Company is actively seeking customers in contiguous geographical
locations.

The Company continues to evaluate and improve its internal operational
procedures and develop new procedures for product presentation. Often
times this requires retaining existing personnel or acquiring specialized
equipment such as pizza ovens. The Company attempts to achieve a
continuing level of employee satisfaction with programs for training,
providing high wages and retirement benefits together with a seniority and
stable working conditions. The

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Company believes employee satisfaction will result in improved and more
consistent service for its clients.

OPERATIONS

The Company's primary emphasis has, and will be, on large corporate
accounts. These types of accounts present the opportunity to provide a
wide variety of food services in a single location to a select group
ranging from vending machines to cafeteria services to special event
catering. Typically, the Company is the exclusive provider of all
available food and beverages and is responsible for the hiring and training
of personnel at each location. On-site managers are selected for each
facility who then, in turn, work closely with the Company's management to
ensure continuing food quality and customer satisfaction.

Each new account is assigned to a member of management who develops a
comprehensive plan to meet that specific client's needs, which can include
the Company being able to provide customized food service for up to 3,000
employees for larger clients. As discussed herein, the HOMEfood MARKET was
developed in direct response to the need of certain clients to feed several
work shifts with different types of quality food at times of the day when
a normal cafeteria operation would not be available.

An operating strategy is then formulated after extensive interviews
and on-site visits. Various factors are considered to maximize the
Company's profits without sacrificing client satisfaction. Each strategy
includes a thorough review of labor and product costs, facility design,
menu design, training and recruiting, specialized needs and equipment
needs. Thereafter, the strategy is continually reviewed to monitor client
employee satisfaction, changing food requirements and quality of food and
service. Additional services are added as demand changes including the
addition of vending machines, catering facilities and food selection
upgrades.

MARKETING

The Company selectively bids for privately owned facility contracts
and contracts awarded by governmental and quasi-governmental agencies.
Other potential food service contracts come to the Company's attention
through direct contact with a customer, by mail and telephone, from
conversations with suppliers, such as purveyors and vending machine
suppliers, and state listings. New clients require the Company to submit
a bid and make a proposal encompassing, among other things, a capital
investment and other financial terms. In certain cases, a private-facility
owner may choose to negotiate with the Company exclusively for a period of
time and during the bidding process, the Company expends a great deal of
time and effort preparing proposals and negotiating contracts.

To attract typical office buildings as clients, the Company is
constantly attempting to upgrade its food service and provide upscale,
quality foods. To the extent employees are able to satisfy their food
needs at the employer's location, the less time employees are away from
their office setting which results in an increase in corporate and
individual productivity. Further, if the Company can satisfy the employees
with diverse and high-quality food items, employers are often willing to
subsidize a portion of the costs.

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The Company believes that food service contracting in its business
segments is far from saturated. The Company believes that it can compete
with even the largest of its competitors because it provides direct
personal contact with its clients two or three times a week, offers
flexible menus to meet customer's desires, and intensively trains its unit
managers.

HOMEfood MARKET

In February 1996, the Company introduced the HOMEfood MARKET program
as its version of home meal replacement for client employees and building
tenants working different shifts and as a convenience to employees on their
way home. Home meal replacement is broadly defined as a retail food
service that replaces home-style, cooked meals with those prepared out of
the home and which are made from scratch but have the convenience of fast
food. This type of food service ranges from parts of meals, like salads,
to complete meals such as a turkey dinner with gravy and side dishes.
Home-style meals also require some sort of further processing by the
customer, such as reheating or finishing, at home.

HOMEfood MARKET provides a convenient way to assemble fresh,
convenient meals at home which are fully prepared and ready to heat and
serve. The Company prepares part of the menu in its on-site kitchen while
a number of branded items are made off-site, like DeLuca Italian entrees,
then placed in microwavable containers that can be heated and served
quickly. The menu offers a variety of branded Italian entrees, whole
rotisserie chickens, chicken dinners, sandwich roll-ups, sandwiches and
salad entrees.

The Company believes that the availability of the HOMEfood MARKET was
instrumental in the Company obtaining its contract with Bloomingdale's By
Mail, Ltd., ("Bloomingdale's") in Cheshire, Connecticut. The HOMEfood
MARKET provides Bloomingdale's daytime employees the opportunity to have a
pre-cooked meal for dinner and its late shift employees with a complete
meal.

The Company believes that variety and freshness are the primary
factors influencing customer satisfaction and frequency of visits.
Accordingly, the Company continually evaluates the HOMEfood MARKET menu,
including price, in an attempt to maximize the success of the program.

MAJOR CONTRACTS

The Company is a party to a number of large, multi-year contracts
among its' twenty-two (22) separate customers. Some of the larger
contracts include Pitney Bowes, Inc., of Stamford, Connecticut (currently
6 locations with over 2,500 employees), Oxford Health Plans, Inc., of White
Plains, New York (currently 5 locations with over 4,000 employees), and Ft.
James Paper Co., of Norwalk, Connecticut (with over 1,000 employees). In
April 1998, the Company opened its largest facility, known as the "New Leaf
Cafe", in the Twin Towers in Metro Park, New Jersey (approximately 2,500
employees).

In 1995, the Company entered into a contract with the city of Hamden,
Connecticut to manage a banquet facility and club bar at the Laurel View
Country Club, a full service country club with golf course. Laurel View
provides an excellent location for large banquet service

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events such as weddings, class reunions and other large events. Revenues
from this facility increase significantly in the summer months with
weddings and golfing events. The Company's original one-year contract was
extended for a three-year period commencing June 1997.

RECENT DEVELOPMENTS

In August 1998, the Company entered an agreement with RivCan
Associates of Stamford, Connecticut for the exclusive rights to operate,
sell and dispense food, alcoholic beverages and other food products at the
Stamford Twin Rinks in Stamford, Connecticut. Pursuant to the agreement,
the Company must pay RivCan $180 per week commencing September 5, 1998; an
additional fee of $625 per week for six (6) months after the
restaurant/sports bar becomes fully functional (including granting of the
liquor license) and thereafter, and $5,400 per month for the five (5) year
life of the contract. The Company will earn a fixed percentage rate of
5.5% of net sales with any excess over 5.5% being divided 80% to RivCan and
20% to the Company.

The RivCan facility is a multi-faceted skating rink facility for a
wide variety of recreational uses from adult hockey, in-house leagues, and
youth hockey programs. The complex features two sheets of ice, restaurant
and sports bar. The Company believes the contract to be a natural
progression into the new sports/recreation division of the Company's
activities. The contract is believed to generate approximately $1.0
million a year in revenues pending liquor license approval.

In August 1998, the Company appointed Mr. Timothy Hayes as regional
sales and operations manager for New England and eastern New York. Mr.
Hayes was formerly sales manager for Everest Dining Services, a division of
Compass Group North America. Mr. Hayes is a graduate of the Culinary
Institute of America and has over twenty five years of experience in the
food service industry.

ACQUISITION STRATEGY

COMPETITION

The Company encounters significant competition in each area of the
contract food service market in which it operates. Food service companies
compete for clients on the basis of quality and service standards, local
economic conditions, innovative approaches to food service facilities

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design and maximization of sales and price (including the making of loans,
advances and investments in client facilities and equipment). Competition
may result in price reductions, decreased gross margins and loss of market
share. Certain of the Company's competitors compete with the Company on a
national basis and have greater financial and other resources than the
Company. In addition, existing or potential clients may elect to "self
operate" their food service, eliminating the opportunity for the Company to
compete for the account. There can be no assurance that the Company will
be able to compete successfully in the future or that competition will not
have a material adverse effect on the Company's business, financial
condition or results of operations.

GOVERNMENT REGULATION

The Company's business is subject to various governmental regulations
including environmental employment and safety regulations. In addition,
the Company is subject to state health department regulations with yearly
inspections. Food service operations at the various locations are subject
to various sanitation and safety standards and state and local licensing of
the sale of food products. Compliance with these various regulations are
not material; however, there can be no assurance that additional federal
and state legislation or changes in regulatory implementation will not
limit the activities of the Company in the future or increase the cost of
regulatory compliance.

In addition, the Company has a liquor license at its Laurel View
facility and, accordingly is subject to the liquor license requirements in
the state of Connecticut. Typically, liquor licenses must be renewed
annually and may be revoked or suspended for cause at any time. Alcoholic
beverage control regulations relate to numerous aspects of the Company's
operations, including minimum age of patrons and employees, hours of
operation, advertising, wholesale purchasing, inventory control and
handling, and storage and dispensing of alcoholic beverages. The Company
has not encountered any material problems relating to its alcoholic
beverage license to date. The failure to retain the liquor license at
Laurel View could adversely affect the Company's business and ability to
obtain such a license elsewhere.

The Company is subject to "dram-shop" statute. This type of statute
generally provides to a person injured by an intoxicated person the right
to recover damages from an establishment which wrongfully served alcoholic
beverages to the intoxicated individual. The Company carries liquor
liability coverage as part of its existing comprehensive general liability
insurance which it believes is adequate. While the Company maintains such
insurance, there can be no assurance that such insurance will be adequate
to cover any potential liability or that such insurance will continue to be
available on commercially acceptable terms. See "RISK FACTORS - Government
Regulation."

CERTAIN RISKS

RETENTION AND RENEWAL OF CUSTOMER CONTRACTS. The Company's success
will depend on its ability to retain and renew existing client contracts
and to obtain and successfully negotiate new client contracts. Certain of
the Company's corporate dining contracts representing approximately 55% of
the Company's annual sales are from two major customers. There can be no
assurance that the Company will be able to retain and renew existing client
contracts or obtain

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new contracts or that such contracts will be profitable. The Company's
failure to retain and renew existing contracts or obtain new contracts
could have a material adverse effect on the Company's business, financial
condition and results of operations.

INVESTMENT IN CLIENT CONTRACTS. Typically the Company is required to
invest a substantial amount of money in a client's facility for equipment
and initial start-up expenses. Historically, the Company has funded these
expenditures from cashflow and short-term borrowings. To the extent the
Company is unable to be reimbursed for a part of these costs or enter into
long-term contracts or is unable to retain existing clients, the Company
could experience short-term cashflow problems or be required to seek
additional outside financing, the availability of which there can be no
assurances.

DEPENDENCE ON BUILDING OWNERS TO RETAIN TENANTS. The Company's
customers consist primarily of tenants in large office complexes and
buildings in the Northeastern United States. Accordingly, the Company is
dependent, in a large part, on the building owners to attract and retain
quality tenants by offering competitive rental rates, favorable locations
and adequate maintenance services. To the extent these entities fail to
provide a favorable rental atmosphere and retain existing tenants, the
Company may lose customers, revenues, and potentially a food service
contract irrespective of the quality of its food service facility. If the
Company were to lose customers due to building vacancies, it could have an
adverse material effect on the Company's operations and financial
condition.

FLUCTUATING FOOD PRICES AND SHORTAGES. The Company is subject to
fluctuating food prices and availability of certain food items which can,
and does, vary by location. Although the Company's contracts with its
clients allow for certain adjustments due to rising prices over a specified
period of time, often times the Company must take a reduced margin to
insure the availability of certain required food groups and avoid customer
dissatisfaction. Although most shortages last only a short period of time,
shortages in certain items may adversely affect the quality and variety of
food offered at a given location. The Company attempts to anticipate
shortages by centralized buying for its various locations by placing large
orders with reliable suppliers and following trends in product availability
and price.

COMPETITION IN TAKE-HOME PREPARED MEAL MARKET; DEPENDENCE ON CUSTOMERS
WITH DISPOSABLE INCOME. At certain of its locations, the Company offers
tenant employees the opportunity to purchase fully cooked homestyle meals
with can be served at home with little or no additional preparation. The
Company's fully prepared, take home meals compete with many other forms of
home replacement meals, including a variety of ethnic foods. The Company's
take home meals are generally purchased by upper middle class employees who
have the disposable income to purchase such meals. If a down turn in the
economy were to occur, it is likely that this source of revenues would be
adversely affected.

DEPENDENCE ON KEY PERSONNEL. The Company's future success depends to
a significant extent on the efforts and abilities of its founders and
executive Officers, Geoffrey W. Ramsey and David J. Murphy. Although the
Company has five (5) year employment agreements with these two individuals,
the loss of the services of these individuals could have a material adverse
effect on the Company's business, financial condition and results of
operations. The Company believes that its future success also will depend
significantly upon its ability to attract, motivate

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and retain additional highly skilled managerial personnel. Competition for
such personnel is intense, and there can be no assurance that the Company
will be successful in attracting, assimilating and retaining the personnel
it requires to grow and operate profitability. On July 21, 1998, the
Company obtained a $1,000,000 key man life insurance policy on each of
these individuals, of which the Company will be the beneficiary.

LABOR SHORTAGES. From time to time, the Company must hire and train
a number of qualified food service managers and temporary workers to
provide food service at a new corporate location or scheduled events at the
Laurel View Country Club and other locations. The Company may encounter
difficulty in hiring sufficient numbers of qualified individuals to staff
these events, which could have a material adverse effect on its business,
financial condition and results of operations. These shortages occur most
often during the summer months when a large number of events are planned at
the Laurel View Country Club.

COMPETITION. The Company encounters significant competition in each
area of the contract food service market in which it operates. Certain of
the Company's competitors compete with the Company on both a national and
local basis and have significantly greater financial and other resources
than the Company. Competition may result in price reductions, decreased
gross margins and loss of market share. In addition, existing or potential
clients may elect to "self operate" their food service, thereby eliminating
the opportunity for the Company to compete for the account. There can be
no assurance that the Company will be able to compete successfully in the
future or that competition will not have a material adverse effect on the
Company's business, financial condition or results of operations.

INFLATION RISK. Although most of the Company's contracts provide for
minimum annual price increases for products and services provided by the
Company, the Company could be adversely impacted during inflationary
periods if the rate of contractual increases are lower than the inflation
rate.

ACQUISITION RISKS. A key component of the Company's strategy is to
pursue acquisitions of related businesses. There can be no assurance,
however that the Company will be able to identify, negotiate and consummate
acquisitions or that acquired businesses can be operated profitably or
integrated successfully into the Company's operations. In addition,
acquisitions by the Company are subject to various risks generally
associated with the acquisition of businesses, including the financial
impact of expenses associated with the integration of acquired businesses.
There can be no assurance that the Company's historic or future
acquisitions will not have an adverse impact on the Company's business,
financial condition or results of operations. If suitable opportunities
arise, the Company anticipates that it would finance future acquisitions
through available cash, bank lines of credit or through additional debt or
equity financing. There can be no assurance that such debt or equity
financing would be available to the Company on acceptable terms when, and
if, suitable strategic opportunities arise. If the Company were to
consummate one or more significant acquisitions in which part or all of the
consideration consisted of equity, stockholders of the Company could suffer
a significant dilution of their interests in the Company. In addition,
many of the acquisitions the Company is likely to pursue, if accounted for
as a purchase, would result in substantial amortization charges to the
Company.

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GOVERNMENT REGULATION. The Company's business is subject to various
governmental regulations incidental to its operations, such as
environmental, employment, and health and safety regulations. The Company
also holds a liquor license at one facility and is subject to the liquor
license requirements of the state of Connecticut, including its "dram-shop"
statute. "Dram-shop" statutes generally provide a person injured by an
intoxicated person the right to recover damages from an establishment that
wrongfully served alcoholic beverages to the intoxicated person. While the
Company maintains insurance for such liability, there can be no assurance
that such insurance will be adequate to cover any potential liability or
that such insurance will continue to be available on commercially
acceptable terms. The loss of its liquor license could have a material
adverse effect on the Company's business, financial condition or results of
operations. There can be no assurance that additional federal or state
regulation would not limit the activities of the Company in the future or
significantly increase the cost of regulatory compliance.

EFFECTIVE CONTROL BY CURRENT OFFICERS AND DIRECTORS. The Company's
current Officers, Directors and family members beneficially own
approximately 66.6% of the voting Common Stock and voting Series A
Preferred Stock outstanding. The Company's Certificate of Incorporation
does not authorize cumulative voting in the election of directors and as a
result, the Company's Officers and Directors currently are, and in the
foreseeable future will continue to be, in a position to have a significant
impact on the outcome of substantially all matters on which shareholders
are entitled to vote, including the election of Directors.

NO DIVIDENDS. The Company has paid no cash dividends on its Common
Stock and has no present intention of paying cash dividends in the
foreseeable future. It is the present policy of the Board of Directors to
retain all earnings to provide for the growth of the Company. Payment of
cash dividends in the future will depend, among other things, upon the
Company's future earnings, requirements for capital improvements, the
operating and financial conditions of the Company and other factors deemed
relevant by the Board of Directors.

NO PRIOR PUBLIC MARKET AND POSSIBLE VOLATILITY OF PRICE OF SHARES OF
COMMON STOCK AND WARRANTS. The prices of securities of publicly traded
corporations tend to fluctuate widely. It can be expected, therefore,
that trading in the Company's Common Stock and Warrants may have wide
fluctuations in price. Prior to July 21, 1998, there was no public market
for the Company's Common Stock or Warrants and, despite the initial listing
of the Common Stock and Warrants on Nasdaq, there is no assurance that a
market will develop or be sustained. The lack of a current market for the
Common Stock and Warrants, fluctuations in trading interest and changes in
the Company's operating results, financial condition and prospects could
have a significant impact on the market prices for the Common Stock and the
Warrants.

NASDAQ MAINTENANCE REQUIREMENTS AND EFFECTS OF POSSIBLE DELISTING;
RISKS RELATED TO LOW-PRICED STOCKS. Although the Company's Common Stock
and Warrants are listed on the Nasdaq Small-Cap Market, the Company must
continue to meet certain maintenance requirements in order for such
securities to continue to be listed on Nasdaq. Nasdaq has implemented new
entry and maintenance requirements for companies traded on the Nasdaq
Small-Cap Market, including increased financial standards and requiring the
companies to have at least two independent directors and an audit
committee, a majority of which are independent directors. There can be no
assurance that the Company will continue to meet such new requirements. If
the Company's securities are delisted from Nasdaq, this could restrict
investors' interest in the

-12-

<PAGE>

Company's securities and could materially and adversely affect any trading
market and prices for such securities. In addition, if the Company's
securities are delisted from Nasdaq, and if the Company's net tangible
assets do not exceed $2 million, and if the Common Stock is trading for
less than $5.00 per share, then the Company's Common Stock and Warrants
would each be considered a "penny stock" under federal securities law.
Additional regulatory requirements apply to trading by broker-dealers of
penny stocks which could result in the loss of effective trading markets,
if any, for the Company's Common Stock and Warrants.

RISK OF LOW-PRICED STOCKS. If the Company's Securities were delisted
from Nasdaq, and no other exclusion from the definition of a "penny stock"
under applicable Securities and Exchange Commission regulations were
available, such Securities would be subject to the penny stock rules. A
"penny stock" is defined as a stock that has a price of $5.00 or less. The
rules relating to "penny stocks" impose additional sales practice
requirements on broker-dealers who sell such securities to persons other
than established customers and accredited investors (generally defined as
investors with net worth in excess of $1,000,000 or annual income exceeding
$200,000, or $300,000 together with a spouse). For example, the broker
dealer must deliver to its customer prior to effectuating any transaction,
a risk disclosure document which sets forth information as to the risks
associated with "penny stocks," information as to the salesperson,
information as to the bid and ask prices of the "penny stock," the
importance of the bid and ask prices to the purchaser, and investor's
rights and remedies if the investor believes he/she has been defrauded.
Also, the broker dealer must disclose to the purchaser its aggregate
commission received on the transaction, current quotations for the
securities and monthly statements which provide information as to market
and price information. In addition, for transactions covered by these
rules, the broker-dealer must make a special suitability determination for
the purchase and must have received the purchaser's written consent to the
transaction prior to sale. Consequently, delisting from Nasdaq, if it were
to occur, could affect the ability of broker-dealers to sell the Company's
Securities and the ability of purchasers in the Offering to sell their
Securities in the secondary market.

RESTRICTIONS ON EXERCISE OF WARRANTS; POSSIBLE REDEMPTION OF WARRANTS.
Investors owning Warrants may not be able to exercise the Warrants unless
at the time of exercise this Registration Statement is current, or a new
registration statement registering the Common Stock issuable upon exercise
of the Warrants is effective and such shares have been registered and/or
qualified or deemed to be exempt from registration and/or qualification
under the securities laws of the state of residence of the holder of the
Warrants. The Company does not intend to advise holders of the Warrants of
their inability to exercise the Warrants other than in response to a
specific written inquiry to the Company. The value of the Warrants may be
greatly reduced if a current registration statement covering the shares of
Common Stock underlying the Warrants is not effective or if such Common
Stock is not registered or exempt from registration in the states in which
the holders of the Warrants reside. The Warrants are subject to redemption
by the Company on 30 days prior written notice provided that the daily
trading price for the shares is above $10.00 for at least 30 consecutive
trading days ending within ten days prior to the date of the notice of
redemption. If the Warrants are redeemed, Warrantholders will lose their
right to exercise the Warrants except during such 30 day redemption period.
Any redemption of the Warrants during the one-year period commencing on
July 21, 1998 shall require the written consent of the Underwriter.

-13-

<PAGE>

(i) PRINCIPAL PRODUCTS PRODUCED AND SERVICE RENDERED AND
PRINCIPAL MARKETS. The principal service rendered by the Company is
contract food service management company with its operations in
Connecticut, New York and New Jersey. The Company will seek to open other
geographical markets during the upcoming fiscal year.

(ii) STATUS OF NEW PRODUCTS OR INDUSTRY SEGMENTS. The Company
has not announced a new product or industry segment, which would require
the investment of a material amount of the Company's assets, or which
otherwise is material.

(iii) SOURCES AND AVAILABILITY OF RAW MATERIALS. The Company
as a service orientated entity is not dependant on the availability of raw
materials, however, the Company is dependant on the availability of
qualified, trained manpower.

(iv) PATENTS, TRADEMARKS, LICENSES, FRANCHISES AND CONCESSIONS.
The Company does not own any patents, trademarks, licenses, franchises, or
concessions.

(v) SEASONAL NATURE OF BUSINESS. The Company's business is
somewhat seasonal in nature. Many of the Company's corporate customers are
slower in the summer months due to vacation schedules of their employees
and shift reductions. Special events catering tends to peak at various
times of the year depending on corporate meetings, holiday parties and the
frequency of weddings and special events. The Company adjusts its labor
staffing and inventories as necessary during these periods.

(vi) MAJOR CUSTOMERS. The following table sets forth information
concerning customers, or any group of customers under common control, or
customers which are affiliates of each other, to which sales were made by
the Company during the fiscal year ended June 28, 1998, in an amount which
equals 10% or more of the Company's revenue and the Company's relationship
to each:

RELATIONSHIP PERCENT
TO AMOUNT OF OF TOTAL
CUSTOMER COMPANY REVENUE REVENUE
-------- ------- ------- -------

Pitney Bowes, Inc. None $1,415,814 20%
Oxford Health Plans, Inc. None $2,460,688 35%

The Company believes that if it should lose any of its present major
customers, such loss would have a material adverse effect on the Company.

(vii) BACKLOG. Backlog is not relevant to an understanding
of the Company's business.

(viii) RENEGOTIATION OR TERMINATION OF GOVERNMENTAL CONTRACTS.
Except for liquor licenses discussed below, no portion of the Company's
business is subject to renegotiation of profits or termination of contracts
or subcontracts at the election of the Government.

-14-

<PAGE>

(ix) COMPETITION. The Company encounters significant competition
in each area of the contract food service market in which it operates.
Certain of the Company's competitors compete with the Company on both a
national and local basis and have significantly greater financial and other
resources than the Company. Competition may result in price reductions,
decreased gross margins and loss of market share. In addition, existing or
potential clients may elect to "self operate" their food service, thereby
eliminating the opportunity for the Company to compete for the account.
There can be no assurance that the Company will be able to compete
successfully in the future or that competition will not have a material
adverse effect on the Company's business, financial condition or results of
operations.

(x) RESEARCH AND DEVELOPMENT. The Company has not engaged and
does not currently engage in any research and development activities.

(xi) GOVERNMENT REGULATION. The Company's business is subject to
various governmental regulations incidental to its operations, such as
environmental, employment, and health and safety regulations. The Company
also holds a liquor license at one facility and is subject to the liquor
license requirements of the state of Connecticut, including its "dram-shop"
statute. "Dram-shop" statutes generally provide a person injured by an
intoxicated person the right to recover damages from an establishment that
wrongfully served alcoholic beverages to the intoxicated person. While the
Company maintains insurance for such liability, there can be no assurance
that such insurance will be adequate to cover any potential liability or
that such insurance will continue to be available on commercially
acceptable terms. The loss of its liquor license could have a material
adverse effect on the Company's business, financial condition or results of
operations. There can be no assurance that additional federal or state
regulation would not limit the activities of the Company in the future or
significantly increase the cost of regulatory compliance.

(xii) EMPLOYEES. As of April 1, 1998, the Company has 140
full-time employees, including Geoffrey Ramsey, David Murphy and Anne
Ramsey, Officers and Directors of the Company and 25 part-time employees
employed for special occasions and seasonal busy times. None of the
Company's employees are represented by a union. The Company employs
district managers with strong sales and administrative backgrounds. These
managers are responsible for overseeing the accounts in their region, as
well as forecasting the budget for each account. To assist each district
manager is a food service director in each cafeteria. The food service
director is responsible for the day-to-day activities of the account. In
the smaller accounts, a chef/manager will perform these duties. The
supporting cast in each cafeteria may include an executive chef, sous chef,
grill cook, deli servers, cashiers, dishwashers, catering personnel and
general kitchen help.

As evidenced by the recent hiring of Timothy Hayes, the hiring
philosophy for the Company is to employ managers, chefs and cooks who have
obtained experience from larger food service organizations, graduates of a
culinary school or graduates with a degree in Hotel and Restaurant
management. Other employees are hired locally and are trained on-site by
the Company's food service directors, chef/managers and/or district
mangers.

-15-

<PAGE>

(d) FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND
EXPORT SALES. The Company has no operations in foreign countries and no
portion of its sales or revenues is derived from customers in foreign
countries.

Item 2. DESCRIPTION OF PROPERTIES
- -------------------------------------

The Company leases its office facility under the terms of a month-to-month
lease agreement with a monthly payment of $2,000. The Company also
maintains food service facilities at a number of locations pursuant to its
contracts with the building owners. In addition, the Company also pays
monthly rental charges of $2,100 to the Town of Hamden for use of the
Laurel View Country Club food service and banquet facility.

Item 3. LEGAL PROCEEDINGS
- -----------------------------

The Company knows of no pending or threatened legal proceeding to
which it is or will be a party which, if successful, might result in a
material adverse change in the business, properties, or financial condition
of the Company or its subsidiaries.

Item 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
- -------------------------------------------------------------

No matter was submitted to the vote of shareholders during the fourth
quarter of the Company's fiscal year. The Company anticipates holding its
Annual Shareholders Meeting in November 1998.

-16-

<PAGE>

PART II

Item 5. MARKET PRICE AND DIVIDENDS ON THE COMPANY'S COMMON EQUITY AND
- -------------------------------------------------------------------------
RELATED STOCKHOLDER MATTERS
- ---------------------------

(a) PRINCIPAL MARKET OR MARKETS. The Company's Common Stock and
Warrants are traded on the over-the-counter market and, commencing on July
21, 1998, have been listed on the National Association of Securities
Dealers, Inc., Automated Quotation System ("NASDAQ") under the symbols,
"CAFE" and "CAFEW". In addition, on July 21, 1998, the Company's
securities were listed on the Boston Stock Exchange under the symbols "HAC"
and "HACW." Prior to July 21, 1998 there was no trading market in the
Company's securities.

On September 21, 1998, the last reported sales price for the Company's
Common Stock and Warrants as reported on NASDQ was $3.00 and $.9375,
respectively and $_____ and $_____ as reported on the Boston Stock
Exchange.

(b) APPROXIMATE NUMBER OF HOLDERS OF COMMON STOCK. The approximate
number of holders of record or the Company's common stock at September 1,
1998 was 350.

(c) DIVIDENDS. The Company has never paid cash dividends on its
Common Stock. The Board of Directors does not anticipate paying cash
dividends in the foreseeable future as it intends to retain future earnings
to finance the growth of the business. The Delaware General Corporation
Law provides that dividends may only be paid out of capital surplus or out
of earnings. There are no other limitations on the ability of the Company
to pay dividends to its shareholders. The payment of future cash dividends
will depend on such factors as earnings levels, anticipated capital
requirements, the operating and financial conditions of the Company and
other factors deemed relevant by the Board of Directors.

-17-

<PAGE>

Item 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- -------------------------------------------------------------------------
RESULTS OF OPERATIONS
- ---------------------

The following review should be read in conjunction with the financial
statements and notes thereto.

FORWARD-LOOKING STATEMENTS MAY NOT PROVE ACCURATE

When used in this Prospectus, the words "anticipate," "estimate,"
"expect," "project," and similar expressions are intended to identify
forward-looking statements. Such statements are subject to certain risks,
uncertainties and assumptions including the Company failing to generate
projected revenues. Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect, actual
results may vary materially from those anticipated, estimated or projected.

GENERAL

Host America is a regional contract food service management company
specializing in providing full restaurant and employee dining, special
event catering, vending and office coffee service, home food replacement
and management of corporate dining rooms and cafeterias for office
complexes and manufacturing plants. This diversity of its services allows
the Company's clients to offer their employees full breakfast and lunch
availability, multi-level catering and a variety of complimentary food
service options. The Company currently has operations in Connecticut, New
York and New Jersey and, in the near future, the Company intends to expand
to Illinois and Florida.

RECENT DEVELOPMENTS

In February 1998, the Company commenced food service operations for
Bloomingdale's By Mail, Ltd., located in Cheshire, Connecticut, which
handles the Bloomingdales' catalog division. Management believes a key
component of the contract was the availability of the HOMEfood MARKET
concept for home meal replacement. The HOMEfood MARKET offers employees
the opportunity to purchase complete prepared meals at their place of
employment without requiring reheating or further preparation. The
HOMEfood MARKET serves two purposes: it not only provides Bloomingdale's
daytime employees a meal to bring home, but more importantly, provides
quality food service to Bloomingdale's evening employees in a cost-effective
manner. In addition to providing a cafeteria and the HOMEfood
MARKET, the Company manages vending and office coffee programs. Based on
the quality of the food and service in the cafeterias, the Company was also
awarded the Bloomingdales special events catering contract for that
building.

In April 1998, the Company opened its largest account, the "New Leaf
Cafe" located in the atrium of the Metro Park Twin Towers in Edison, New
Jersey. The facility has over 3,000 people in the office complex and the
Company is the sole restauranteurer in the complex. The agreement
encompasses all phases of the Company's food service operations, including
full service vending, office coffee, catering and a HOMEfood MARKET which
will open in August 1998.

-18-

<PAGE>

In May 1998, the Company entered into contracts with Tyco Submarine
Systems, Ltd. in Morristown and Eatontown, New Jersey. Both locations
employ an aggregate of 800 employees. The Company offers full service
dining, vending machines and catering. HOMEfood MARKETS are to be added in
August 1998 and each location will have "food court cafes" offering pizzas
made to order, tortilla wraps and deli-style sandwiches.

In May 1998, the Company signed a contract with Pitney Bowes, Inc.
bringing the total locations to six buildings in Connecticut with 2,500
employees. The Company offers full service dining at each location,
vending machines, office coffee service, corporate office catering
(primarily working lunches). Corporate office catering accounts for 35% of
the revenues attributable to this account.

In August 1998, the Company entered an agreement with RivCan
Associates of Stamford, Connecticut for the exclusive rights to operate,
sell and dispense food, alcoholic beverages and other food products at the
Stamford Twin Rinks in Stamford, Connecticut. Pursuant to the agreement,
the Company must pay RivCan $180 a week commencing September 5, 1998; an
additional fee of $625 per week for six (6) months after the
restaurant/sports bar becomes fully functional (including granting of the
liquor license) and thereafter, and $5,400 per month for the five (5) year
life of the contract. The Company will earn a fixed percentage rate of
5.5% of net sales with any excess over 5.5% being divided 80% to RivCan and
20% to the Company.

RESULTS OF OPERATIONS - FOR THE YEAR ENDED JUNE 28, 1998 COMPARED TO THE
YEAR ENDED JUNE 29, 1997

Net revenues aggregated $7,001,637 for the year ended June 28, 1998,
representing an increase of $1,029,711 or 17.2% over the year ended June
29, 1997. Further, when the net revenues for the year ended June 28, 1998
are compared with the amount of net revenues two years ago of $4,939,428
for fiscal 1998 the increase is $2,062,209 or 41.8%.

-19-

<PAGE>

canteen items offered for sale as well as continued refining of the mix of
products sold to maximize sales per location.

Cost of sales increased $1,072,729 for the year ended June 28, 1998
when compared to the year ended June 29, 1997, representing an increase of
20.2%. Although the increase was trending similar to net revenues, the
increase in cost of sales was more as a percentage than the increase in net
revenues reflecting the increased food costs associated with the higher
quality food and personnel at the Company's new locations.

General and administrative expenses increased $3,651,980 or 660% in
fiscal 1998 when compared to fiscal 1997. The significant increase in
general and administrative expense is primarily due to a stock incentive given
to management and directors of $3,500,000 during the year ended June 28,
1998. The remaining increase relates to the hiring of additional employees
including a regional sales and operations manager to gain additional market
share and an additional administrative person to support the growing
operation.

RESULTS OF OPERATIONS - FOR THE YEAR ENDED JUNE 29, 1997 COMPARED TO THE
YEAR ENDED JUNE 30, 1996

Net revenues aggregated $5,971,926 for the year ended June 29, 1997,
representing an increase of $1,032,498 or 20.9% over the year ended June
30, 1996. Further, when the net revenues for the year ended June 29, 1997
are compared with the amount of net revenues two years ago of $3,388,677
for fiscal 1995, the increase is $2,583,249 or 76.2%.

The Company has continued an aggressive program of adding new
facilities under its food management programs as well as enhanced revenues
at existing facilities. The Company added four new locations during fiscal
1997 which accounted for approximately $853,000 of the overall increase.
A significant portion of this increase is due to increased servicing to
Pitney Bowes. The Company has developed a methodology to implement a full
service food and canteen operation in a timely and responsive manner to
support the expanding needs of this important customer. The remaining
increase of approximately $179,000 results from expansion of food and
canteen items offered for sale as well as continued refining of the mix of
products sold to maximize sales per location.

Cost of sales increased $858,026 for the year ended June 29, 1997 when
compared to the year ended June 30, 1996, representing an increase of
19.2%. Although the increase was trending similar to net revenues, the
increase in cost of sales was less as a percentage than the increase in net
revenues reflecting the favorable impact on margins that the change in
product mix is having on operations.

General and administrative expenses increased $111,818 or 25.3% in
fiscal 1997 when compared to fiscal 1996. The increase was primarily
related to additional salaries and related costs incurred to support the
additional facilities taken on during the year. The remaining increase
relates to the expenses incurred to advertise the HOMEfood MARKET.

-20-

<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

The Company's liquidity as evidenced by its current ratio has remained
relatively stable. The current ratio at June 28, 1998 and June 29, 1997
was .904 and .968, respectively. The slight decrease during the year is
primarily due to the cash requirements and related working capital loans
obtained by the Company in connection with the public offering completed in
July 1998.

Cash flows from operating activities for the year ended June 28, 1998
amounted to $380,571 primarily resulting from management of current assets
and liabilities. Investment in property and equipment (net of sales) in
the amount of $60,920 and net repayments of debt and payment of deferred
offering cost of $410,243 combined to result in an overall decrease in cash
for the period of $90,592.

Cash flows from operating activities in fiscal 1997 amounted to
$184,610. The positive cash flow was primarily due to net income $86,543
and non-cash expenditures such as depreciation and amortization of $82,299.
The remainder, $15,768 resulted from management of other current asset and
liability items during the period. Cash flows from investing activities
for the year ended June 29, 1997 reflected an outflow of $68,543 reflecting
a net investment in new equipment to support the expansion to new
facilities.

Cash flows from financing activities also resulted in a net outflow of
cash of $48,692 representing a net repayment of debt when considering the
additional financing and repayment of existing notes.

The net effect of all these events resulted in increasing cash by
$67,375 for the year and achieving an ending cash balance of $140,121 at
June 29, 1997.

The Company received approximately $3,931,000 in net proceeds from a
public offering of Common Stock and Purchase Warrants completed in July
1998. The Company will use these proceeds to hire additional sales
personnel for the New Jersey and New York markets; seek acquisitions of
existing companies in the contract food industry; development of additional
products and marketing concepts; and working capital.

SEASONABILITY

The Company's business is somewhat seasonal in nature. Many of the
Company's corporate customers are slower in the summer months due to
vacation schedules of their employees and shift reductions. Special events
catering tends to peak at various times of the year depending on corporate
meetings, holiday parties and the frequency of weddings and special events.
The Company adjusts its labor staffing and inventories as necessary during
these periods.

COMMITMENTS

-21-

<PAGE>

the Company also pays monthly rental charges of $2,100 to the Town of
Hamden for use of the Laurel View Country Club food service and banquet
facility.

EQUIPMENT LEASE

The Company is also leasing various equipment under certain operating
leases which expire within one to two years. In certain cases, the cost of
leasing the equipment is billed to customers in connection with the
Company's cafeteria services. Rent expense for these operating leases for
equipment aggregated $27,026 and $26,592 for the years ended June 28, 1998
and June 29, 1997, respectively.

EMPLOYMENT CONTRACTS

On February 19, 1998, the Company entered into five-year employment
agreements with its Officers/Directors. Under the terms of the agreements,
the President and Vice President of the Company are to receive annual
salaries of $85,000 and $80,000, respectively, which may be increased by
the Company's Compensation Committee or the Board of Directors, but shall
not be decreased without the consent of the employee. Both individuals
receive an expense account, an automobile expense allowance, related
business expenses and all other benefits afforded other employees. The
Company also provides health, disability and insurance to each of these
individuals.

IMPACT OF THE YEAR 2000 ISSUE

The Year 2000 Issue is the result of computer programs being written
using two digits rather than four to define the applicable year. Any of
the Company's computer programs that have date-sensitive software may
recognize a date using "00" as the year 1900 rather than the year 2000.
This could result in a system failure or miscalculations causing
disruptions of operations, including, among other things, a temporary
inability to process transactions, send invoices, or engage in similar
normal business activities. Based on an assessment of its computer
systems, the Company believes that it will not encounter significant
operational problems or be required to modify or replace significant
portions of its software so that its computer systems will properly utilize
dates beyond December 31, 1999. However, if problems are encountered and
modifications and conversions are not timely made, the Year 2000 problem
may have an impact on the operations of the Company.

Item 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- -----------------------------------------------------

Information with respect to this item is contained in the financial
statements appearing on Item 14 of this Report. Such information is
incorporated herein by reference.

Item 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
- -------------------------------------------------------------------------
FINANCIAL DISCLOSURE
- --------------------

None.

-22-

<PAGE>

PART III

The information required by Part III of Form 10KSB is incorporated
herein by reference to Registrant's definitive Proxy to be filed in
connection with the Annual Meeting of Shareholders to be held on November
11, 1998.

-23-

<PAGE>

PART IV

Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
- --------------------------------------------------------------------------

(a) (1) The following Financial Statements are filed as part of this
Report:
Page
----

Independent Auditors' Report. . . . . . . . . . . . . . . . . . .F-1

Balance Sheets, June 28, 1998 and June 29, 1997 . . . . . . . . .F-2

Statements of Operations, Years ended June 28, 1998 and
June 29, 1997 . . . . . . . . . . . . . . . . . . . . . . . . .F-3

Statements of Changes in Stockholders' Equity, Years ended
June 28, 1998 and June 29, 1997 . . . . . . . . . . . . . . . . .F-4

Statements of Cash Flows, Years ended June 28, 1998
and June 29, 1997 . . . . . . . . . . . . . . . . . . . . . . . .F-5

Notes to Financial Statements . . . . . . . . . . . . . . . . . .F-6

(a) (2) All schedules have been omitted because the required information
is inapplicable or is shown in the notes to the financial
statements.

(a) (3) Exhibits:

1.1 Form of Underwriting Agreement between the Company and Barron
Chase Securities, Inc.*

1.2 Form of Selected Dealers Agreement.*

1.3 Form of Underwriter's Warrant Agreement and Form of Warrant
Certificate.*

3.1 Certificate of Incorporation dated July 31, 1986 and Amendments
thereto.*

3.2 Bylaws.*

3.3 Form of Specimen Common Stock Certificate.*

3.4 Form of Specimen Warrant Certificate.*

4.0 Warrant Agreement between the Company and American Securities
Stock Transfer, Inc.*

10.1 Agreement of Manual and Vending Food and Refreshment Service
between Oxford Health Plans and the Company dated December 28, 1993.*

-24-

<PAGE>

10.2 Agreement for Cafeteria and Special Events Food and Vending
Services with Pitney Bowes, Inc. and the Company dated June 26, 1995.*

10.3 Agreement of Manual and Vending Food and Refreshment Service
with James River Paper Company, Inc. and the Company dated July
13, 1990.*

10.4 Agreement for Banquet Food and Beverage Services between the
Town of Hamden and the Company dated June 18, 1997.*

10.5 Employment Agreement between the Company and Geoffrey W. Ramsey.*

10.6 Employment Agreement between the Company and David J. Murphy.*

10.7 Form of Financial Advisory Agreement.*

10.8 Form of Merger and Acquisition Agreement.*

10.9 Agreement with Bloomingdales By Mail and the Company dated
January 1998.*

10.10 Agreement with New Leaf Cafe and the Company dated March 1998.*

10.11 Agreement with Tyco Submarine Systems Ltd. and the Company
dated March 24, 1998.*

10.12 Agreement with Tyco Submarine Systems Ltd. and the Company
dated May 1, 1998.*

10.13 Agreement between RivCan and the Company dated August 3, 1998.

11.1 Schedule of Computation of Earnings (Loss) Per Common Share.

27.1 Financial Data Schedule
________________
* The documents identified are incorporated by reference from the Company's
Registration Statement on Form SB-2 (No. 333-50673).

(b) Reports on Form 8-K:

During the last quarter of the period covered by this report, the
Company did not file an 8-K.

-25-

<PAGE>

HOST AMERICA CORPORATION

FINANCIAL STATEMENTS
AS OF JUNE 28, 1998 AND JUNE 29, 1997

TOGETHER WITH

INDEPENDENT AUDITORS' REPORT

<PAGE>

HOST AMERICA CORPORATION

TABLE OF CONTENTS

Page
----

INDEPENDENT AUDITORS' REPORT F1

FINANCIAL STATEMENTS

Balance Sheets F2

Statements of Operations F3

Statements of Changes in Stockholders' Equity F4

Statements of Cash Flows F5

Notes to Financial Statements F6

<PAGE>

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of
Host America Corporation

We have audited the accompanying balance sheets of Host America Corporation
(the Company) as of June 28, 1998 and June 29, 1997, and the related
statements of operations, changes in stockholders' equity, 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 generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 financial position of Host America
Corporation as of June 28, 1998 and June 29, 1997, and the results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles

/s/ DiSanto Bertoline & Company, P.C.

Glastonbury, Connecticut
September 10, 1998

-F1-

<PAGE>

HOST AMERICA CORPORATION
BALANCE SHEETS
JUNE 28, 1998 AND JUNE 29, 1997

ASSETS

June 28, 1998 June 29, 1997
------------- -------------

CURRENT ASSETS
Cash $ 49,529 $ 140,121
Accounts receivable, net of allowance
for doubtful accounts of $8,300 and
$10,000 at June 28, 1998, and
June 29, 1997, respectively 380,989 331,263
Inventory 173,807 173,759
Deferred offering costs 486,029 -
Prepaid expenses and other 117,909 73,082
Deferred income taxes 30,000 30,000
----------- -----------
Total current assets 1,238,263 748,225

PROPERTY AND EQUIPMENT, net 324,254 234,133
----------- -----------
$ 1,562,517 $ 982,358
=========== ===========

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
Demand note payable $ 75,000 $ -
Current portion of long-term debt 123,661 85,643
Accounts payable 870,003 580,190
Accrued expenses 284,860 96,393
Due to officer/director 17,041 10,641
----------- -----------
Total current liabilities 1,370,565 772,867

LONG-TERM DEBT, less current portion
included above 166,080 80,770

COMMITMENTS (Note 9) - -

STOCKHOLDERS' EQUITY
Preferred stock, $.001 par value,
20,000,000 shares authorized,
700,000 shares issued and outstanding 700 -
Common stock, $.001 par value,
80,000,000 shares authorized, 130,000
shares issued and outstanding 130 130
Additional paid-in capital 3,744,258 244,958
Deficit (3,719,216) (116,367)
----------- -----------
Total stockholders' equity 25,872 128,721
----------- -----------
$ 1,562,517 $ 982,358
=========== ===========

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
FINANCIAL STATEMENTS.
-F2-

<PAGE>

HOST AMERICA CORPORATION
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED JUNE 28, 1998 AND JUNE 29, 1997

For the years ended
----------------------------
June 28, 1998 June 29, 1997
------------- -------------

NET REVENUES $ 7,001,637 $ 5,971,926

COST OF GOODS SOLD 6,393,090 5,320,361
----------- -----------

Gross profit 608,547 651,565

GENERAL AND ADMINISTRATIVE EXPENSES 4,205,347 553,367
----------- -----------

Income (loss) from operations (3,596,800) 98,198

OTHER INCOME (EXPENSE)
Miscellaneous income 16,687 18,924
Other expense (1,774) -
Interest expense (20,962) (18,079)
----------- -----------
(6,049) 845
----------- -----------

Income (loss) before provision for
income taxes (3,602,849) 99,043

PROVISION FOR INCOME TAXES - 12,500
----------- -----------

Net income (loss) $(3,602,849) $ 86,543
=========== ===========

EARNINGS (LOSS) PER COMMON SHARE $ (27.71) $ 0.67
=========== ===========

WEIGHTED AVERAGE SHARES OUTSTANDING 130,000 130,000
=========== ===========

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
FINANCIAL STATEMENTS.
-F3-

<PAGE>

HOST AMERICA CORPORATION
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS END JUNE 28, 1998 AND JUNE 29, 1997

Preferred Stock Common Stock Additional Total
-------------------- -------------------- Paid-in Stockholders'
Shares Amount Shares Amount Capital Deficit Equity
-------- -------- -------- -------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance,
June 30, 1996 - $ - 13,000,000 $ 13,000 $ 232,088 $ (202,910) $ 42,178

Net income - - - - - 86,543 86,543
-------- ------- ---------- --------- ----------- ----------- -----------

Balance,
June 29, 1997 - - 13,000,000 13,000 232,088 (116,367) 128,721

Issuance of
Preferred
Stock 700,000 700 - - 3,499,300 - 3,500,000

Reverse stock
split - - (12,870,000) (12,870) 12,870 - -

Net loss - - - - - (3,602,849) (3,602,849)
-------- ------- ---------- --------- ----------- ----------- -----------

Balance,
June 28, 1998
700,000 $ 700 130,000 $ 130 $ 3,744,258 $(3,719,216) $ 25,872
======== ======= ========== ========= =========== =========== ===========
</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
FINANCIAL STATEMENTS.
-F4-

<PAGE>

HOST AMERICA CORPORATION
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 28, 1998 AND JUNE 29, 1997

For the years ended
----------------------------
June 28, 1998 June 29, 1997
------------- -------------

CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $(3,602,849) $ 86,543
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities
Depreciation and amortization 84,180 82,299
Gain on sale of property and equipment 15,561 311
Deferred income taxes - 8,300
Compensation expense pursuant to
issuance of preferred stock 3,500,000 -
Changes in operating assets and
liabilities:
Increase in accounts payable 289,813 143,298
Increase (decrease) in accrued expenses 188,467 (13,814)
Increase in inventory (48) (8,382)
Increase in prepaid expenses and other (44,827) (15,051)
Increase in accounts receivable (49,726) (98,894)
----------- -----------
Net cash provided by operating activities 380,571 184,610
----------- -----------

CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of equipment 15,561 4,088
Purchases of property and equipment (76,481) (72,631)
----------- -----------
Net cash used in investing activities (60,920) (68,543)
----------- -----------

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from demand note payable and
long-term debt 173,906 43,041
Increase (decrease) in due to
officer/director 6,400 (1,459)
Principal payments on long-term debt (104,520) (90,274)
Deferred offering costs (486,029) -
----------- -----------
Net cash used in financing activities (410,243) (48,692)
----------- -----------

NET (DECREASE) INCREASE IN CASH (90,592) 67,375

CASH, beginning of year 140,121 72,746
----------- -----------

CASH, end of year $ 49,529 $ 140,121
=========== ===========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ 20,962 $ 18,079
Income taxes 1,774 4,200

NON CASH INVESTING AND FINANCING ACTIVITIES
Long-term debt incurred to acquire
property and equipment 128,942 -

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
FINANCIAL STATEMENTS.
-F5-

<PAGE>

HOST AMERICA CORPORATION
NOTES TO FINANCIAL STATEMENTS
JUNE 28, 1998 AND JUNE 29, 1997

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF OPERATIONS

Host America Corporation (the Company) was incorporated in
Delaware on February 6, 1986 with the name University Dining
Services, Inc. On March 9, 1998, the Company filed a certificate
of amendment changing its name to Host America Corporation. The
Company is a contract food management organization which
specializes in providing full service restaurant and employee
dining, special event catering, vending and office coffee service
to business and industry accounts primarily located in
Connecticut and northern New Jersey. Approximately 91% of sales
are directly related to the management of corporate restaurants
and catering, with the remaining 9% of sales attributable to
vending operations.

FISCAL YEAR

The Company's fiscal year ends on the last Sunday in June.
Fiscal years in the two-year periods ended June 28, 1998 and June
29, 1997, each contain fifty-two weeks.

USE OF ESTIMATES

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

CASH EQUIVALENTS

For the purpose of the statement of cash flows, the Company
defines cash equivalents as highly liquid instruments with an
original maturity of three months or less. The Company had no
cash equivalents at June 28, 1998 and June 29, 1997.

INVENTORY

Inventory consists primarily of food supplies and is stated at
the lower of cost or market, with cost determined on a first-in,
first-out basis.

-F6-

<PAGE>

HOST AMERICA CORPORATION
NOTES TO FINANCIAL STATEMENTS (Continued)
JUNE 28, 1998 AND JUNE 29, 1997

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

DEFERRED OFFERING COSTS

Deferred offering costs consist of specific incremental costs
incurred in connection with a proposed offering of securities.
These costs were applied against the proceeds of the offering
which was completed in July, 1998 (SEE NOTE 11).

PROPERTY AND EQUIPMENT

Property and equipment is stated at cost. Upon retirement or
disposition of depreciable properties, the cost and related
accumulated depreciation are removed from the accounts and any
resulting gain or loss is reflected in the results of operations.
Depreciation and amortization are computed by applying the
straight-line method over the estimated useful lives of the
related assets, which range from three to ten years.

Maintenance, repairs and minor renewals are charged to operations
as incurred. Expenditures which substantially increase the
useful lives of the related assets are capitalized.

REVENUE RECOGNITION

The Company's revenue is recognized at the point of sale of food
and merchandise items and upon delivery of service for catering,
restaurant management and related services.

INCOME TAXES

The Company recognizes deferred tax liabilities and assets for
the expected future tax consequences of events that have been
included in the financial statements or tax returns. Deferred tax
liabilities and assets are determined based on the differences
between the financial statement and tax bases of assets and
liabilities using enacted tax rates in effect for the year in
which the differences are expected to reverse.

ADOPTION OF ACCOUNTING STANDARDS

EARNINGS PER SHARE

The Company has adopted Statement of Financial Accounting
Standards (SFAS) No. 128 "Earnings Per Share." The objective of
SFAS No. 128 is to simplify the standards for computing earnings
per share (EPS) and replaces the presentation of primary and
fully-diluted EPS with a presentation of basic and diluted EPS.
Implementation of SFAS No. 128 did not have any impact on the
Company's calculation of EPS.

Net (loss) income per common share was computed based upon
130,000 weighted average shares outstanding during each of the
periods. Dilutive earnings per share was not presented as the
potentially dilutive convertible preferred stock and stock
purchase options are anti-dilutive.

-F7-

<PAGE>

HOST AMERICA CORPORATION
NOTES TO FINANCIAL STATEMENTS (Continued)
JUNE 28, 1998 AND JUNE 29, 1997

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

ACCOUNTING FOR STOCK-BASED COMPENSATION

The Company has adopted Statement of Financial Accounting
Standards (SFAS) No. 123, "Accounting for Stock-Based
Compensation", which establishes a fair value based method of
accounting for an employee stock option or similar equity
instrument. SFAS No. 123 gives entities a choice of recognizing
related compensation expense by adopting the new fair value
method or to continue to measure compensation using the intrinsic
value approach under Accounting Principles Board (APB) Opinion
No. 25, the former standard. If the former standard for
measurement is elected, SFAS No. 123 requires supplemental
disclosure to show the effects of using the new measurement
criteria. The Company intends to continue using the measurement
prescribed by APB Opinion No. 25, and accordingly, this
pronouncement will not affect the Company's financial position or
results of operations.

NOTE 2 - FINANCIAL INSTRUMENTS

CONCENTRATIONS OF CREDIT RISK

The Company's financial instruments that are exposed to
concentrations of credit risk consist primarily of cash and
accounts receivable.

* Cash - The Company places its cash and temporary cash
investments with high credit quality institutions. At
times, such investments may be in excess of the FDIC
insurance limit.

* Accounts receivable - The Company grants credit to its
customers, substantially all of whom provide full service
restaurant and employee dining services. Three major
customers comprise 74% of accounts receivable as of June 28,
1998 and two major customers comprise 78% of accounts
receivable at June 29, 1997. Net revenues from individual
customers which exceeded ten percent of total net revenues
during the years ended June 28, 1998 and June 29, 1997
aggregated 55% (2 customers) and 49% (2 customers),
respectively. The Company reviews a customer's credit
history before extending credit and establishes an allowance
for doubtful accounts based upon factors surrounding the
credit risk of specific customers, historical trends, and
other information. Such losses have been within
management's expectations.

-F8-

<PAGE>

HOST AMERICA CORPORATION
NOTES TO FINANCIAL STATEMENTS (Continued)
JUNE 28, 1998 AND JUNE 29, 1997

NOTE 2 - FINANCIAL INSTRUMENTS (Continued)

FAIR VALUE OF FINANCIAL INSTRUMENTS

Statement of Financial Accounting Standards (SFAS) No. 107, "Fair
Value of Financial Instruments", requires disclosure of the fair
value of financial instruments for which the determination of
fair value is practicable. SFAS No. 107 defines the fair value
of a financial instrument as the amount at which the instrument
could be exchanged in a current transaction between willing
parties.

The carrying amount of the Company's financial instruments
approximates their fair value as outlined below:

* Cash, accounts receivable, due to officer/director, accounts
payable and accrued expenses - The carrying amounts
approximate their fair value because of the short maturity
of those instruments.

* Demand note payable, long-term debt - The carrying amount
approximates fair value as the interest rates on the various
notes approximate the Company's estimated incremental
borrowing rate.

The Company's financial instruments are held for other than
trading purposes.

NOTE 3 - PROPERTY AND EQUIPMENT

A summary of property and equipment is as follows:

June 28, June 29,
1998 1997
------ ------

Equipment and fixtures $502,909 $623,906
Vehicles 158,878 124,263
Leasehold improvements 7,089 7,089
-------- --------
668,876 755,258
Less: accumulated depreciation
and amortization 344,622 521,125
-------- --------
$324,254 $234,133
======== ========

Depreciation and amortization expense for the years ended June
28, 1998 and June 29, 1997 totaled $84,180 and $82,299,
respectively.

-F9-

<PAGE>

HOST AMERICA CORPORATION
NOTES TO FINANCIAL STATEMENTS (Continued)
JUNE 28, 1998 AND JUNE 29, 1997

NOTE 4 - DEMAND NOTE PAYABLE

On March 3, 1998, the Company obtained a six-month working
capital loan totaling $75,000. The loan agreement requires the
Company to make monthly payments of interest only at 1 1/2% above
the highest Wall Street Journal Prime Lending Rate (10% at June
28, 1998). The loan is collateralized by substantially all of
the assets of the Company and has been personally guaranteed by
the officers.

NOTE 5 - LONG-TERM DEBT

Long-term debt consists of the following as of June 28, 1998 and
June 29, 1997:

June 28, June 29,
1998 1997
------ ------

Various equipment notes payable
at interest rates ranging from
10% to 10.25%, maturing through
December, 2002. The notes are
secured by the related equipment. $145,236 $115,000

Various vehicle notes payable at
interest rates ranging from 8.75%
to 10.5%, maturing through January,
2003. The notes are secured by
the related vehicles. 63,933 46,397

Note payable to bank with monthly
principal payments of $1,250
plus interest at 10%, maturing
September 10, 2002. 63,750 -

Note payable to vendor at an
interest rate of 18 1/2%. 16,822 5,016
-------- --------
289,741 166,413
Less: current portion 123,661 85,643
-------- --------
$166,080 $ 80,770
======== ========

Maturities of long-term debt for each of the fiscal years
succeeding June 28, 1998 are as follows:

1999 $123,661
2000 84,050
2001 49,931
2002 23,901
2003 8,198
--------
$289,741
========

NOTE 6 - DUE TO OFFICER/DIRECTOR

Demand amounts due to officer/director bear interest at the rate
of 9.95% per annum and are being repaid based on a twenty-five
year amortization of principal.

-F10-

<PAGE>

HOST AMERICA CORPORATION
NOTES TO FINANCIAL STATEMENTS (Continued)
JUNE 28, 1998 AND JUNE 29, 1997

NOTE 7 - STOCKHOLDERS' EQUITY

STOCK OPTIONS

On August 10, 1997, the Company granted stock purchase options to
certain officers and directors of the Company extending the right
to purchase up to 12,000 shares of the Company's common stock at
an exercise price determined by the Company's Board of Directors
to be five dollars per share. The stock purchase options are
subject to certain adjustment provisions in the event of any
stock dividends, reverse splits and/or reclassifications of
common stock, and expire ten years from the date of the grant.

A summary of the status of the Company's stock options as of June
28, 1998, and changes during the year is presented below:

Outstanding Price
----------- -----

Outstanding at beginning of year - $ -
Granted 12,000 5.00
Exercised - -
Canceled - -
------ -----
Outstanding at end of year 12,000 $5.00
====== =====

The Company has adopted Statement of Financial Accounting
Standards (SFAS) No. 123, "Accounting for Stock-Based
Compensation". In accordance with the provisions of SFAS No.
123, the Company applies APB Opinion No. 25 in accounting for its
stock option plans and, accordingly, does not recognize
compensation cost at the grant date. If the Company had elected
to recognize compensation cost based on the fair value of the
options granted at grant date as prescribed by SFAS No. 123, net
income and earnings per common share would have been adjusted to
the pro forma amounts indicated below:

1998
------

Net income (loss) - as reported $(3,602,849)
Net income (loss) - pro forma (3,634,169)
Earnings (loss) per common share - as reported (27.71)
Earnings (loss) per common share - pro forma (27.96)

The fair value of each option grant is estimated on the date of
grant with the following assumptions:

Expected dividend yield 0%
Expected volatility N/A
Risk-free interest rate 6.5%
Expected life of options 120 months

-F11-

<PAGE>

HOST AMERICA CORPORATION
NOTES TO FINANCIAL STATEMENTS (Continued)
JUNE 28, 1998 AND JUNE 29, 1997

NOTE 7 - STOCKHOLDERS' EQUITY (Continued)

REVERSE STOCK SPLIT

On February 14, 1998, the Board of Directors of the Company
authorized the reverse split of all issued and outstanding shares
of common stock so that each one hundred shares outstanding
converted to one share. Share amounts in the statements of
changes in stockholders' equity reflect the actual share amounts
outstanding for the periods presented. All references to the
number of common shares and per share amounts reflected elsewhere
in the accompanying financial statements and related footnotes
have been restated as appropriate to reflect the effect of the
split for all periods presented.

PREFERRED STOCK

On March 1, 1998, the Company issued 700,000 shares of Preferred
Stock to certain officers and directors of the Company. Each
share of Preferred Stock is convertible into one share of Common
Stock at a conversion value of $5.00 per share. The conversion
price can potentially decrease should the Company meet certain
revenue and pre-tax earnings incentives over the next three years
and in the event the Company does not attain any of the
incentives, each share of Series A Preferred Stock then
outstanding shall automatically convert, at no additional cost to
the holder into one (1) share of common stock at the end of five
(5) years. The Preferred Shares have been valued by the Board of
Directors at $5.00 per share based on the stock's conversion
value. The Preferred Shares are entitled to vote on all matters
that the Common Stock is entitled to vote on the basis of one
vote per share. Compensation expense of $3,500,000 has been
recognized in general and administrative expenses in the
accompanying statements of operations as a result of this
transaction.

NOTE 8 - INCOME TAXES

The provision for income taxes consists of the following for the
years ending June 28, 1998 and June 29, 1997:

1998 1997
------ ------

Current
Federal $ - $ -
State - 4,200
Deferred - 8,300
------- -------
$ - $12,500
======= =======

The Company has federal net operating loss carryforwards of
approximately $115,000 expiring in fiscal 2013.

-F12-

<PAGE>

HOST AMERICA CORPORATION
NOTES TO FINANCIAL STATEMENTS (Continued)
JUNE 28, 1998 AND JUNE 29, 1997

NOTE 8 - INCOME TAXES (Continued)

Expected tax expense based on the federal statutory rate is
reconciled with the actual expense for the years ended June 28,
1998 and June 29, 1997 as follows:

1998 1997
------ ------

Statutory federal income tax 34% 34%
State taxes, net of federal
income tax benefit - 4
Other 1 2
Utilization of net operating
loss carryforwards - (34)
Change in valuation allowance (35) 6
----- -----
-% 12%
===== =====

The significant components of the deferred tax provision are as
follows:

1998 1997
------ ------

Valuation allowance $ 977,200 $ (22,800)
Net operating loss - federal 3,000 25,500
Allowance for doubtful accounts 800 (2,800)
Net operating loss - state (1,000) 8,400
Issuance of preferred stock (980,000) -
----------- -----------
$ - $ 8,300
=========== ===========

The components of the deferred tax asset account as of June 28,
1998 and June 29, 1997 are as follows:

1998 1997
------ ------

Deferred tax assets:
Issuance of preferred stock $ 980,000 $ -
Net operating loss - federal 30,000 33,000
Allowance for doubtful accounts 2,000 2,800
Net operating loss - state 1,000 -
Valuation allowance (983,000) (5,800)
--------- ---------
Total deferred tax asset $ 30,000 $ 30,000
========= =========

The Company establishes a valuation allowances in accordance with
the provisions of SFAS No. 109, "Accounting for Income Taxes".
The Company continually reviews the adequacy of the valuation
allowance and recognizes a benefit from income taxes only when
reassessment indicates that it is more likely than not that the
benefits will be realized. In fiscal 1998, the Company increased
the valuation allowance by approximately $977,000 based upon
reasonable and prudent tax planning strategies.

-F13-

<PAGE>

HOST AMERICA CORPORATION
NOTES TO FINANCIAL STATEMENTS (Continued)
JUNE 28, 1998 AND JUNE 29, 1997

NOTE 9 - COMMITMENTS

OPERATING LEASES

The Company leases its office facility under a verbal agreement
with a monthly payment of $2,000. The verbal agreement is an
extension of a three year lease agreement which expired in
October, 1997 and required a monthly payment of $1,575. Rent
expense charged to operations under this and preceding leases
aggregated $22,300 and $18,900 for the years ended June 28, 1998
and June 29, 1997, respectively.

The Company is also leasing various equipment under certain other
operating leases which expire within one to two years. In
certain cases, the cost of leasing the equipment is billed to
customers in connection with the Company's cafeteria services.
Rent expense for these operating leases for equipment aggregated
$27,026 and $26,592 for the years ended June 28, 1998 and June
29, 1997, respectively.

Lastly, the Company leases a food service and banquet facility
from the Town of Hamden under the terms of a three-year lease
agreement expiring in December, 1999. Rent expense charged to
operations under this lease agreement aggregated $25,200 for the
years ended June 28, 1998 and June 29, 1997, respectively.

Future minimum lease payments on all operating leases for each of
the fiscal years succeeding June 28, 1998 are as follows:

1999 $ 61,050
2000 36,600
2001 16,000
--------
$133,650
========

EMPLOYMENT CONTRACTS

On February 19, 1998, the Company entered into five-year
employment agreements with its officers/directors. Under the
terms of the agreements, the President and Vice President of the
Company are to receive annual salaries of $85,000 and $80,000,
respectively, which may be increased by the Company's
Compensation Committee or the Board of Directors, but shall not
be decreased without the consent of the employee. Both
individuals receive an expense account, an automobile expense
allowance, related business expenses and all other benefits
afforded other employees. The Company also provides health,
disability and insurance to each of these individuals.

NOTE 10 - ADVERTISING

The Company expenses the production costs of advertising the
first time the advertising takes place. Advertising expense was
$12,553 and $17,571 for the years ended June 28, 1998 and June
29, 1997, respectively.

-F14-

<PAGE>

HOST AMERICA CORPORATION
NOTES TO FINANCIAL STATEMENTS (Continued)
JUNE 28, 1998 AND JUNE 29, 1997

NOTE 11 - SUBSEQUENT EVENTS

In July, 1998, the Company completed the issuance of an
additional 1,000,000 common shares and 1,000,000 common warrants
through a public offering, resulting in net proceeds (after
deducting issuance costs) of $3,931,034. The proceeds of the
offering will be used for acquisitions, sales and marketing,
working capital and product development.

-F15-

<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.

HOST AMERICA CORPORATION

By: /s/ GEOFFREY W. RAMSEY
---------------------------------
Geoffrey W. Ramsey
President and Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.

Signature Title Date
- --------- ----- ----

/s/ GEOFFREY W. RAMSEY President, Director, Chief September 28, 1998
- -------------------------- Executive Officer and ------------------
Geoffrey W. Ramsey Principal Financial and
Accounting Officer

/s/ DAVID J. MURPHY Vice President and Director September 28, 1998
- -------------------------- ------------------
David J. Murphy

/s/ ANNE L. RAMSEY Secretary and Director September 28, 1998
- -------------------------- ------------------
Anne L. Ramsey

/s/ THOMAS P. EAGAN, JR. Director September 28, 1998
- -------------------------- ------------------
Thomas P. Eagan, Jr.

/s/ ROBERT C. VAUGHAN Director September 28, 1998
- -------------------------- ------------------
Robert C. Vaughan

/s/ PATRICK J. HEALY Director September 28, 1998
- -------------------------- ------------------
Patrick J. Healy

/s/ JOHN D'ANTONA Director September 28, 1998
- -------------------------- ------------------
John D'Antona

EXHIBIT 10.13

AGREEMENT FOR BANQUET, FOOD AND BEVERAGE SERVICES

This Agreement is made this 3rd day of August, 1998, by and between RivCan
Associates, located at 1063 Hope Street, Stamford, CT 06907 (hereinafter
referred to as RivCan) and Host America Corporation, located at Two
Broadway, Hamden, CT 06518-2697 (hereinafter referred to as Host) for the
provision of managing all food services, excluding vending, at Stamford
Twin Rinks, Stamford, CT.

WITNESSETH

In consideration of the covenants herein and intending to be legally bound
hereby, the parties mutually agree as follows:

RivCan hereby grants to Host America Corporation, an independent
contractor, the exclusive rights and privileges to operate, sell and
dispense food (excluding health juices and energy bars sold by The New York
Health Club), alcoholic beverages, and other such products as are
authorized by RivCan at or upon the Stamford Twin Rinks premises. The menus
will be mutually agreeable to both.

OWNERSHIP OF EQUIPMENT: It is understood that RivCan is the owner of the
building, all food service equipment and furnishings including rugs,
tables, chairs, ceiling fixtures, and cash registers. Host's responsibility
is to provide $20,000 worth of small- wares which will become property of
RivCan after one year. A smallwares list shall be prepared immediately and
be mutually agreed upon. RivCan will provide adequate inventories to be
used in connection with the banquet food and beverage services. Host and
RivCan will take inventory of all owned equipment at the commencement of
this

<PAGE>

contract. Any miscellaneous food service equipment and any other equipment
supplemental to the services that have been supplied by Host shall remain
Host property at all times but cannot be removed from the premises for 30
days after termination of contract. These equipment will be covered by
Host's insurance. These items must be clearly marked with I.D. tags.

MAINTENANCE AND EQUIPMENT: The division of responsibility between RivCan
and Host is hereafter provided.

Host will be responsible for:

a) removal of all trash and garbage and placement of same at the
dumpster;
b) keeping said premises, furniture including tables and chairs,
fixtures, manual food service equipment in a clean and sanitary
condition in accordance with recognized standards for such equipment
and in accordance with all laws, ordinances, regulations and rules of
federal, state and local authorities;
c) routine cleaning of the kitchen, cold storage areas and counter areas;
d) laundry service for kitchen linens (uniforms, kitchen cleaning cloths,
etc.)
e) purchasing of all food and supplies at best possible wholesale or
trade prices and available volume discounts and will be booked at
actual cost.

RivCan will be responsible for:

a) cleaning of the dining area floors, day-to-day cleaning of the dining
area including, walls, ceilings, windows and light fixtures;
b) furnishing exterminator services,
c) semi-annual cleaning of hoods, ducts and filters;
d) furnishing maintenance service if and when required for the proper
maintenance and repairs of said premises, fixtures, furniture and
equipment and replacing equipment as is mutually agreed to be
necessary, except in those cases where the necessity for replacement
is caused through the negligence of Host employees.

<PAGE>

LICENSES AND PERMITS: Host shall obtain, as a cost of operation prior to
commencing operations at RivCan premises, all necessary permits, licenses
and other approvals required by law for its operation hereunder. Host
expects to begin operation on Tuesday, September 8, 1998. RivCan is
responsible for the cost of the liquor permits and will be named as
permitee. RivCan agrees to cooperate with Host and to execute such
documents as shall be reasonably necessary or appropriate to obtain said
permits, licenses and approvals.

UTILITIES: RivCan shall, at its expense, provide Host with necessary and
sufficient refrigeration, freezer space, heat, light, water and electricity
for the food and beverage operations as mutually agreed upon.

RECORDS: Host will at all times maintain an accurate record of all
merchandise inventories and sales in connection with the operation of the
food and beverage service and provide to RivCan monthly operating reports.
All such records shall be kept on file by Host for a period of three years,
and Host shall give RivCan and its agents the privilege, at any reasonable
time, of auditing its records monthly. All sales, for the purpose of this
Agreement, are defined as cash collections less applicable federal, state
and local taxes for such Host has the sole responsibility to collect,
report and pay to the taxing authorities.

INSURANCE: During the term of this Agreement, Host will obtain and keep in
force throughout the term of the agreement Comprehensive Insurance
including Product Liability insurance with limits of $2,000,000.00 per
occurrence/$2,000,000.00 aggregate combined single limit for bodily injury
and property damage.

<PAGE>

INDEMNIFICATION: Host will indemnify and hold RivCan, its employees,
guests, and tenants, harmless from any loss damage or liability arising
directly or indirectly from operations under this Agreement, including
operation of the equipment and acts of omission, commission or negligence
of employees, contractors or agents when engaged in operations under this
Agreement. Any cash shortage over $200.00 in any given month will be
Host's responsibility.

PERSONNEL POLICIES: All food service employees will be on Host payroll.
All persons employed by Host at Stamford Twin Rinks premises shall be
dressed in RivCan approved uniforms at all times. Host employees shall
comply with the rules and regulations at any time promulgated by RivCan for
the safe, orderly and efficient conduct of all activities being carried out
while on RivCan premises.

Host shall not retain at the premises any employee unacceptable to RivCan
for any reason. RivCan will allow employees and agents of Host access to
service areas and equipment at all reasonable times. Host, in performing
work by this Agreement, shall not discriminate against any employee or
applicant for employment because of race, color, creed, national origin,
age, sex or disability. Host employment policies meet the requirements of
the Fair Labor Standards Act and all other regulations required by the
United States Department of Labor. Host is an equal opportunity employer.

FINANCIAL CONSIDERATION: Host agrees to operate the restaurant/sports bar
snack bar and catering at the Stamford Twin Rinks. Please see Addendum for
Model Operating Statement. The Host / RivCan financial relationship is
based on the following:

a. Host will pay a fee of $180.00 per week to RivCan for the Food
Court commencing September 5th, 1998.

<PAGE>

b. Host will pay an additional fee of $625.00 per week to RivCan for
a period of six months commencing when the restaurant/sports bar
is fully operational (including liquor license) or September
24th, whichever is later.

c. After this period, a fee of $5,400.00 per month will be paid by
Host to RivCan.

d. Host America will earn a fixed percentage fee in the amount of
5.5 % of Net Sales.

e. Any excess over 5.5% will be divided 80% to RivCan and 20% to
Host America Corporation .

If expenses exceed sales, Host is solely responsible for the loss. Host
shall be responsible for all cost of operation of the food service, except
for RivCan obligations specified on page two of this Agreement. Host shall
pay for all foodstuffs and materials which are required for providing the
food services described herein, and the wages, salaries and benefits of its
employees engaged to provide such services.

ADJUSTMENT OF FINANCIAL ARRANGEMENT: In the event of material cost changes
(whether taxes, labor, merchandise or equipment), it is understood that
commensurate adjustments in commission percentage or other financial
arrangements between Host and RivCan shall be agreed upon and effected by
appropriate officials of the parties. All obligations hereunder are
subject to federal, state and local regulations. In the event the
premises, in which Host equipment and machines are located, are partially
or completely damaged by fire, the elements, the public enemy, or any other
casualty, or if Host is prevented from operating hereunder because of such
damage or because of riots, labor troubles or disturbances, the same shall
not be considered as a default under the provisions of this Agreement.

<PAGE>

HOURS AND DATES OF OPERATIONS: By mutual agreement

COMMENCEMENT AND TERMINATION: This Agreement shall become effective
August 3rd, 1998 and shall remain in force until August 3rd, 2003. It
shall thereafter renew itself automatically for five-year periods. If
during the contract period either party wishes to withdraw from this
contract, a 90 day written notice will be given. Any notice given
hereunder shall, if to Host, be sent to Geoffrey Ramsey, President, Host
America Corporation, 2 Broadway, Hamden, CT 06518-2697, by registered
mail, and, if to RivCan, be sent to Richard W. Shriner, Jr., Manager,
RivCan Associates, 1063 Hope Street, Stamford, CT 06907 by registered
mail.

STATE LAW DEFINITION: The provisions of this Agreement shall be construed
under the laws of the State of Connecticut.

In witness whereof, the parties have executed this Agreement as of the date
first above written.

ATTEST: RivCan Associates

/s/ By /s/ RICHARD W. SHRINER, JR.
- ------------------------- ----------------------------------
Richard W. Shriner, Jr.
Manager, duly authorized

ATTEST: Host America Corporation

/s/ By /s/ LAWRENCE E. ROSENTHAL
- ------------------------- ----------------------------------
Lawrence E. Rosenthal
Director of Marketing, duly authorized

EXHIBIT 11.1
HOST AMERICA CORPORATION
SCHEDULE OF COMPUTATION OF EARNINGS (LOSS) PER COMMON SHARE

June 28, 1998 June 29, 1997
------------- -------------

Net income (loss) $(3,602,849) $ 86,543
----------- -----------
Net income (loss) for basic earnings
per common share $(3,602,849) $ 86,543
=========== ===========

Weighted average number of common
shares outstanding during the year 130,000 130,000
----------- -----------

Weighted average number of shares
used in calculation of basic earnings
per share 130,000 130,000
=========== ===========

Basic earnings (loss) per common share $ (27.71) $ 0.67
=========== ===========

Earnings per common share is computed using the weighted average number of
shares deemed outstanding as adjusted for the exchange of shares between
entities under common control. There is no difference between basic and
diluted earnings per common share for all periods presented because there are
no dilutive securities.

<ARTICLE> 5
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-28-1998
<PERIOD-END> JUN-28-1998
<CASH> 50
<SECURITIES> 0
<RECEIVABLES> 389
<ALLOWANCES> 8
<INVENTORY> 174
<CURRENT-ASSETS> 1,238
<PP&E> 324
<DEPRECIATION> 84
<TOTAL-ASSETS> 1,563
<CURRENT-LIABILITIES> 1,371
<BONDS> 0
0
1
<COMMON> 0
<OTHER-SE> 25
<TOTAL-LIABILITY-AND-EQUITY> 1,563
<SALES> 7,002
<TOTAL-REVENUES> 7,002
<CGS> 6,393
<TOTAL-COSTS> 6,393
<OTHER-EXPENSES> 4,205
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 21
<INCOME-PRETAX> (3,603)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,597)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,603)
<EPS-PRIMARY> (27.71)
<EPS-DILUTED> (27.71)

</TABLE>