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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20559
FORM 10-KSB/A
(Mark One)
(x) Annual Report Under Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the fiscal year ended December 31, 1999
or
( ) Transition Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
Commission file number 000-22845
CREATIVE HOST SERVICES, INC.
(Exact name of registrant as specified in its charter)
California 33-1069494
(State of Incorporation) (I.R.S. Employer Identification No.)
6335 FERRIS SQUARE, SUITES G-H, SAN DIEGO, CALIFORNIA 92126
(Address of principal executive offices) (Zip Code)
(619) 587-7300
Registrant's telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange On
Title of Each Class Which Registered
COMMON STOCK NASDAQ
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities 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
--- ---
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-KSB or any
amendment to this Form 10-KSB. / /
Revenues for fiscal year 1999 were $18,176,951
The aggregate market value of voting stock held by non-affiliates of
the registrant was $59,896,809 as of March 29, 2000 (computed by reference to
the last sale price of a share of the registrant's Common Stock on that date as
reported by NASDAQ).
There were 5,704,458 shares outstanding of the registrant's Common
Stock as of March 29, 2000.
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concession locations contributed to the higher payroll costs, the Company
expects payroll expenses to increase in total dollar amounts with the addition
of new concession facilities, but to decrease modestly as a percent of revenues
as newly opened facilities operate more efficiently and the Company reaps the
benefits of recently implemented cost control measures. General and
administrative expenses increased from $1,124,556 in 1997 to $1,826,168 in 1998,
and increased as a percentage of total revenues from 11% in 1997 to 12% in 1998.
The increase was attributable primarily to increases in administrative salaries.
The Company will continue to add additional administrative staff commensurate
with its growth but expected general and administrative expenses to continue to
decline as a percentage of total revenues.
INTEREST EXPENSE. Interest expense for the fiscal year ended December
31, 1997 was $205,965 compared to $84,839 for the fiscal year ended December 31,
1998. As a percentage of total revenues, interest expense was 2% in 1997 and
decreased to 1% in 1998 due to capitalization of interest related to concession
improvements.
NET INCOME (LOSS). Net income for the fiscal year ended December 31,
1998 was $480,532 compared to $37,631 for the fiscal year ended December 31,
1997. Operating income increased from $236,955 in 1997 to $581,671 in 1998.
Management attributes the increase in net income to the increase in the number
of operating facilities.
SAME STORE SALES. The Company operated ten locations during both the
full fiscal years ended December 31, 1998 and December 31, 1997. Sales for those
locations were $8,286,842 for the fiscal year ended December 31, 1998 and
$7,651,314 for the fiscal year ended December 31, 1997, representing an increase
of $635,528 or 8.3%.
LIQUIDITY AND CAPITAL RESOURCES
In December 1998 the Company made a private placement of $3,000,000 of
12% Secured Notes due December 21, 2003, the proceeds of which were utilized to
finance the construction and capital improvements for new airport concessions,
and to repay outstanding indebtedness. During 1999 the Company continued to need
additional financing to establish its airport facilities, which was met
primarily with equipment lease financing and two small private placements of
Common Stock to accredited investors only pursuant to which approximately
$467,000 of equity capital was raised. The Company's working capital position
improved in December, 1999 when the holder of $1,495,000 outstanding amount of
12% Secured Notes converted the entire balance held by him into Common Stock at
a rate of $2.625 per share. In January and March, 2000, the remaining $1,505,000
of outstanding 12% Secured Notes were converted into Common Stock at the rate of
$2.625 per share. The exercise of the outstanding warrants that were issued at
the same time as the Notes did not improve the Company's liquidity because they
were exercised on a "cashless" basis, resulting in the issuance of shares
without a capital contribution to the Company. The cashless exercise did,
however, result in less dilution in the outstanding number of shares than if the
warrants had been exercised for cash.
The prior holder of $1,505,000 of notes is also claiming that it is
entitled to the issuance of approximately 106,000 additional warrants to
purchase shares of the Company's Common Stock, as payment of accrued but
unpaid interest in 1999, alleging that an agreement was made for the payment
of such interest by the granting and "cashless" exercise of such warrants.
The prior noteholder is asserting that the exercise price of such warrants
should be $1.25 per share or less. The Company did not grant the warrants
and does not believe that it agreed to grant them. The Company has tendered
approximately $39,000 in cash to the holder as payment of the interest, and
therefore deems the interest paid in full. The Company will vigorously defend
against any claim made by the noteholder for additional shares of its common
stock. There is however, no assurance that the Company will not be obligated
to issue additional warrants or shares as a result of this claim.
The Company's liquidity and working capital improved significantly
commencing in January, 2000 as a result of (a) the exercise of outstanding
warrants to purchase the Company's Common Stock for an exercise price of $5.40
per share, pursuant to which approximately $1,768,500 of capital had been raised
as of March 29, 2000, with approximately 135,000 remaining $5.40 warrants yet to
be exercised as of that date, and (b) the private placement of approximately
240,000 shares of the Company's Common Stock for a price of $5.00 per share,
pursuant to which approximately $1,200,000 of gross capital and approximately
$1,080,000 of net capital had been raised as of March 29, 2000. The Company
ceased the private placement of its Common Stock at $5.00 per share and expects
that the remaining outstanding warrants will be exercised at $5.40 per share,
although there is no assurance as to it or when those warrants will be
exercised. Assuming that the remaining 135,000 warrants with the $5.40 per share
exercise price are exercised, the Company would realize approximately $729,000
of additional capital. While the Company believes that the capital raised from
the private placement of Common Stock and the exercise of the $5.40 warrants
will be adequate to meet facility construction needs in 2000 and eliminate or
substantially reduce the need for equipment lease financing, the Company intends
to seek at least an additional $1,400,000 of equity capital in 2000
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: June 6, 2000 CREATIVE HOST SERVICES, INC.
By: /s/ Sayed Ali
------------------------
Sayed Ali, President
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.
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/s/ Sayed Ali Chairman of the Board and June 6, 2000
---------------------- President
Sayed Ali
/s/ Booker T. Graves Director June 6, 2000
----------------------
Booker T. Graves
/s/ John P. Donohue, Jr. Director June 6, 2000
----------------------
John P. Donohue, Jr.
/s/ Charles B. Radloff Director June 6, 2000
----------------------
Charles B. Radloff
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CREATIVE HOST SERVICES, INC.
INDEX TO EXHIBITS
SEQUENTIALLY
EXHIBIT NO. EXHIBIT NUMBERED PAGE
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27* Financial Data Schedule
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*Previously filed
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