As filed with the Securities and Exchange Commission on November 13, 2000
Registration No. 333-______
-----------
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
CREATIVE HOST SERVICES, INC.
(Exact name of registrant as specified in their charter)
California
(State or other jurisdiction of incorporation or organization of registrant)
33-1069494
(I.R.S. employer identification number)
6335 Ferris Square, Suites G-H
San Diego, California 92126
(619) 587-7300
(Address, including zip code, and telephone number,
including area code, of registrants' principal executive office)
Sayed Ali, President
Creative Host Services, Inc.
6335 Ferris Square, Suite G-H
San Diego, California 92126
(619) 587-7300
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
With copies to:
M. Richard Cutler, Esq.
Cutler Law Group
610 Newport Center Drive, Suite 800
Newport Beach, California 92660
(949) 719-1977
(949) 719-1988 (fax)
Approximate date of commencement of
proposed sale to the public: From time to time
after the effective date of this Registration
Statement.
If any of the securities being registered on this form are to be offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [ ]
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1993, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X] If this Form is
filed to register additional securities for an offering pursuant to Rule
462(b) under the Securities Act, please check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ] _____.
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. Registration No. _______.
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed Maximum Proposed Maximum
Title of Each Class of Amount to be Aggregate Price Aggregate Amount of
Securities to be Registered Registered(1) Per Share(2) Offering Price Registration Fee
<S> <C> <C> <C> <C>
Common Stock.................................... 728,638 $ 5.38 $ 3,920,073 $1,034.90
Common Stock issuable upon exercise of
warrants held by GCA Strategic Investment
Fund Limited.................................. 125,000 $ 6.86 $ 857,500 $ 226.38
- ------------------------------------------------ ================== ===================== =============== ================
Totals 853,638 $ 4,777,573 $1,261.28
================================================ ================== ===================== =============== ================
</TABLE>
(1) This Registration Statement covers shares of the Registrant's Common
Stock being registered for resale on behalf of certain Selling
Securityholders. This Registration Statement registers securities to be
offered pursuant to terms which provide for a change in the amount of
securities being offered or issued to prevent dilution resulting from
stock splits, stock dividends or similar transactions. Pursuant to Rule
416, this Registration Statement shall be deemed to cover the additional
securities to be offered or issued in connection with any such provision.
(2) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(c) based on the closing price of the Company's common stock
on November 10, 2000. The exercise price of the warrants is based upon
the actual exercise price of the warrants.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
Subject to Completion, Dated November 13, 2000
<PAGE>
PROSPECTUS
CREATIVE HOST SERVICES, INC.
[LOGO]
728,638 Shares Common Stock
This Prospectus covers 728,638 shares of the Common Stock, no par
value (the "Common Stock") of Creative Host Services, Inc., a California
corporation ("CHST") held or which may be held upon conversion of certain
convertible debentures by certain individuals and entities (collectively,
the "Selling Securityholders"). We will not receive any of the proceeds from
the sale of securities by the Selling Securityholders.
Our Common Stock is traded on the NASDAQ Small Cap Market under the
symbol "CHST." On November 13, 2000, the last bid price and ask price for the
Common Stock as reported on the NASDAQ Small Cap Market was $5.32 and
$5.50, respectively.
For a discussion of certain factors that should be considered in
connection with an investment in the Company's Common Stock, see "Risk
Factors" beginning on page 3.
-------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
-------------------------
The Selling Securityholders may from time to time sell all or a
portion of the securities offered by this Prospectus in transactions in the
over-the-counter market, in negotiated transactions, or otherwise, at fixed
prices that may be changed, at market prices prevailing at the time of sale,
or at negotiated prices. The Selling Securityholders may effect such
transactions by selling such securities directly to purchasers or through
dealers or agents who may receive compensation in the form of discounts,
concessions or commissions from the Selling Securityholders and/or the
purchasers of the securities for whom they may act as agents.
<PAGE>
ADDITIONAL INFORMATION
This Prospectus is part of a Registration Statement on Form S-3
(together with all amendments and exhibits (the "Registration Statement")
which has been filed by CHST with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "Securities
Act"), relating to the securities offered by this Prospectus. This Prospectus
does not contain all of the information set forth in the Registration
Statement, certain parts of which are omitted in accordance with the rules
and regulations of the Commission. For further information, you may read the
Registration Statement. Statements made in this Prospectus as to the contents
of any contract, agreement or other document referred to in this Prospectus
are not necessarily complete. With respect to each such contract, agreement
or other document filed as an exhibit to the Registration Statement, you may
read the exhibit for a more complete description of the matter involved, and
each such statement shall be deemed qualified in its entirety by such
reference.
We are subject to the informational reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance with the Exchange Act we file reports, proxy and information
statements and other information with the Commission. Such reports, proxy and
information statements and other information, as well as the Registration
Statement and Exhibits of which this Prospectus is a part, filed by us may be
inspected and copied at the public reference facilities of the Commission,
Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, DC 20549, as
well as at the following Regional Offices: 7 World Trade Center, 13th Floor,
New York, New York 10048 and Citicorp Center, 500 West Madison Street--Suite
1400, Chicago, Illinois 60661. You may obtain copies of such material from
the Commission by mail at prescribed rates. You should direct your requests
to the Commission's Public Reference Section, Room 1024, Judiciary Plaza, 450
Fifth Street, N.W., Washington, DC 20549. The Commission maintains a web site
that contains reports, proxies, and information statements regarding
registrants that file electronically with the Commission. The address of the
web site is http://www.sec.gov. Our Common Stock is traded on the Nasdaq Small
Cap Market. Reports and other information concerning us can also be obtained
at the offices of the National Association of Security Dealers, Inc., Market
Listing Section, 1735 K Street, N.W., Washington, D.C., 20006.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
We hereby incorporate by reference into this Prospectus the
following documents previously filed with the Commission:
1. The Company's Annual Report on Form 10-KSB/A for the year ended
December 31, 1999.
2. The Company's Quarterly Report on Form 10-QSB for the quarterly
period ended June 30, 2000.
3. The description of the Company's Common Stock contained in the
Company's Registration Statement on Form SB-2, dated July 22,
1997.
4. The Company's Report on Form 8-K filed on October 25, 2000.
All documents filed by us pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and
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<PAGE>
prior to the termination of this offering are deemed incorporated by
reference in this Prospectus and are a part of this Prospectus from the date
of the filing of such documents. See "Additional Information". Any statement
contained in a document incorporated or deemed to be incorporated in this
Prospectus by reference shall be deemed to be modified or superseded for
purposes of this Prospectus to the extent that a statement contained in this
Prospectus or in any other subsequently filed document which also is or is
deemed to be incorporated by reference in this Prospectus modifies or
supersedes such statement. Any statement so modified or superseded shall not
be deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
We will provide without charge to each person to whom this
Prospectus is delivered, upon request of any such person, a copy of any of
the foregoing documents incorporated in this Prospectus by reference, other
than exhibits to such documents not specifically incorporated by reference.
Written or telephone requests should be directed to our President at our
principal executive offices: Creative Host Services, Inc., 6335 Ferris
Square, Suites G-H, San Diego, California, telephone number (858) 587-7300.
RISK FACTORS
Purchasing shares of Common Stock in Creative Host Services, Inc. is
risky. You should be able to bear a complete loss of your investment. You
should carefully consider the following factors, among others.
Forward-Looking Statements. The following cautionary statements are
made pursuant to the Private Securities Litigation Reform Act of 1995 in
order for CHST to avail itself of the "safe harbor" provisions of that Act.
The discussions and information in this Prospectus including the documents
incorporated by reference may contain both historical and forward-looking
statements. To the extent that the Prospectus contains forward-looking
statements regarding the financial condition, operating results, business
prospects or any other aspect of CHST, please be advised that our actual
financial condition, operating results and business performance may differ
materially from that projected or estimated by us in forward-looking
statements. We have attempted to identify, in context, certain of the factors
that we currently believe may cause actual future experience and results to
differ from our current expectations. The differences may be caused by a
variety of factors, including but not limited to adverse economic conditions,
general decreases in air travel, intense competition, including entry of new
competitors, increased or adverse federal, state and local government
regulation, inadequate capital, unexpected costs, lower revenues and net
income than forecast, loss of airport concession bids or existing locations,
price increases for supplies, inability to raise prices, failure to obtain
new concessions, the risk of litigation and administrative proceedings
involving the Company and its employees, higher than anticipated labor costs,
the possible fluctuation and volatility of the Company's operating results
and financial condition, failure to make planned business acquisitions,
failure of new businesses, if acquired, to be economically successful, decline
in the Company's stock price, adverse publicity and news coverage, inability
to carry out marketing and sales plans, loss of key executives, changes in
interest rates, inflationary factors, and other specific risks that may be
alluded to in this Prospectus or in other reports filed by us.
Need for Additional Capital. We may not have sufficient cash flow
from our current operations to enable us to acquire and build additional
locations at our historic growth rate. We may be required to raise additional
capital in the future
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<PAGE>
to build out capital improvements for any newly awarded concession locations.
We obtained $2,375,000 from the sale of $2,500,000 original principal amount of
7% Convertible Debentures due September 26, 2003 to GCA Strategic Investment
Fund Limited, a selling shareholder in this prospectus, pursuant to Rule 506
of Regulation D of the Securities Act of 1933, as amended. We utilized those
proceeds to acquire Gladco Enterprises, Inc. Failure to secure adequate
capital to bid, win, retain or service concession contracts will hinder our
growth or force us to franchise valuable locations that we would otherwise
prefer to operate directly. In addition, we presently utilize equipment leasing
to finance some of our operations. Additional lease financing with rates
acceptable to us may not be available, in which case we will be required to
raise additional capital or cease our expansion program until such financing
or capital is made available, if ever.
Dependence on Airport Concession Business. We are currently
dependent on the airport concession business for substantially all of our
revenues. We expect such dependence to continue for the foreseeable future.
The concession business is highly competitive and subject to the
uncertainties of the bidding and proposal process. Sophisticated bid packages
and persuasive presentations are required in order to have an opportunity to
win concession contracts at airports and other public venues. While there are
thousands of airport concessions nationwide, the majority of those
concessions are located in the largest 125 airports. Concession business
operators, such as CHST, must maintain their reputations with the various
airport authorities and other government, quasi government and public
agencies in order to remain eligible to win contracts. The terms and
conditions of concession contracts must be carefully analyzed to ensure that
they can be profitable for us. Certain of our locations have incurred and may
in the future incur net operating losses. Because our concession agreements
contain minimum rent guarantees, we are constrained in our ability to
terminate under-performing locations. In addition, the failure of any single
concession could have a material adverse impact on our reputation with
airport authorities generally, and hinder our ability to renew existing
concessions or secure new ones. There is no assurance that we will continue
to be awarded concession contracts by airports or by any other public venue,
that the concession contracts will be profitable, or that we will not lose
contracts that we have been awarded.
Concessions Subject To Set Asides and Special Requirements. Rules
issued by the Federal Aviation Administration ("FAA") require a portion of
airport concession contracts to be awarded to certain classes of entities or
persons designated as disadvantaged business enterprises ("DBEs"). The rules
do not specify the method in which the DBEs must participate, whether through
owning the concession, employment or providing services. Competitors in the
industry have relied on combinations of using DBE employees or vendors to
meet this requirement. Prior to CHST's initial public offering in July 1997,
Mr. Sayed Ali, a native of Pakistan, owned all of the Company's Common Stock,
thereby satisfying FAA rules. As a result of the change in ownership
resulting from the initial public offering and from subsequent private
placements, CHST's status as a DBE is less clear. Certain existing concession
contracts designate CHST as a DBE and may have to be reaffirmed. We believe
that even if Mr. Ali's current equity ownership of CHST is no longer sufficient
to qualify as a DBE, we would be able to maintain all of our contracts and
continue to satisfy DBE rules by hiring or contracting with minority parties
or other entities qualifying as DBEs, if required. However, we have not
discussed with any airport authority the possible impact of our change in
status, nor have we
-4-
<PAGE>
attempted to reaffirm any existing contract. Our status as a DBE assisted us
in securing concessions with several airports. We believe we can continue to
secure new concessions on the basis of the products and services we offer and
our industry reputation. We have secured concessions to operate more than 25
additional locations after our initial public offering and the resultant
dilution of ownership, although we are not aware of the extent to which
CHST's DBE status, or lack thereof, was a factor in the airport authorities'
decisions to award such contracts to us. To the extent that our historic rate
of success in securing new airport concessions was attributable to our status
as a DBE, that growth rate may decline if we are not recognized as a DBE or
if DBE programs are eliminated or curtailed.
Possible Early Termination of Concessions. Certain airport
authorities or airlines that operate concession locations provide in their
concession agreements for the right to reacquire the concession from the
concessionaire upon reimbursement of equipment and build out costs and,
sometimes, a percentage of anticipated profits during the balance of the
concession term. Certain of the Company's significant concession contracts,
including Los Angeles International, Des Moines, Iowa, Columbia, South
Carolina, Cedar Rapids, Iowa, and others, provide for such early termination.
To date, we have not had any of our concessions terminated, and we have not
received notice that any airport authority is contemplating the early
termination of any of our concessions. No assurances can be provided,
however, that these airport authorities will not exercise their contractual
right to early termination of the concession contracts in the future.
Possible Delay in Commencement of Concession Operations. The
commencement of our concession operations at any airport location are subject
to a number of factors which are outside our control, including construction
delays and decisions by airport authorities to delay the opening of
concessions. CHST has, in the past, experienced delays in commencing
operations because of decisions by airport authorities. CHST's franchisee had
completed capital improvements for a facility at the Denver International
Airport, only to have the airport authority close the concourse when a major
airline withdrew its operations from that airport. Consequently, we bear the
risk that after a concession has been awarded, the completion of capital
improvements or the commencement of operations at completed facilities may be
delayed. Any such delay or requirement by an airport authority for us to
construct facilities during peak travel periods would adversely impact our
financial projections and cash flow planning, and may have a material adverse
impact on our financial position.
CHST's Risks Under Prior Note. CHST was obligated to pay the
outstanding original principal amount of $3,000,000 of 12% Secured
Convertible Notes issued on December 21, 1998 (collectively, the "Notes").
The Notes were payable interest only on a monthly basis, with all principal
and accrued but unpaid interest due in full on December 21, 2003. The Note
also contained requirements for maintenance of coverage and cash flow ratios,
as well as other restrictions. During 1999 CHST was in technical default on
certain of those covenants, triggering the accrual of default interest equal
to an additional 3% per annum, raising the overall interest rate on the Note
during that period to 15% per annum. Restrictions in the Note also
contributed to preventing us from submitting bid proposals for three airport
locations that we otherwise would have sought in 1999. The entire outstanding
balance of the Note was converted into shares of the Company's Common Stock
in accordance with its terms in late 1999 and early 2000, and all shares
issued to the Noteholders were registered with the Securities and Exchange
Commission on March 13, 2000, as required by the terms of the Notes. We
tendered the default interest payments to the Noteholders, one of which
accepted the payment with respect to $1,495,000 original principal amount of
Note. The other Noteholder which previously held $1,505,000 original
principal amount of Note has received the default interest payment of
approximately $39,000, but is claiming that we agreed to issue approximately
106,000 warrants to the Noteholder in lieu of the cash payment for default
interest. The Noteholder is claiming that the warrants would entitle it to
purchase our common stock at prices prevailing in October or November of
1999. We vigorously deny the Noteholder's claims and do not believe that we
agreed to issue any warrants to the Noteholder. Nevertheless, there is no
assurance regarding the outcome of the dispute and, if litigation results, we
could incur significant costs.
Risks of Decline in Stock Price. Our stock price has recently been
volatile. Furthermore, the market trading price of our stock could decline or
continue to be volatile because of the eligibility of the Common Stock
covered by this Prospectus to be sold in the open market. This Prospectus
causes the supply of free trading shares to increase substantially. There is
no assurance that the price of our stock on the NASDAQ market will not
decline because of the availability of the Common Stock covered by this
Prospectus for potential sale, and for other reasons. CHST may register more
shares of its stock in the future, potentially increasing the supply of free
trading shares and possibly exerting downward pressure on our stock price.
Risk of Dilution Through Additional Issuances of Shares. We may
issue more shares of our common or preferred stock in the future in order to
raise capital and make acquisitions of other businesses. Outstanding warrants
and stock options may be exercised, causing more dilution in the outstanding
shares of our capital stock. We are generally permitted to issue additional
shares of our capital stock with the approval of our Board of Directors and
without the consent of CHST's shareholders.
Dependence on Key Personnel and Need to Attract Qualified
Management. Our success will depend largely upon CHST's management. While
management has had previous experience in concession and restaurant
operations, there can be no assurance that our operations will be successful.
Sayed Ali, Chairman of the Board, President and Chief Executive Officer of
CHST, entered into a new five-year employment agreement with CHST which
commenced as of January 1, 2000. The new employment agreement provides for an
annual salary for Mr. Ali of $140,000 in 2000, $155,000 in 2001, $171,000 in
2002, $189,000 in 2003 and $208,000 in 2004. Mr. Ali is also entitled to be
granted 60,000 additional stock options, vesting 20,000 upon grant, 20,000 in
January 2001 and 20,000 in January 2002. The exercise price will be 110% of
the fair market value of the stock on the date of grant, and the exercise
period will be three years from the date of vesting. In the event of a loss
of the services of Mr. Ali, CHST could be materially adversely affected
because there is no assurance that CHST could obtain successor management of
equivalent talent and experience.
Risks of Litigation. We are and may in the future become subject to
litigation that could have a material adverse impact on our operating results
and financial condition. Besides the threat of litigation from one of our
former lenders regarding warrants (see "Risk Factors--CHST's Risks Under
Prior Note"), CHST and Sayed Ali have been named as defendants in lawsuits
for breach of contract and related claims by Amplicon Financial Company, a
prior lessor of equipment to CHST. Amplicon is claiming that additional
payments are due to it under an equipment lease, while we believe that we
terminated the lease. CHST and Mr. Ali, who purportedly executed a personal
guarantee of the lease, intend to vigorously defend against Amplicon's
claims. We have also been served with litigation relating to a claim for
additional warrants to purchase our Common Stock from an investor relations
firm alleging that in early 1998 we entered into a consulting agreement with
it. We do not believe that the firm provided any services for us and we intend
to defend the claim. We have provided up to $106,000 in reserves against our
pending litigation. There is no assurance regarding the outcome of these
threatened and pending lawsuits.
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<PAGE>
CHST has obtained a $1,000,000 key man policy on Mr. Ali which CHST owns.
Given our stage of development, we are dependent upon our ability to
identify, hire, train, retain and motivate highly qualified personnel,
especially management personnel which will be required to supervise our
expansion into various geographic areas. There can be no assurance that we
will be able to attract qualified personnel or that our current employees
will continue to work for us. The failure to attract, assimilate and train
key personnel could have a material adverse effect on our business, financial
condition and results of operations.
Highly Competitive Industry Dominated by Larger Competitors. We
compete with certain national and several regional companies to obtain the
rights from airport and other authorities to operate food, beverage, news,
gift, merchandise and inflight catering concessions. The airport concession
market is principally serviced by several companies which are significantly
larger than CHST, including, but not limited to, Host Marriott Services,
Inc., CA One Services, Concessions International, and Ogden Food Services.
Each of these well established competitors possesses substantially greater
financial, marketing, administrative and other resources than CHST. Many of
our competitors have achieved significant brand name and product recognition.
They engage in extensive advertising and promotional programs, both generally
and in response to efforts by additional competitors to enter new markets or
introduce new products. There can be no assurance that we will be able to
compete successfully in our chosen markets.
Dependence Upon Continuing Approvals from Government Regulatory
Authorities. The food and beverage service industry is subject to various
federal, state and local government regulations, including those related to
health, safety, wages and working conditions. While CHST has not experienced
difficulties in obtaining necessary government approvals to date, the failure
to obtain and retain food licenses or any other governmental approvals could
have a material adverse effect on the Company's operating results. Moreover,
our failure to meet government regulations could result in the temporary
closure of one or more of our concession facilities, restaurants or the food
preparation center, any of which would have a material adverse impact on our
financial condition and result of operations. In addition, operating costs
are affected by increases in the minimum hourly wage, unemployment tax rates,
sales taxes and similar matters over which we have no control. We are also
subject to federal and state laws, rules and regulations that govern the
offer and sale of franchises.
No Assurance of Enforceability of Trademarks. We utilize trademarks
in our business and have registered our Creative Croissants(R) trademark.
While we intend to file federal trademark registrations for certain of our
other trademarks, we have not yet done so. There can be no assurance that we
will be granted registration for such trademarks or that our trademarks do
not or will not violate the proprietary rights of others, that our trademarks
would be upheld if challenged or that we will not be prevented from using our
trademarks, any of which could have a material adverse effect on us. Should
we believe that our trademarks are being infringed upon by competitors, there
can be no assurance that we will have the financial resources necessary to
enforce or defend our trademarks and service marks.
Seasonality. Because our airport concession business is
dependent on pedestrian traffic at domestic airports, we experience
some seasonality consistent with enplanements and general air traffic patterns.
Accordingly, our revenues and income are generally expected to be
lowest in the first quarter of the year and become progressively stronger
through the fourth quarter, which includes the holiday travel periods.
Control by Principal Shareholder. The principal shareholder of the
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<PAGE>
Company, Mr. Sayed Ali, beneficially owns approximately 20% of the
outstanding shares of capital stock of CHST. Accordingly, Mr. Ali has
significant influence over the outcome of all matters submitted to the
shareholders for approval, including the election of directors of the Company.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the shares
offered by the Selling Securityholders.
SELLING SECURITYHOLDERS
The shares of Common Stock being offered by the Selling
Securityholders were issued to them in connection with the following
transactions:
- The Company sold approximately $2,500,000 in 7% Convertible
Debentures due September 26, 2003 (the "Debentures") to GCA Strategic Investment
Fund Limited. The purchase price of the Debentures was 9% of the principal
amount, or $2,375,000. The Debentures are convertible at the lower of 110% of
the volume weighted average sales price of the Company's common stock on the day
immediately preceding closing or 85% of the five lowest volume weighted average
sales prices of the Company's common stock during the 25 days immediately
preceding the date of a notice of conversion. We are registering in this
registration statement a total of 150% of the number of shares into which we
estimate the Debentures would be converted if they were converted at the current
market price.
- The Company also issued to GCA Strategic Investment Fund 125,000
warrants to purchase the Company's common stock at an exercise price of 102% of
the closing bid price on the day immediately preceding the Closing Date. That
exercise price is $6.86 per share.
- We are registering a total of 69,638 shares for four selling
shareholders who received these shares as a portion of the purchase price of
Gladco Enterprises, Inc. We had agreed to register those shares in the purchase
agreement for Gladco.
- We are registering a total of 34,000 shares to three selling
shareholders who received these shares as consideration for legal and consulting
services performed for the company.
The following tables set forth certain information with respect to
each Selling Securityholder for whom we are registering securities for resale
to the public. Beneficial ownership of the Common Stock by such Selling
Securityholders after this offering will depend on the number of shares of
Common Stock sold by each Selling Securityholder.
The following Selling Securityholders own outstanding shares of Common Stock:
<TABLE>
<CAPTION>
NUMBER OF OUTSTANDING SHARES OFFERED
NAME OF SELLING SECURITYHOLDER BY THIS PROSPECTUS
- ------------------------------ ------------------------------------
<S> <C>
GCA Strategic Investment Fund Limited (upon conversion of debentures) 625,000
Virgil A. Gladieux Marital Trust (Gladco acquisition) 29,944
Louis Coccoli, Jr. (Gladco acquisition) 29,944
Edwin L. Klett (Gladco acquisition) 6,964
Herbert H. Gill (Gladco acquisition) 2,786
David I. Lefkowitz 20,000
Mark M. Rickoff 10,000
Cutler Law Group 4,000
</TABLE>
The following Selling Securityholders hold Warrants and therefore
have the right to acquire the number of shares indicated below:
<TABLE>
<CAPTION>
NUMBER OF SHARES
ISSUABLE UPON EXERCISE
NAME OF SELLING SECURITYHOLDER OF WARRANTS
- ------------------------------ ---------------------------
<S> <C>
GCA Strategic Investment Fund Limited (upon exercise of warrants) 125,000
</TABLE>
PLAN OF DISTRIBUTION
Sales of the shares of Common Stock by the Selling Securityholders
may be effected from time to time in transactions (which may include block
transactions) in the over-the-counter market, in negotiated transactions,
through the writing of options on the Common Stock or a combination of such
methods of sale, at fixed prices that may be changed, at market prices
prevailing at the time of sale, or at negotiated prices. The Selling
Securityholders may effect such transactions by selling the shares of Common
Stock directly to purchasers or through broker-dealers that may act as agents
or principals. Such broker-dealers may receive compensation in the form of
discounts, concessions or commissions from the Selling Securityholders and/or
the purchasers of shares of Common Stock for whom such broker-dealers may
act as agents or to whom they sell as principals, or both. Such compensation
as to a particular broker-dealer
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<PAGE>
might be in excess of customary commissions.
The Selling Securityholders and any broker-dealers that act in
connection with the sale of the shares of Common Stock as principals may be
deemed to be "underwriters" within the meaning of Section 2(11) of the
Securities Act. Any commissions received by them and any profit on the resale
of the shares of Common Stock earned by them as principals might be deemed
to be underwriting discounts and commissions under the Securities Act. The
Selling Securityholders may agree to indemnify any agent, dealer or
broker-dealer that participates in transactions involving sales of the shares
of Common Stock against certain liabilities, including liabilities under the
Securities Act. The Company will not receive any proceeds from the sale of
the shares of Common Stock.
The shares of Common Stock are offered by the Selling
Securityholders on a delayed or continuous basis pursuant to Rule 415 under
the Securities Act. We have agreed to pay all expenses incurred in connection
with the registration of the shares offered by the Selling Securityholders
except that the Selling Securityholders are exclusively liable to pay all
commissions, discounts and other payments to broker-dealers incurred in
connection with their sale of Common Stock.
LIMITATION ON LIABILITY AND INDEMNIFICATION OF DIRECTORS
Under the California Corporations Code and CHST's Amended and
Restated Articles of Incorporation, our directors will have no personal
liability to CHST or its shareholders for monetary damages incurred as the
result of the breach or alleged breach by a director of his "duty of care".
This provision does not apply to the directors' (i) acts or omissions that
involve intentional misconduct or a knowing and culpable violation of law,
(ii) acts or omissions that a director believes to be contrary to the best
interests of the corporation or its shareholders or that involve the absence
of good faith on the part of the director, (iii) approval of any transaction
from which a director derives an improper personal benefit, (iv) acts or
omissions that show a reckless disregard for the director's duty to the
corporation or its shareholders in circumstances in which the director was
aware, or should have been aware, in the ordinary course of performing a
director's duties, of a risk of serious injury to the corporation or its
shareholders, (v) acts or omissions that constitute an unexcused pattern of
inattention that amounts to an abdication of the director's duty to the
corporation or its shareholders, or (vi) approval of an unlawful dividend,
distribution, stock repurchase or redemption. This provision would generally
absolve directors of personal liability for negligence in the performance of
duties, including gross negligence.
The effect of this provision in CHST's Amended and Restated Articles
of Incorporation is to eliminate the rights of CHST and its shareholders
(through shareholder's derivative suits on behalf of CHST) to recover
monetary damages against a director for breach of his fiduciary duty of care
as a director (including breaches resulting from negligent or grossly
negligent behavior) except in the situations described in clauses (i) through
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<PAGE>
(vi) above. This provision does not limit nor eliminate the rights of CHST or
any shareholder to seek non-monetary relief such as an injunction or
rescission in the event of a breach of a director's duty of care. In
addition, CHST's Restated Articles of Incorporation provide that if
California law is amended to authorize the future elimination or limitation
of the liability of a director, then the liability of the directors will be
eliminated or limited to the fullest extent permitted by the law, as amended.
The California Corporations Code grants corporations the right to indemnify
their directors, officers, employees and agents in accordance with applicable
law. CHST's Bylaws provide for indemnification of such persons to the full
extent allowable under applicable law.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers or persons controlling
CHST pursuant to the foregoing provisions, CHST has been informed that in the
opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Act and is therefore unenforceable.
LEGAL MATTERS
The validity of the Common Stock being offered hereby will be passed
upon by Cutler Law Group, 610 Newport Center Drive, Suite 800, Newport Beach
California 92660. Cutler Law Group owns 4,000 shares of the Company's Common
Stock, all of which are covered by this Prospectus.
EXPERTS
The financial statements and the related supplemental schedules
incorporated in this Prospectus by reference from CHST's Annual Report on
Form 10-KSB/A for the year ended December 31, 1999 have been audited by
Stonefield Josephson, independent certified public accountants, as set forth
in their report appearing with the financial statements, and have been so
included in reliance upon the report of such firm given upon their authority
as experts in accounting and auditing.
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<PAGE>
No dealer, salesman or any other person
has been authorized by CHST to
give any information or to make any
representations other than those
contained in this Prospectus in
connection with the offering made
hereby, and if given or made, such
information or representations may not
be relied upon. The Prospectus does not
constitute an offer to sell or the CREATIVE HOST SERVICES, INC.
solicitation of an offer to buy any
securities other than those specifically [LOGO]
offered hereby or an offer to sell, or a
solicitation of an offer to buy, to any
person in any jurisdiction in which such
offer or sale would be unlawful. Neither
the delivery of this Prospectus nor any
sale made hereunder shall under any
circumstances create any implication
that there has been no change in the
affairs of CHST since the dates as of
which information is furnished or
since the date of this Prospectus.
----------------- -------------------------
PROSPECTUS
-------------------------
TABLE OF CONTENTS
Page
ADDITIONAL INFORMATION..................2
INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE...............................2
RISK FACTORS............................3
USE OF PROCEEDS.........................7
SELLING SHAREHOLDERS....................7 November 13, 2000
PLAN OF DISTRIBUTION....................7
LIMITATION ON LIABILITY AND
INDEMNIFICATION OF DIRECTORS............8
LEGAL MATTERS...........................9
EXPERTS ...............................9
======================================== =======================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. Other Expenses Of Issuance And Distribution
The following table sets forth the expenses, other than any
underwriting discounts or commissions, payable in connection with the
distribution of the shares being registered. All expenses incurred are in
connection with the registration. All amounts shown are estimates except for
the SEC registration fee.
SEC Registration Fee $ 1,261.28
NASDAQ Listing Fee $ 0.00
Blue Sky Fees and Expenses $ 0.00
Printing and Engraving Expenses $ 500.00
Accounting Fees and Expenses $ 2,000.00
Legal Fees and Expenses $ 15,000.00
Registerar and Transfer Agent's Fees
and Expenses $ 500.00
Miscellaneous Expenses $ 238.72
------------
Total $ 19,500.00
============
ITEM 15. Indemnification Of Directors And Officers
Under the California Corporations Code and the Company's Amended and
Restated Articles of Incorporation, the Company's directors will have no
personal liability to the Company or its shareholders for monetary damages
incurred as the result of the breach or alleged breach by a director of his
"duty of care". This provision does not apply to the directors' (i) acts or
omissions that involve intentional misconduct or a knowing and culpable
violation of law, (ii) acts or omissions that a director believes to be contrary
to the best interests of the corporation or its shareholders or that involve the
absence of good faith on the part of the director, (iii) approval of any
transaction from which a director derives an improper personal benefit, (iv)
acts or omissions that show a reckless disregard for the director's duty to the
corporation or its shareholders in circumstances in which the director was
aware, or should have been aware, in the ordinary course of performing a
director's duties, of a risk of serious injury to the corporation or its
shareholders, (v) acts or omissions that constitute an unexcused pattern of
inattention that amounts to an abdication of the director's duty to the
corporation or its shareholders, or (vi) approval of an unlawful dividend,
distribution, stock repurchase or redemption. This provision would generally
absolve directors of personal liability for negligence in the performance of
duties, including gross negligence.
The effect of this provision in the Company's Amended and Restated
Articles of Incorporation is to eliminate the rights of the Company and its
shareholders (through shareholder's derivative suits on behalf of the Company)
to recover monetary damages against a director for breach of his fiduciary duty
of care as a director (including breaches resulting from negligent or grossly
negligent behavior) except in the situations described in clauses (i) through
(vi) above. This provision does not limit nor eliminate the rights of the
Company or any shareholder to seek non-monetary relief such as an injunction or
rescission in the event of a breach of a director's duty of care. In addition,
the Company's Restated Articles of Incorporation provide that if California law
is amended to authorize the future elimination or limitation of the liability of
a director, then the liability of the directors will be eliminated or limited to
the fullest extent permitted by the law, as amended. The California Corporations
Code grants corporations the right to indemnify their directors, officers,
employees and agents in accordance with applicable law. The Company's Bylaws
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<PAGE>
provide for indemnification of such persons to the full extent allowable under
applicable law. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers or persons controlling
the Company pursuant to the foregoing provisions, the Company has been informed
that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Act and is
therefore unenforceable.
ITEM 16. Exhibits
4.1 Specimen Certificate for Common Stock(1)
4.2 Warrant for $16.00 Warrant (Warrant Certificate)(3)
4.3 Warrant for $5.40 Warrant (Warrant Certificate)(2)
4.4 Warrant for $3.03 Warrant (Warrant Certificate)(3)
4.5 Warrant for $16.00 Warrant (Warrant Certificate) (4)
4.6 Warrant for $11.00 Warrant (Warrant Certificate) (4)
4.7 Securities Purchase Agreement, dated as of September 26,
2000, between Creative Host Services, Inc. and GCA Strategic
Investment Fund Limited (5)
4.8 Convertible Debenture, dated as of September 26, 2000,
issued by Creative Host Services, Inc. to GCA Strategic
Investment Fund Limited (5)
4.9 Warrant, dated as of September 26, 2000, issued by Creative
Host Services, Inc. to GCA Strategic Investment Fund
Limited (5)
4.10 Registration Rights Agreement, dated as of September 26,
2000, between Creative Host Services, Inc. and GCA Strategic
Investment Fund Limited (5)
4.11 Escrow Agreement, dated as of September 26, 2000, between
Creative Host Services, Inc., GCA Strategic Investment Fund
Limited and The Law Offices of Kim T. Stephens (5)
5.1 Opinion of Cutler Law Group
23.1 Consent of Cutler Law Group (contained in Exhibit 5)
23.2 Consent of Stonefield Josephson, independent accountants
24 Power of Attorney (contained on signature page)
- ------------------
(1) Incorporated by reference from the exhibits included with the Company's
Annual Report under Section 13 or 15(d) of the Securities Exchange Act
of 1934 on Form 10-KSB filed with the SEC for fiscal year ended
December 31, 1997.
(2) Incorporated by reference from Exhibits included with the
Company's Registration Statement on Form S-1 declared effective by
the SEC on July 21, 1997.
(3) Incorporated by reference from Exhibits included with the Company's
Registration Statement on Form S-3 filed with the SEC on June 7, 2000.
(4) Incorporated by reference from Exhibits included with the Company's
Registration Statement on Form S-3 filed with the SEC on July 7, 2000.
(5) Incorporated by reference from Exhibits included with the Company's
Form 8-K filed with the SEC on October 25, 2000.
ITEM 17. Undertakings
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually
or in the aggregate, represent a fundamental change in the
information set forth in the registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration
Statement or any material change to such information in the
registration statement;
provided, however, that paragraphs (i) and (ii) do not apply if the
information required to be included in a post-effective amendment by
those paragraphs is contained in the periodic reports filed by the
Registrant pursuant to Section 13 or Section 15(d) of the Exchange Act
that are incorporated by reference in the registration statement.
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<PAGE>
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the
termination of the offering.
(4) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the Registrant's annual report pursuant to
Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934
that is incorporated by reference in the registration statement shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the indemnification provisions described
under Item 15, or otherwise, the Registrant has been advised that in the opinion
of the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
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<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned thereto duly authorized,
in the City of San Diego, State of California, on November 13, 2000.
CREATIVE HOST SERVICES, INC.
By: /s/ SAYED ALI
-----------------------------------
Sayed Ali, President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Sayed Ali, his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place, and stead, in any and all capacities, to sign
any and all amendments (including post-effective amendments) to this
Registration Statement, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as he or she might
or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirement 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/ SAYED ALI President, Chief Financial November 13, 2000
- ------------------------------ Officer and Director
Sayed Ali
/s/ BOOKER T. GRAVES Director November 13, 2000
- ------------------------------
Booker T. Graves
/s/ JOHN P. DONOHUE, JR. Director November 13, 2000
- ------------------------------
John P. Donohue, Jr.
/s/ CHARLES B. RADLOFF Director November 13, 2000
- ------------------------------
Charles B. Radloff
II-4
