                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K

(MARK ONE)

[X]  ANNUAL  REPORT PURSUANT TO SECTION 13 OR 15(d)
     OF THE  SECURITIES  EXCHANGE ACT OF  1934 (Fee  required)

     For Fiscal year ended June 30, 2004
                                       OR
[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 or 15(D)
     OF THE SECURITIES EXCHANGE ACT OF 1934 (No fee required)

     (NO FEE REQUIRED)

                  For the transition period from _____ to _____

                         Commission file Number 0-19824
                      NUTRITION MANAGEMENT SERVICES COMPANY
             (Exact name of registrant as specified in its charter)

       Pennsylvania                                        23-2095332
(State or other jurisdiction of                (IRS Employer Identification No.)
incorporation or organization)

                725 Kimberton Road, Kimberton, Pennsylvania 19442
                -------------------------------------------------
    (Address of principal executive office)                (Zip Code)

Registrant's  telephone  number,  including  area  code:  610-935-2050
                                                          ------------

           Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
  Title of Each Class  on Which Registered
  -------------------  -------------------

                                      None

          Securities registered pursuant to Section 12(g) of the Act:
  Title of Each Class
  -------------------

Share of Class A Common Stock (no par value)

                            (COVER PAGE 1 OF 2 PAGES)





Indicate by checkmark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchanges 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 the 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]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2).    YES:        NO  X
                                             ---       ---

The aggregate  market value of voting stock (Class A Common Stock, no par value)
held by  non-affiliates of the Registrant as of March 31, 2004 was approximately
$205,576.

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: At December 7, 2004, there was
outstanding 2,494,000 share of the Registrant's Class A Common Stock, no par
value, and 100,000 shares of the Registrant's Class B Common Stock, no par
value.


DOCUMENTS INCORPORATED BY REFERENCE
-----------------------------------

The information required by Part III for Form 10-K will be incorporated by
reference to certain portions of a definitive proxy statement which is expected
to be filed by the Registrant pursuant to Regulation 14A within 120 days after
the close of its fiscal year.

This report consists of consecutively numbered pages (inclusive of all exhibits
and including this cover page). The Exhibit Index appears on page 21.


                            (COVER PAGE 2 OF 2 PAGES)





PART I

ITEM 1 - BUSINESS

GENERAL

Nutrition  Management  Services  Company  (the  "Company"  or the  "Registrant")
provides food management  services to continuing care facilities,  hospitals and
retirement communities.

The Company was incorporated  under the laws of the Commonwealth of Pennsylvania
on March 28, 1979, and focuses on the continuing care and  health-care  segments
of the food service market.  Its customers  include  continuing care facilities,
hospitals, and retirement communities.

On May 31, 1994, the Company purchased  twenty-two (22) acres of land containing
a  40,000  square  foot  building  formerly  used as a  restaurant  and  banquet
facility.  The  Company  renovated  the  property  to serve  as a  comprehensive
training facility for Company employees.  In addition,  the facility serves as a
showroom for  prospective  customers who can observe the Company's  programs for
nursing  and  retirement  home  dining and  hospital  cafeteria  operations.  In
September  1997,  the  Company  opened  the  retail  restaurant  portion  of the
Collegeville  Inn Conference & Training  Center.  In connection  therewith,  the
Company  expended  approximately  $6,000,000  in  renovation  work  through  the
issuance of two twenty-year bonds dated December 1996 and working  capital.  The
Company  opened the banquet and training  division  during its second quarter of
fiscal year 1998.  The  remaining  division of the  project  was  available  for
operations in the third quarter of fiscal 2000. On September 8, 2004 the Company
entered into an agreement of sale for the land adjacent to its  Collegeville Inn
Conference & Training Center.  The agreement  provides for an initial deposit of
$10,000 within ten days of the effective date of the agreement,  with additional
deposits of $50,000 and $25,000  payable to the Company upon the  occurrence  of
certain events,  including,  but not limited to, zoning approvals.  The deposits
are non-refundable upon the end of a 120-day inspection period,  which commenced
on the date the Buyer  received a fully  executed  original of the  agreement of
sale.  Pursuant to the terms of the  agreement of sale,  the Company may realize
gross  proceeds of not less than  $1,710,000.  However,  the Company may realize
gross  proceeds in excess of  $1,710,000,  if the buyer is able to maximize  the
yield of the property.  The agreement of sale  provides  that  settlement  occur
within twenty-four months of the date of the agreement, however, upon payment of
additional  deposits,  settlement  may be extended an additional  twelve months.
Upon  closing of the  transaction,  the Company  plans on using the  proceeds to
retire a proportional  amount of outstanding  debt associated with the parcel of
land.  There can be no assurance that the sale of this land will be completed in
accordance with the terms of the agreement of sale.

                                        1




The Company realizes that in order to reduce continuing  operating losses it may
have to  dispose of certain  assets,  including  its  research  and  development
facility,  the Collegeville  Inn Conference and Training Center.  The Company is
exploring  all  reasonable   alternatives  to  improve  its  operating  results,
including  but not limited to,  increasing  food service  revenues with targeted
marketing efforts, increasing revenues from the sale of the Company's Cook Chill
products,  the sale or lease of all or part of the  Collegeville  Inn Conference
and Training Center,  sale of excess land at the Collegeville Inn Conference and
Training Center and reduction of operating  expenses.  There can be no assurance
as to the success of any or all of these alternatives.

Financial Information About Industry Segments

See Note P on page F-19 of the Consolidated Financial Statements.

Description of Services

The Company  provides  contract  food  service to  continuing  care  facilities,
hospitals, and retirement communities.  The Company provides complete management
and supervision of the dietary  operations in its customers'  facilities through
the use of on-site  management  staff,  quality and cost-control  programs,  and
training and education of dietary staff. The Company's operational districts are
supported by Regional  Managers,  District Managers,  Registered  Dietitians and
Quality Assurance staff.

The  Company  seeks to provide  food  service at a lower cost than  self-managed
facilities,  while maintaining or improving  existing service,  nutritional care
standards and regulatory compliance.

Marketing and Sales

The  Company's  customers  include  continuing  care  facilities,  hospitals and
retirement communities,  which range in size from small individual facilities to
large multi-facility operations. Although many facilities perform their own food
service  functions  without  relying upon outside  management  firms such as the
Company,  the Company  expects the market for its services to grow as facilities
increasingly  seek to contain  costs and are  required to comply with  increased
governmental regulations.

The  Company's  services  are  marketed  at the  corporate  level  by its  Chief
Executive  Officer,  its  President,  and  its  Marketing  Representatives.  The
Company's  services are marketed  primarily  through  in-person  solicitation of
facilities.  The Company also utilizes direct mail and  participates in industry
trade shows.


                                        2




Market for Services

The market for the Company's  services  consists of a large number of facilities
involved  in various  aspects of the  continuing  care and health  care  fields,
including nursing homes,  retirement  communities,  hospitals and rehabilitation
centers.  Such  facilities  may be specialized  or general,  privately  owned or
publicly  traded,  for  profit or  not-for-profit  and may serve  residents  and
patients on a continuing or short-term basis.

Service Agreements

The Company provides its services under several different financial arrangements
including  a fee basis and  profit  and loss  basis.  As of June 30,  2004,  the
Company provided services under various service agreements at 67 facilities.  At
certain of these  facilities,  the  Company  has  contracts  to provide  vending
services and  housekeeping  services in addition to the contract to provide food
services.  Most of these  contracts  have one year  terms and are  automatically
renewable at the end of each service year. The agreements generally provide that
either party may cancel the agreement upon ninety (90) days written notice.

In consideration  for providing its services,  the Company expects to be paid by
its clients in accordance  with the credit terms agreed upon which range from 30
days to 90 days.

Major Customer

The Company  had sales to one  customer,  Hebrew  Hospital  Homes,  representing
approximately  28%,  26% and 15% of total  revenues for the years ended June 30,
2004,  2003 and  2002,  respectively.  The loss of this  customer  could  have a
material adverse effect on the Company's future results of operations.

Competition

The Company  competes mainly with regional and national food service  management
companies  operating in the continuing care and health care industries,  as well
as with the self managed departments of its potential clients.

Although the  competition  to service these  facilities is intense,  the Company
believes that it competes effectively for new agreements as well as for renewals
of existing agreements based upon the quality and dependability of its services.
The  Company's  ability  to compete  successfully  depends  upon its  ability to
maintain and improve  quality,  service and  reliability,  to attract and retain
qualified  employees  and to  continue  to  expand  its  marketing  and  service
activities.

                                        3




Employees

At June 30, 2004, the Company employed a total of  approximately  370 employees.
Approximately  190 of those  employees serve in various  executive,  management,
administrative,  quality  assurance  and sales  capacities.  The  remaining  180
employees  are  primarily  dietary  and  housekeeping   workers.   Approximately
twenty-three (23%) percent of the Company's dietary and housekeeping workers are
covered  by  a  collective  bargaining   agreement.   The  Company's  collective
bargaining  agreement  commenced  in 2003 and ends in 2006.  The  Company  makes
contributions  to the  union's  benefits  funds as  required  by the  collective
bargaining agreement. The Company considers relationships with its employees and
unions to be satisfactory.

Purchasing

For the years ending June 30,  2004,  2003 and 2002,  respectively,  the Company
purchased  34%, 23% and 24% of its food and non-food  products  from one vendor,
respectively.  While the Company maintains a good relationship with this vendor,
in the event of a disruption in the Company's  relationship  with this vendor or
any disruption in the vendor's  business,  the Company has alternate  sources of
supply for its food and non-food products.

Financial Information About Foreign and Domestic Operations and Export Sales

Not applicable.

ITEM 2 - PROPERTIES

The  Company  leases  its  corporate  offices,  located at 725  Kimberton  Road,
Kimberton, Pennsylvania 19442, which consists of approximately 8,500 square feet
from Ocean 7, Inc., a corporation  controlled by the Chief Executive  Officer of
the  Company.  The  initial  term of the  lease  expired  on June  30,  2003 and
continues on a  month-to-month  lease based on terms generally  similar to those
prevailing  to unrelated  parties.  During the three years ending June 30, 2004,
2003 and 2002,  the  Company  paid the  related  entity  rent in the  amounts of
$273,043, $255,587 and $242,252,  respectively.  The Company leases an apartment
from a corporation controlled by a related party to accommodate visiting clients
and employees.

In  addition,  the Company is provided  with office  space at each of its client
facilities.


                                        4




The  Company  owns  approximately  twenty-two  acres  of land  in  Collegeville,
Pennsylvania,  upon  which  construction  was  completed  in 1997.  The  Company
renovated  an  existing  40,000  square  foot  building  to serve as a  training
facility and conference center. On September 8, 2004 the Company entered into an
agreement of sale for the land adjacent to its  Collegeville  Inn facility.  The
agreement provides for the initial deposit within ten days of the effective date
of  the  agreement,  with  additional  deposits  due  to the  Company  upon  the
occurrence of certain events,  including,  but not limited to, zoning approvals.
Pursuant to the terms of the  agreement of sale,  the Company may realize  gross
proceeds of not less than  $1,710,000.  However,  the Company may realize  gross
proceeds in excess of $1,710,000,  if the buyer is able to maximize the yield of
the property.

The Company presently owns food service equipment,  computers, office furniture,
and equipment,  automobiles and trucks.  Management believes that all properties
and  equipment  are  sufficient  for  the  conduct  of  the  Company's   current
operations.

ITEM 3 - LEGAL PROCEEDINGS

On February  7, 2001,  the Company  filed a suit  against a major  client in the
Court  of  Common  Pleas  in  Chester  County,   Pennsylvania.   This  suit  has
subsequently  been removed to the United States  District  Court for the Eastern
District  of  Pennsylvania.  In the  lawsuit,  the Company made various  claims,
including among others a claim that the client failed to pay approximately  $2.1
million in invoiced amounts, a claim that the client failed to pay approximately
$1 million in other amounts owing, a claim for  reimbursement for start up costs
in an amount in excess of $400,000,  a claim for over $2 million in lost profits
(or,  alternatively,  a claim for  reimbursement  for over  $300,000  in credits
issued in exchange  for the promise to extend the  arrangement),  a claim in the
nature of treble  damages and counsel  fees,  and other  claims.  The client has
filed a  counterclaim  which the  Company is  contesting  as part of the overall
proceedings. The case is currently listed for trial in early 2005.

The Company is involved in litigation with two separate construction contractors
related to the renovations of Collegeville  Inn Conference and Training  Center.
The Company denies its liability for each claim and has asserted offsets against
the amounts claimed. One case is listed for trial in early 2005, while the other
case is in discovery.

Although  it is not  possible  to predict  with  certainty  the outcome of these
unresolved legal actions or the range of possible loss or recovery,  the Company
believes these  unresolved  legal actions will not have a material effect on its
financial  position or results of  operations.

                                       5




In  addition  to the  litigation  described  above,  the  Company  is exposed to
asserted and unasserted claims in the normal course of business.  In the opinion
of management,  the resolution of these matters will not have a material adverse
effect on the Company's financial position, results of operations or cash flows.

ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not applicable.

PART II
ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The Company's Class A Common Stock No Par Value, (the "Class A Common Stock") is
traded on the OTC  Bulletin  Board  (Ticker  Symbol -  NMSCA.OB)  and is a penny
stock.  Securities and Exchange Commission  regulations generally define a penny
stock to be an equity  security  that is not  listed  on  NASDAQ  or a  national
securities  exchange  and that has a market  price of less than $5.00 per share,
subject to certain  exceptions.  The  regulations of the Securities and Exchange
Commission  require  broker-dealers  to deliver to a purchaser of the  Company's
Class A Common Stock a disclosure schedule explaining the penny stock market and
the risks  associated  with it.  Various sales  practice  requirements  are also
imposed  on  broker-dealers   who  sell  penny  stocks  to  persons  other  than
established  customers and accredited  investors  (generally  institutions).  In
addition,  broker-dealers  must provide the customer  with current bid and offer
quotations for the penny stock,  the compensation of the  broker-dealer  and its
salesperson in the transaction and monthly account statements showing the market
value of each penny stock held in the customer's account.


                                        6




The following  table shows the range of high and low bid  quotations as reported
by OTC Bulletin  Board for the quarters  ending during the last two fiscal years
for the Class A Common Stock:

                  Fiscal 2004             High            Low
                  --------------          ----            ---
                  Fourth Quarter          $1.15           $0.22
                  Third Quarter            0.22            0.20
                  Second Quarter           0.21            0.20
                  First Quarter            0.21            0.20

                  Fiscal 2003             High            Low
                  -----------             ----            ---
                  Fourth Quarter          $0.30           $0.20
                  Third Quarter            0.20            0.20
                  Second Quarter           0.39            0.20
                  First Quarter            0.35            0.21

The  prices   presented  are  bid  prices,   which   represent   prices  between
broker-dealers  and  do  not  include  retail  mark-ups  and  mark-downs  or any
commission  to the  broker-dealer.  The above  prices do not  reflect  prices in
actual transactions.

HOLDERS

As of December  7, 2004,  there were  approximately  43 holders of record of the
Class A Common Stock.

DIVIDENDS

The Company has not paid any  dividends on its Class A or Class B Common  Stock.
It is not expected  that the Company will pay any  dividends in the  foreseeable
future.  The  Company's  credit  facilities  prohibit  it from  paying  any cash
dividends.


                                        7




ITEM 6 - SELECTED FINANCIAL DATA

The  selected  historical  financial  data  presented  below  should  be read in
conjunction  with,  and is  qualified  in its  entirety  by  reference  to,  the
Consolidated Financial Statements and the notes thereto.


                                                             Years ended June 30

                                       2004          2003              2002           2001             2000
                                       ----          ----              ----           ----             ----

Revenue                          $ 27,999,905    $ 27,306,030    $ 29,906,631    $ 40,870,720    $ 42,613,918
Gross profit                        5,257,520       4,621,590       6,223,884       7,621,056       8,588,173
(Loss) Income from
Operations                           (856,851)     (1,099,435)        (86,087)        138,720         810,718
Other income
(expense)                            (195,283)       (217,393)       (290,616)       (462,885)       (467,238)


Net (loss) income                    (850,434)       (819,441)       (286,724)       (315,952)        163,018

Per share of common stock (basic and diluted):

Net (loss) income               ($       0.30)   ($      0.29)   ($      0.10)   ($      0.11)   $        .06
                                 ============    ============    ============    ============    ============

Weighted average
common shares
outstanding                         2,847,000       2,847,000       2,847,000       2,847,000       2,859,959
                                 ============    ============    ============    ============    ============


                                                                   As of June 30
                                                                   -------------

                                       2004          2003              2002           2001             2000
                                       ----          ----              ----           ----             ----

Working  capital                 $    226,441     $ 1,726,474     $ 2,923,148     $ 2,875,949    $  4,554,099
Total Assets                       14,279,295      15,142,714      17,352,016      18,504,547      20,166,854

Long-term debt                      5,376,922       5,339,343       6,273,998       6,453,248       8,002,784

Stockholders' equity                4,629,683       5,480,117       6,299,558       6,586,282       6,902,234


                                                                             8




ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FORWARD-LOOKING STATEMENTS

This Form 10-K contains certain forward looking statements within the meaning of
Section 27A of the  Securities  Act of 1993, as amended,  and Section 21E of the
Securities Exchange Act of 1934 as amended,  which are intended to be covered by
the safe  harbors  created  thereby.  Although  the  Company  believes  that the
assumptions  underlying  the  forward-looking  statements  contained  herein are
reasonable, any of the assumptions could be inaccurate, and therefore, there can
be no assurance that the  forward-looking  statements included in this Form 10-K
will prove to be accurate.  Factors  that could cause  actual  results to differ
from the results discussed in the forward-looking  statements  include,  but are
not limited to, results of operations of Collegeville  Inn Conference & Training
Center,  the sale of land  adjacent to the  Collegeville  Inn  discussed in Item
1--Business, General and the outcome of the Company's litigation discussed under
Item 3-Legal Proceedings.

In  light  of the  significant  uncertainties  inherent  in the  forward-looking
statements  included  herein,  the inclusion of such  information  should not be
regarded  as a  representation  by the  Company  or any  other  person  that the
objectives and plans of the Company will be achieved.

RESULT OF  OPERATIONS  YEAR ENDED JUNE 30, 2004  COMPARED TO YEAR ENDED JUNE 30,
2003

Revenues for the year ended June 30, 2004 ("Fiscal 2004")  increased by $693,875
or 2.4% to $27,999,905  compared to revenues of  $27,306,030  for the year ended
June 30, 2003 ("Fiscal 2003").  This increase is primarily due to the net impact
of revenues from new contracts versus revenues from lost contracts.

Cost of operations  for Fiscal 2004 was  $22,742,385  compared to $22,684,440 in
Fiscal 2003, an increase of $57,945 or .3%. This increase in costs of operations
is due to increased revenues during the period.

Gross  profit for Fiscal 2004 was  $5,257,520  or 18.8% of revenue,  compared to
$4,621,590 or 16.9% of revenue in Fiscal 2003, an increase of $635,930 or 13.8%.
The  increase  in  gross  profit  is  due  to  the  additon  of  new  customers,
renegotiation  of  contract  rates  in  the  normal  course  of  business,   the
elimination  of under  preforming  customers  and other  operating  efficiencies
implemented in the current year.

General and administrative  expenses for Fiscal 2004 were $4,909,172 or 17.5% of
revenue, compared to $4,556,706 or 16.7% of revenue for Fiscal 2003, an increase
of  $352,466  or 7.7%.  The  increase is due to higher  fixed  costs,  including
expenses  related to  advertising,  recruitment  and the  addition of  corporate
overhead personnel to support its new business.

                                       9




Depreciation and amortization for Fiscal 2004 was $620,199, compared to $775,057
for Fiscal  2003.  This  decrease was due  primarily to the end of  amortization
expense for investment in contracts in Fiscal 2003.

Provision  for  doubtful  accounts  for Fiscal  2004 was  $585,000  compared  to
$389,262  for Fiscal  2003.  Due to the  passage  of time,  the  Company  made a
decision to increase the provision for doubtful accounts with respect to certain
delinquent  customers.   The  Company  believes  it  will be  successful  in  its
collection efforts related to these outstanding balances.

Loss from  operations  for  Fiscal  2004 was  ($856,851)  or  (3.1%) of  revenue
compared  to  ($1,099,435)  or (4.0%) of revenue  for Fiscal  2003,  a change of
$242,584 or 22.1%.  This  improvement  over Fiscal 2003 is due to an increase in
revenues, gross profit and operating efficiencies.

Interest  expense  for Fiscal 2004 was  $186,699 or .7% of revenue,  compared to
$211,953 or .8% of revenue for Fiscal 2003.  This  decrease is primarily  due to
reduction of long-term debt.

For the  reasons  stated  above,  loss before  income  taxes for Fiscal 2004 was
($1,052,134)  or (3.8)% of  revenue  compared  to loss  before  income  taxes of
($1,316,828) or (4.8) % of revenue for Fiscal 2003. The Company is exploring all
reasonable  alternatives  to improve its  operating  results,  including but not
limited to,  increasing food service revenues with targeted  marketing  efforts,
increasing revenues from the sale of the Company's Cook Chill products, the sale
or lease of all or part of the  Collegeville Inn Conference and Training Center,
sale of excess land at the  Collegeville  Inn Conference and Training Center and
reduction of operating expenses.  There can be no assurance as to the success of
any or all of these alternatives.

Net loss for Fiscal 2004 was  ($850,434)  or ($0.30)  per share  compared to net
loss of ($819,441) or ($0.29) per share for Fiscal 2003.

RESULT OF  OPERATIONS  YEAR ENDED JUNE 30, 2003  COMPARED TO YEAR ENDED JUNE 30,
2002

Revenues for the year ended June 30, 2003 ("Fiscal  2003")  decreased by 8.7% to
$27,306,030 compared to revenues of $29,906,631 for the year ended June 30, 2002
("Fiscal  2002").  This  decrease is primarily due to the net impact of revenues
from lost contracts versus revenues from new contracts.

Cost of operations  for Fiscal 2003 was  $22,684,440  compared to $23,682,747 in
Fiscal  2002,  a  decrease  of  $998,307  or  4.2%.  This  decrease  in costs of
operations  is due to lower  revenues  during  the  period  partially  offset by
inflationary  price,  wage and expense  increases along with payroll and related
costs for new contracts.


                                       10




Gross  profit for Fiscal 2003 was  $4,621,590  or 16.9% of revenue,  compared to
$6,223,884  or  20.8%  of  revenue  in  Fiscal 2002, a decrease of $1,602,294 or
25.7 %. The  decrease in gross profit as a percent of revenue is due to customer
mix and a change in the term of certain client contracts, which have resulted in
lower gross margins.

General and administrative  expenses for Fiscal 2003 were $4,556,706 or 16.7% of
revenue,  compared to $4,562,244 or 15.2% of revenue for Fiscal 2002, a decrease
of $5,538.  The  percentage  increase is due to higher  fixed  costs  within the
general  and  administrative  expenses  compared  to lower  sales.  General  and
administrative  expenses for Fiscal 2003 include  $138,605 of development  costs
related to the Company's Cook-Chill food preparation technology.

Depreciation and amortization for Fiscal 2003 was $775,057, compared to $847,727
for Fiscal  2002.  This  decrease was due  primarily to the end of  amortization
expense for investment in contracts.

Provision  for  doubtful  accounts  for Fiscal  2003 was  $389,262  compared  to
$900,000 for Fiscal 2002.  The decrease is due to increased  collection  efforts
and an increased  effort by management to attract a credit worthy customer base.
Additionally,  bad debt  expense was  reduced as a result of a cash  recovery of
approximately  $142,000  relating  to accounts  receivable  written off prior to
Fiscal 2003.

Loss from  operations  for  Fiscal  2003 was  ($1,099,435)  or (4.0%) of revenue
compared  to  ($86,087)  or (.3%) of revenue  for  Fiscal  2002,  a decrease  of
$1,013,348.  This decrease is due to lower revenues as well as increased general
and administrative expenses some of which are fixed.

Interest  expense  for Fiscal 2003 was  $211,953 or .8% of revenue,  compared to
$261,037 or .9% of revenue for Fiscal 2002.  This decrease is primarily due to a
reduction of long-term debt.

For the  reasons  stated  above,  loss before  income  taxes for Fiscal 2003 was
($1,316,828)  or (4.8)% of  revenue  compared  to loss  before  income  taxes of
($376,703) or (1.3)% of revenue for Fiscal 2002.

Net loss for Fiscal 2003 was  ($819,441)  or ($0.29)  per share  compared to net
loss of ($286,724) or ($0.10) per share for Fiscal 2002.


                                       11




LIQUIDITY AND CAPITAL RESOURCES

Our  requirement  for capital is to fund (i) sales growth and (ii) financing for
acquisitions. Our primary source of financing during 2004 and 2003 was cash flow
from  operations.  At June 30, 2004, the Company had working capital of $226,441
as compared to $1,726,474 at June 30, 2003.  This decrease in working capital is
primarily attributable to operating losses sustained in the current fiscal year,
a  reclassification  of a deferred  tax asset from short term to long term and a
restriction  of cash.  The  Company's  cash and cash  equivalents  decreased  by
$413,989 to $946,523  primarily due to operating  losses,  a restriction of cash
and an increase in investing  activities  including  the purchase of  marketable
securities.  Cash provided by operations for fiscal 2004 was $552,136,  compared
to $1,444,749 provided by operations for fiscal 2003.

Investing  activities  consumed  $280,656 in cash during fiscal 2004 compared to
$13,407 in cash provided  during fiscal 2003.  Investing  activities  for fiscal
2004  include  capital  expenditures  in the  amount of  $80,314  as well as the
purchase of  marketable  securities of $200,342.  During fiscal 2004,  financing
activities  consumed  $685,469 in cash,  compared  to $690,954  consumed in cash
during fiscal 2003, primarily due to a restriction of cash.

The Company has certain  credit  facilities  with its bank including a revolving
credit of $3,500,000. At June 30, 2004, the Company had $653,078 available under
its revolving credit. The Company has pledged a $250,000  Certificate of Deposit
as  additional  collateral  against the  revolving  line of credit.  The Company
issued two series of Industrial Bonds totaling  $3,560,548 in December 1996. The
outstanding balance on the bonds was $2,675,000 as of June 30, 2004. In December
2004, the Company entered into an agreement whereby the credit loan facility was
extended to December 31, 2005.

The Loan Facility contains certain covenants that include maintenance of certain
financial  ratios,  maintenance of minimum levels of working  capital as well as
affirmative  and negative  covenants.  At June 30, 2004,  the Company was not in
compliance with these covenants required under the credit facility agreement. On
December  15, 2004 the Company  entered  into an amended  agreement  whereby the
non-compliance  was waived and new financial  covenants were negotiated  through
June 30, 2005, which reflect the Company's  current  operating  projections.  As
part of the  amended  agreement,  the  Company's  Chief  Executive  Officer  was
required to execute a limited personal guarantee in the amount of $3,000,000.


                                       12




===============================================================================================
                                                      Payment Due By Period
===============================================================================================
                                                    Less
   Contractual                         Total        than 1     1-3        4-5        After 5
   Obligations                                       year      years      years       years
                   ============================================================================
Note Payable                           154,453     154,453           -           -           -
Long-Term Debt*                      5,521,922     145,000   3,161,922     350,000   1,865,000
Operating Leases                        99,770      41,702      58,068           -           -
Total Contractual Cash
Obligations                          5,776,145     341,155   3,219,990     350,000   1,865,000


o    Long-Term  Debt includes  $2,846,922  outstanding  on the revolving line of
     credit,  leaving $653,078 available under the $3,500,000  revolving line of
     credit.

============================================================================================
                                                      Amount of Commitment Expiration
                                                              Per Period
                                             ===============================================
Other Commercial         Total Amounts       Less than           1-3         4-5       Over
Commitments               Committed           1 year            years       years       5
                                                                                       years
                  ============================================ ==============================
Lines of Credit          3,500,000               -            3,500,000       -          -
Standby Letter of
  Credit                 3,065,000               -            3,065,000       -          -
  Total Commercial
  Commitments            6,565,000               -            6,565,000       -          -


Based upon its present  plans,  management  believes that  operating  cash flow,
available  cash  and  available  credit  resources  will  be  adequate  to  make
repayments of indebtedness  described  herein,  to meet the working capital cash
needs of the Company and to meet anticipated  capital  expenditure  needs during
the 12 months ending June 2005.

On September 8, 2004 the Company  entered into an agreement of sale for the land
adjacent to its  Collegeville  Inn Conference & Training  Center.  The agreement
provides for an initial deposit of $10,000 within ten days of the effective date
of the agreement, with additional deposits of $50,000 and $25,000 payable to the
Company upon the occurrence of certain  events,  including,  but not limited to,
zoning  approvals.  The  deposits are  non-refundable  upon the end of a 120 day
inspection  period,  which  commenced  on the date the  Buyer  received  a fully
executed  original  of the  agreement  of  sale.  Pursuant  to the  terms of the
agreement  of sale,  the  Company may  realize  gross  proceeds of not less than
$1,710,000.  However,  the  Company  may  realize  gross  proceeds  in excess of
$1,710,000,  if the buyer is able to  maximize  the yield of the  property.  The
agreement of sale provides that settlement  occur within  twenty-four  months of
the  date of the  agreement,  however,  upon  payment  of  additional  deposits,
settlement  may be extended an  additional  twelve  months.  Upon closing of the
transaction,  the Company  plans on using the proceeds to retire a  proportional
amount of outstanding  debt associated with the parcel of land.  There can be no

                                       13




assurance  that the sale of this land will be completed in  accordance  with the
terms of the agreement of sale.

The Company realizes that in order to reduce continuing  operating losses it may
have to  dispose of certain  assets,  including  its  research  and  development
facility,  the Collegeville  Inn Conference and Training Center.  The Company is
exploring  all  reasonable   alternatives  to  improve  its  operating  results,
including  but not limited to,  increasing  food service  revenues with targeted
marketing efforts, increasing revenues from the sale of the Company's Cook Chill
products,  the sale or lease of all or part of the  Collegeville  Inn Conference
and Training Center,  sale of excess land at the Collegeville Inn Conference and
Training Center and reduction of operating  expenses.  There can be no assurance
as to the success of any or all of these alternatives.

In an effort to extend our current  bank debt,  we may seek to access the public
equity  market  whenever  conditions  are  favorable,  even if we do not have an
immediate need for additional  capital at that time. Any additional  funding may
result in significant dilution and could involve the issuance of securities with
rights,  which are senior to those of  existing  stockholders.  We may also need
additional  funding  earlier than  anticipated,  and our cash  requirements,  in
general, may vary materially from those now planned, for reasons including,  but
not limited to,  competitive  advances and higher than anticipated  expenses and
lower than anticipated revenues from operations.

NEW ACCOUNTING PRONOUNCEMENTS

In January  2003 the FASB  issued  Financial  Interpretation  No. 46 ("FIN 46"),
"Consolidation  of Variable  Interest  Entities"  and in December  2003 the FASB
issued Financial  Interpretation No. 46 (revised) ("FIN 46(R)"),  "Consolidation
of Variable Interest Entities  (revised)".  These  interpretations of Accounting
Research  Bulletin  No.  51,   "Consolidated   Financial   Statements,"  address
consolidation  by business  enterprises of certain  variable  interest  entities
where there is a controlling financial interest in a variable interest entity or
where the variable  interest does not have sufficient  equity at risk to finance
its activities  without  additional  subordinated  financial  support from other
parities. The Company will apply the consolidation requirement of FIN 46 and FIN
46(R) in future  periods if the Company should own any interests in any variable
interest entity.

CRITICAL ACCOUNTING POLICIES

The discussion and analysis of our financial condition and results of operations
are based upon the Company's consolidated financial statements,  which have been
prepared in accordance  with  accounting  principles  generally  accepted in the
United States of America. The preparation of these financial statements requires
the Company to make estimates and judgments  that affect the reported  amount of

                                       14




assets and  liabilities,  revenues  and  expenses,  and  related  disclosure  of
contingent  assets  and  liabilities  at the  date  of the  Company's  financial
statements.  Actual  results may differ  from these  estimates  under  different
assumptions or conditions.

Critical  accounting  policies  are  defined  as those  that are  reflective  of
significant  judgments and  uncertainties,  and potentially result in materially
different  results  under  different  assumptions  and  conditions.  The Company
believes that its critical accounting policies include those described below.

REVENUE RECOGNITION

Revenue  is  generated  primarily  from  fees for food  service  management  and
facilities  management at  continuing  care and health care  facilities  and the
Collegeville Inn restaurant.  Revenue is recognized when services are performed.
Ongoing  assessments of the credit  worthiness of customers  provide the Company
reasonable assurance of collectibility upon performance of services.

ACCOUNTS RECEIVABLE

The Company  performs  ongoing  credit  evaluations of its customers and adjusts
credit  limits  based on  payment  history  and the  customer's  current  credit
worthiness,  as determined by a review of their current credit information.  The
Company  continuously  monitors  collections and payments from its customers and
maintains a provision for estimated credit losses based on historical experience
and any specific  customer  collection  issues that have been identified.  While
such credit losses have historically been within the Company's  expectations and
the provisions  established,  the Company cannot guarantee that it will continue
to  experience  the same credit loss rates that it has in the past.  The Company
has  increased  its  reserves in fiscal  2004.  Due to the passage of time,  the
Company made a decision to increase the  provision  for doubtful  accounts  with
respect to certain delinquent customers.

IMPAIRMENT OR DISPOSAL OF LONG LIVED ASSETS

The carrying  value of property,  plant,  and equipment is evaluated  based upon
current and  anticipated  undiscounted  operating cash flows before debt service
charges.  An impairment is  recognized  when it is probable that such  estimated
future  cash  flows  will  be  less  than  the  carrying  value  of the  assets.
Measurement  of the amount of  impairment,  if any, is based upon the difference
between the net carrying value and the fair value, which is estimated based upon
anticipated undiscounted operating cash flows before debt service charges. Based
upon a review  of its  long-lived  assets,  the  Company  did not  recognize  an
impairment loss for the fiscal year ended June 30, 2004;  however,  there can be
no assurance  that the Company  will not  recognize  an  impairment  loss on its
long-lived assets in future periods.

                                       15





INCOME TAX ACCOUNTING

The  Company  determines  its  provision  for income  taxes  using the asset and
liability  method.  Under this method,  deferred tax assets and  liabilities are
recognized  for the future tax  effects of  temporary  differences  of  existing
assets and  liabilities and their  respective tax bases.  Future tax benefits of
tax loss and credit  carryforwards  also are  recognized as deferred tax assets.
When necessary,  deferred tax assets are reduced by a valuation allowance to the
extent  the  Company  concludes  there  is  uncertainty  as  to  their  ultimate
realization.  Deferred tax assets and liabilities are measured using enacted tax
rates in effect for the year in which those  temporary  differences are expected
to be  recovered  or settled.  The effect on  deferred  taxes of a change in tax
rates is recognized in income in the period that the change is enacted.

As of June 30, 2004 and 2003,  the Company  maintained  a deferred  tax asset of
$1,623,841  and  $1,422,141,  respectively.  The  Company  has  not  provided  a
valuation  allowance  against its deferred tax assets after  consideration  of a
future  gain on the  disposal  of  certain  land  adjacent  to its  Collegeville
facility and anticipated  future  profitable  operating  results.  However,  the
amount  realizable  may be  reduced  if future  taxable  income is reduced or is
insufficient to utilize the entire deferred tax asset.

EMPLOYMENT CONTRACTS

For the fiscal years ended June 30, 2004,  2003 and 2002 the Company paid a base
salary of $326,542,  $312,212 and $228,864 to Joseph Roberts, Chairman and Chief
Executive  Officer  and  $228,864,  $228,899  and  $222,674  to  Kathleen  Hill,
President and Chief Operating Officer,  respectively.  The Company currently has
no  employment  contracts  with  either of such  individuals,  additionally  all
previous employment  contracts with such individuals  expired.  The Compensation
Committee of the Board of Directors is currently engaged in discussions with Mr.
Roberts  and Ms.  Hill with  respect to their  compensation  for the fiscal year
ending June 30, 2005.

CAPITAL EXPENDITURES

The Company has no other  material  commitments  for  capital  expenditures  and
believes that its existing cash and cash  equivalents,  cash from operations and
available  revolving  credit  will be  sufficient  to  satisfy  the needs of its
operations and its capital  commitments for the next twelve months.  However, if
the need arose,  the Company  would seek to obtain  capital from such sources as
continuing debt financing or equity financing.

EFFECTS OF INFLATION

Substantially  all of the  Company's  agreements  with its  customers  allow the
Company to pass  through to its  customers  its  increases in the cost of labor,

                                       16




food  and  supplies.  The  Company  believes  that it  will  be able to  recover
increased  costs  attributable  to inflation by  continuing to pass through cost
increases to its customers.

MEDICARE AND MEDICAID REIMBURSEMENTS

A substantial  portion of the Company's revenue is dependent upon the payment of
its fees by customer health care facilities,  which, in turn, are dependent upon
third-party payers such as state governments,  Medicare and Medicaid.  Delays in
payment by third party payers,  particularly  state and local  governments,  may
lead to delays in collection of accounts receivable.

ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The Financial  Statements and Supplementary Data to be provided pursuant to this
Item 8 are included under Part IV, Item 15, of this Form 10-K.

ITEM 9 - CHANGES AND DISAGREEMENTS  WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE

On March 28, 2003,  the  Company,  upon the  recommendation  and approval of its
Audit  Committee,  dismissed  Grant  Thornton,  LLP  ("Grant") as the  Company's
principal  independent  certified  public  accountant.  On September 2, 2003 the
Company  engaged BDO  Seidman,  LLP ("BDO  Seidman")  to serve as the  Company's
principal independent certified public accountant,  effective  immediately.  The
decision  to  dismiss  Grant  was  recommended  by the  Audit  Committee  of the
Company's Board of Directors and approved by the Company's Board of Directors.

In  connection  with the audits for the most  recent  fiscal year ended June 30,
2002 and the subsequent  interim period through  September 2, 2003 there were no
disagreements  between  the  Company  and  Grant  on any  matter  of  accounting
principles or practices,  financial statement  disclosure,  or auditing scope or
procedure which, if not resolved to the satisfaction of Grant, would have caused
Grant  to  make  reference  to the  subject  matter  of  such  disagreements  in
connection with its reports on the Company's  consolidated  financial statements
for such years.  During the fiscal years ended June 30, 2002 and the  subsequent
interim period  through  September 2, 2003,  there were no reportable  events as
defined in item 304(a) (1) (v) of Regulation S-K.

The report of Grant on the consolidated  financial  statements of the Company as
of and for the fiscal  year  ended June 30,  2002 did not  contain  any  adverse
opinion or  disclaimer  of opinion,  nor were they  qualified  or modified as to
uncertainty, audit scope, or accounting principles.


                                       17




The foregoing  disclosures  were previously  reported in Item 4 of the Company's
current  report on Form 8-K filed with the SEC on September 2, 2003. The Company
provided Grant with a copy of the foregoing disclosures and requested that Grant
furnish the Company  with a letter  addressed  to the SEC stating that it agreed
with such statements.  A copy of such letter,  dated September 5, 2003 was filed
as Exhibit 16.1 to Form 8-K, dated September 5, 2003.

During  the  fiscal  year ended June 30,  2002 and  through  September  2, 2003,
neither  the  Company  nor  someone on its behalf  consulted  BDO  Seidman,  LLP
regarding  (i)  the   application  of  accounting   principles  to  a  specified
transaction,  either completed or proposed,  (ii) the type of audit opinion that
matters or reportable  events as set forth in Items 304 (a) (1) (iv) and (a) (1)
(v) of Regulation S-K.

ITEM 9A - CONTROLS AND PROCEDURES

The Company maintains disclosure controls and procedures designed to ensure that
information  required to be  disclosed  in its Exchange Act reports is recorded,
processed,  summarized  and reported  within the time  periods  specified in the
SEC's rules and forms, and that such information is accumulated and communicated
to the Company's management, including its Chief Executive Officer and its Chief
Financial Officer/Principal  Accounting Officer, as appropriate, to allow timely
decisions  regarding  required  disclosure.  In  designing  and  evaluating  the
disclosure controls and procedures,  management recognized that any controls and
procedures,  no  matter  how  well  designed  and  operated,  can  provide  only
reasonable assurance of achieving the desired control objectives, and management
necessarily  was required to apply its judgment in evaluating  the  cost-benefit
relationship of possible controls and procedures.

In  connection  with the  completion  of its audit of,  and the  issuance  of an
unqualified report on, the Company's  consolidated  financial statements for the
fiscal  year  ended June 30,  2004,  the  Company's  independent  auditors,  BDO
Seidman,  LLP ("BDO"),  communicated  to the Company that the  following  matter
involving the Company's  internal controls and operation were considered to be a
"reportable  condition",  as defined under standards established by the American
Institute of Certified Public Accountants, or AICPA.

The Company did not have  sufficient  competent  accounting  personnel  and as a
result  processes  relating to preparation of the Company's  income tax accrual,
including lack of timely management review, contributed to a material adjustment
of the income tax accounts in the fourth quarter of the current fiscal year.


                                       18




Reportable  conditions  are matters  coming to the attention of the  independent
auditors  that, in their  judgment,  relate to significant  deficiencies  in the
design or  operation  of  internal  controls  and  could  adversely  affect  the
Company's  ability to record,  process,  summarize  and  report  financial  data
consistent  with the  assertions of management in the financial  statements.  In
addition,  BDO has advised the Company that they consider this matter,  which is
listed above,  to be a "material  weakness"  that,  by itself or in  combination
could result in a more than remote  likelihood  that a material  misstatement in
the financial  statements  will not be prevented or detected by our employees in
the normal course of performing their assigned functions.

As required by SEC Rule 13a-15(b), the Company carried out an evaluation,  under
the   supervision  and  with  the   participation   of  its  management  of  the
effectiveness of the design and operation of the Company's  disclosure  controls
and procedures as of June 30, 2004. Based on the foregoing,  the Company's Chief
Executive   Officer  ("CEO")  and  Principal   Financial  Manager  ("PFM")  have
determined  that the  Company's  disclosure  controls  and  procedures  were not
effective at a reasonable  assurance level based upon the deficiency  identified
by BDO.  However,  the CEO and PFM noted  that the  Company  has  remedied  this
deficiency  and did not  note  any  other  material  weaknesses  or  significant
deficiencies in the Company's  disclosure  controls and procedures  during their
evaluation.  In November  2004, the Company has hired a Director of Finance with
relevant  education and work experience who will assume  responsibility  for the
preparation of all of the income tax analyses.

PART III

ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE
          REGISTRANT

This information will be contained in the Proxy Statement of the Company for the
2004 Annual Meeting of Shareholders  under the caption  "Directors and Executive
Officers of the Registrant", and is incorporated herein by reference.

ITEM 11 - EXECUTIVE COMPENSATION

This information will be contained in the Proxy Statement of the Company for the
2004 Annual Meeting of Shareholders  under the caption  "Executive  Compensation
and Compensation of Directors" and is incorporated herein by reference.


                                       19



ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
          OWNERS AND MANAGEMENT

This information will be contained in the Proxy Statement of the Company for the
2004 Annual Meeting of Shareholders  under the caption "Security  Ownership" and
"Election of Directors" and is incorporated herein by reference.


ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED
          TRANSACTIONS

This  information  will be contained in the Proxy  Statements of the Company for
the 2004 Annual Meeting of Shareholders under the caption "Certain Relationships
and Related Transactions" and is incorporated herein by reference.

ITEM 14 - PRINCIPAL ACCOUNTANT FEES AND SERVICES

The accounting firm of BDO Seidman,  LLP ("BDO Seidman") served as the Company's
independent registered public accounting firm for the fiscal year ended June 30,
2004. Such firm has no other relationship to the Company or its affiliates.

AUDIT FEES

     BDO  Seidman,  LLP  billed  the  Company  $53,000  for  audit  fees for the
Company's  annual  consolidated  financial  statements for the fiscal year ended
June 30,  2004,  and  $41,000  for audit fees for the fiscal year ended June 30,
2003.

AUDIT RELATED FEES

     BDO  Seidman,  LLP did not  bill  the  Company  for any for  audit  related
services for fiscal year ended June 30, 2004 and June 30, 2003, respectively.

TAX FEES

     BDO  Seidman,  LLP billed the Company  $12,000 for tax  services for fiscal
year ended June 30, 2003.

ALL OTHER FEES

     BDO Seidman, LLP did not bill for any other professional services.

PRE-APPROVAL POLICIES AND PROCEDURES

All audit and non-audit  services to be performed by the  Company's  independent
accountant must be approved in advance by the Audit  Committee.  Consistent with
applicable law, limited amounts of services,  other than audit, review or attest
services, may be approved by one or more members of the Audit Committee pursuant

                                       20




to  authority  delegated by the Audit  Committee,  provided  each such  approved
service is reported to the full Audit Committee at its next meeting.

All of the  engagements  and fees for the  Company's  fiscal year ended June 30,
2004 were approved by the Audit  Committee.

The Audit Committee of the Board of Directors  considered  whether the provision
of  non-audit  services by BDO Seidman  LLP was  compatible  with its ability to
maintain  independence  from an audit  standpoint and concluded that BDO Seidman
LLP's independence was not compromised.


                                       21




                                     PART IV

ITEM 15 - EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES
          AND REPORTS ON FORM 8-K

(A)  1.   Consolidated Financial Statements

          Reports of Independent Registered  Public Accounting Firms         F-2
                                                                             to
                                                                             F-3

          Consolidated Balance Sheets as of
               June 30, 2004 and 2003                                        F-4

          Consolidated Statements of Operations for the
               Years Ended June 30, 2004, 2003 and 2002                      F-5

          Consolidated Statements of Stockholders' Equity for the
               Years Ended June 30, 2004, 2003 and 2002                      F-6

          Consolidated Statements of Cash Flows for the
               Years Ended June 30, 2004, 2003 and 2002                      F-7

          Notes to Consolidated Financial Statements                         F-8
                                                                             to
                                                                            F-21

          Schedule of Valuation Accounts                                    F-23

(B)       Reports on Form 8-K

          None

(C)       Exhibits

          The  following Exhibits  are filed as part of this  report (references
          are to Reg.  S-K  Exhibit Numbers):

3.1       Amended  and  Restated   Certificate  of   Incorporation   of  Company
          (Incorporated  by reference to Exhibit 3-1 of the Company's  Statement
          on Form S-1 (File No. 33-4281).

3.2       By-laws of the Company  (Incorporated  by  reference to Exhibit 3.2 of
          the S-1).

4.1       Specimen Stock  Certificate of the Company  (Incorporated by reference
          to Exhibit 4.1 of the S-1).

                                       22




4.5       Registration  Rights  Agreement  between the Company and Kathleen Hill
          (Incorporated by reference to Exhibit 4.5 of the S-1).

10.4      Company's 1991 Stock Option Plan (Incorporated by reference to Exhibit
          10.4 of the S-1).

10.8      Guaranty   Agreement   between   the   Company   and  Joseph   Roberts
          (Incorporated  by reference to Exhibit 10.9 Annual Report on Form 10-K
          filed September 27, 1992).

10.9      Lease Agreement Between the Company and Ocean 7, Inc. (Incorporated by
          reference to Exhibit 10.11 Annual Report of Form 10-K filed  September
          27, 1992).

10.11     Escrow  Agreement among the Company,  Service America  Corporation and
          Meridian Bank  (Incorporated by reference to Exhibit 2, Current Report
          on Form 8-K filed July 29, 1993).

10.13     Agreement  of  Purchase  and Sale  between  the  Company and REVEST II
          Corporation,  with  Amendments.  (Incorporated by reference to Exhibit
          10.13, Annual Report on Form 10-K filed September 27, 1994).

10.14     Loan Agreement between the Montgomery  County  Industrial  Development
          Authority and Collegeville  Inn Conference & Training Center,  Inc. (a
          wholly-owned subsidiary of the Company). (Incorporated by reference to
          exhibit  10.14,  annual  report on Form 10-K  Filed on  September  27,
          1997).

10.15     Trust  Indenture  between  Montgomery  County  Industrial  Development
          Authority  and Dauphin  Deposit  Bank and Trust  Company,  as Trustee.
          (Incorporated  by reference to exhibit  10.15,  annual  report on Form
          10-K filed September 27, 1997).

10.16     Loan  Agreement  between  Montgomery  County  Industrial   Development
          Authority and Apple Fresh Foods Limited (a wholly-owned  subsidiary of
          the  Company).  (Incorporated  by reference to exhibit  10.16,  annual
          report on Form 10-K Filed on September 27, 1997).

10.17     Trust Indenture  between the Montgomery County  Development  Authority
          and Dauphin Deposit Bank and Trust Company, as Trustee.  (Incorporated
          by reference  to exhibit  10.17,  annual  report on Form 10-K Filed on
          September 27, 1997).

                                       23




10.18     Loan  Agreement   between  the  Company  and  Corestates   Bank,  N.A.
          (Incorporated  by reference to exhibit  10.18,  annual  report on Form
          10-K Filed on September 27, 1997).

31.1      Section 302 Certification of Principal Executive Officer

31.2      Section 302 Certification of Principal Financial Manager

32.1      Section 906 Certification of Chief Executive Officer

32.2      Section 906 Certification of Principal Financial Manager.  The Company
          does not have a Chief Financial Officer.


                                       24




                                   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 annual report to be
signed on its behalf by the undersigned, thereunto duly authorized.

Nutrition Management Services Company
(Registrant)

/s/ Joseph V. Roberts
------------------------------------------
Joseph V. Roberts, Chief Executive Officer
and Director


Date:  December 21, 2004

Pursuant to the  requirements  of the  Securities  and Exchange Act of 1934,  as
amended,  this annual report has been signed by the following  persons on behalf
of the registrant and in the capacities indicated as of December 21, 2004.


/s/ Joseph V. Roberts                        /s/ Kathleen A. Hill
------------------------------              ------------------------------------
Joseph V. Roberts, Chief                    Kathleen A. Hill, President and
Executive Officer and Director              Director
(Principal Financial Officer)



                                         /s/ Samuel R. Shipley
------------------------------              ------------------------------------
Richard Kresky, Director                    Samuel R. Shipley, Director
Director


/s/ Michael M. Gosman                       /s/ Michelle L. Roberts-O'Donnell
------------------------------              ------------------------------------
Michael M. Gosman, Director                 Michelle L. Roberts-O'Donnell,
                                            Director


/s/ Jane Scaccetti
------------------------------
Jane Scaccetti, Director


                                       25




Financial Statements and Reports of Registered Public Accounting Firms

NUTRITION MANAGEMENT SERVICES COMPANY AND SUBSIDIARIES
June 30, 2004, 2003 and 2002


                                TABLE OF CONTENTS


                                                                            Page
                                                                            ----


REPORTS OF INDEPENDENT REGISTERED  PUBLIC ACCOUNTING FIRMS                   F-2
                                                                              to
                                                                             F-3

     CONSOLIDATED BALANCE SHEETS                                             F-4

     CONSOLIDATED STATEMENTS OF OPERATIONS                                   F-5

     CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY                          F-6

     CONSOLIDATED STATEMENTS OF CASH FLOWS                                   F-7

     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                              F-8
                                                                              to
                                                                            F-21

SUPPLEMENTAL INFORMATION

     SCHEDULE OF VALUATION ACCOUNTS                                         F-23




REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



Board of Directors and Stockholders
Nutrition Management Services Company
Kimberton, Pennsylvania

We have  audited  the  accompanying  consolidated  balance  sheets of  Nutrition
Management  Services  Company  as of June 30,  2004  and  2003  and the  related
consolidated statements of operations,  stockholders' equity, and cash flows for
each of the two years in the period  ended June 30,  2004.  We have also audited
the schedule listed in the accompanying  index.  These financial  statements and
schedule are the responsibility of the Company's management.  Our responsibility
is to express an opinion on these financial statements and schedule based on our
audits.

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

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material respects, the financial position of Nutrition Management
Services  Company at June 30, 2004 and 2003, and the results of their operations
and their  cash  flows for each of the two years in the  period  ended  June 30,
2004, in conformity with accounting  principles generally accepted in the United
States of America.

Also, in our opinion,  the schedule presents fairly,  in all material  respects,
the information set forth therein.


/s/ BDO Seidman, LLP
--------------------
BDO Seidman, LLP
Philadelphia, Pennsylvania

September 17, 2004 except
for Note E which is as of
December 15, 2004


                                      F-2




            REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
            -------------------------------------------------------


Board of Directors
Nutrition Management Service Company


            We have audited the accompanying  equity and cash flows of Nutrition
Management  Services  Company and its subs as of June 30, 2002.  for each of the
three years in the period ended June 30, These consolidated financial statements
are the  responsibility of the Company's  management.  Our  responsibility is to
express an  opinion  on these  consolidated  financial  statements  based on our
audits.

            We  conducted  our audits in  accordance  with the  standards of the
Public Company Accounting  Oversight Board. These standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements.  An audit also includes asserting the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audit  provides  a
reasonable basis for our opinion.

            In our opinion,  the consolidated  financial  statements referred to
above present fairly, in all material respects, the consolidated  operations and
their cash flows of Nutrition  Management Services Company, its subsidiaries for
the year ended June 30, 2002, in conformity with accounting principles generally
accepted in the United States of America.

            We  have  also  audited  the  schedule  of  valuation  accounts  for
Nutrition  Management  Services  Company and its subsidiaries for the year ended
June 30, 2002. In our opinion,  this schedule  presents fairly,  in all material
respects, the information required to be set forth therein.

/s/ Grant Thornton LLP
----------------------
Grant Thornton LLP

Philadelphia, Pennsylvania
September 20, 2002

                                      F-3




             Nutrition Management Services Company and Subsidiaries

                           CONSOLIDATED BALANCE SHEETS
                                    June 30,
                                                                                                       2004             2003
                                                                                                  ------------    ------------
Current assets
     Cash and cash equivalents                                                                    $    946,523    $  1,360,512
     Marketable securities                                                                             202,969               -
     Accounts receivable (net of allowance for doubtful accounts of $2,877,336
         and $2,292,336 in 2004 and 2003, respectively)                                              2,259,582       2,843,764
     Unbilled revenue                                                                                   89,263          51,147
     Deferred income taxes                                                                             405,320       1,209,454
     Inventory                                                                                         159,181         155,945
     Prepaid and other                                                                                 372,945         365,558
     Income tax refund                                                                                  63,348          63,348
                                                                                                  ------------    ------------
           Total current assets                                                                      4,499,131       6,049,728
                                                                                                  ------------    ------------

Property and equipment - net                                                                         7,563,568       8,103,456
                                                                                                  ------------    ------------

Other assets
     Restricted cash                                                                                   250,000               -
     Note receivable                                                                                   120,608         136,110
     Advances to officers                                                                              435,283         435,283
     Deferred income taxes                                                                           1,218,521         212,687
     Bond issue costs (net of accumulated amortization of $110,461
         and $95,892 in 2004 and 2003, respectively)                                                   180,863         195,430
     Other assets                                                                                       11,321          10,020
                                                                                                  ------------    ------------
           Total other assets                                                                        2,216,596         989,530
                                                                                                  ------------    ------------

           Total assets                                                                           $ 14,279,295    $ 15,142,714
                                                                                                  ============    ============

              LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities
     Current portion of long-term debt                                                            $    145,000    $    196,813
     Current portion of note payable                                                                   154,453         575,687
     Accounts payable                                                                                3,303,947       2,883,496
     Accrued expenses                                                                                  286,527         303,756
     Accrued payroll                                                                                   222,176         246,622
     Other                                                                                             160,587         116,880
                                                                                                  ------------    ------------
           Total current liabilities                                                                 4,272,690       4,323,254
                                                                                                  ------------    ------------
Long-term liabilities
     Long-term debt-net of current portion                                                           5,376,922       5,184,891
     Long-term note payable                                                                                  -         154,452
                                                                                                  ------------    ------------
           Total long-term liabilities                                                               5,376,922       5,339,343
                                                                                                  ------------    ------------
Commitments and contingencies

Stockholders' equity
     Undesignated  preferred stock-no par, 2,000,000 shares  authorized,  none issued and outstanding
     Common stock
         Class A-no par, 10,000,000 shares authorized; 3,000,000
           issued, 2,747,000 outstanding                                                             3,801,926       3,801,926
         Class B-no par, 100,000 shares authorized; 100,000 shares issued and outstanding                   48              48
     Retained earnings                                                                               1,327,272       2,177,706
                                                                                                  ------------    ------------
                                                                                                     5,129,246       5,979,680
     Less treasury stock - (common - Class A: 253,000 shares - at cost )                              (499,563)       (499,563)
                                                                                                  ------------    ------------
           Total stockholders' equity                                                                4,629,683       5,480,117
                                                                                                  ------------    ------------
           Total liabilities and stockholders' equity                                             $ 14,279,295    $ 15,142,714
                                                                                                  ============    ============


         The accompanying notes are an integral part of these statements


                                       F-4




             Nutrition Management Services Company and Subsidiaries

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                               Year ended June 30,




                                                        2004            2003             2002
                                                    ------------    ------------    ------------

Food service revenue                                $ 27,999,905    $ 27,306,030    $ 29,906,631

Cost of operations
     Payroll and related expenses                     11,178,474      10,938,468      10,170,603
     Other costs of operations                        11,563,911      11,745,972      13,512,144
                                                    ------------    ------------    ------------
           Cost of operations                         22,742,385      22,684,440      23,682,747
                                                    ------------    ------------    ------------
           Gross profit                                5,257,520       4,621,590       6,223,884
                                                    ------------    ------------    ------------
Expenses
     General and administrative expenses               4,909,172       4,556,706       4,562,244
     Depreciation and amortization                       620,199         775,057         847,727
     Provision for doubtful accounts                     585,000         389,262         900,000
                                                    ------------    ------------    ------------

           Expenses                                    6,114,371       5,721,025       6,309,971
                                                    ------------    ------------    ------------

           (Loss)  from operations                      (856,851)     (1,099,435)        (86,087)
                                                    ------------    ------------    ------------

Other (expense) income
     Interest expense                                   (186,699)       (211,953)       (261,037)
     Interest income                                       9,564           9,763           9,131
     Other                                               (18,148)        (15,203)        (38,710)
                                                    ------------    ------------    ------------

           Other expense - net                          (195,283)       (217,393)       (290,616)
                                                    ------------    ------------    ------------

Loss before income taxes                              (1,052,134)     (1,316,828)       (376,703)

Income tax benefit                                      (201,700)       (497,387)        (89,979)
                                                    ------------    ------------    ------------

           Net loss                                 $   (850,434)   $   (819,441)   $   (286,724)
                                                    ============    ============    ============

           Net loss per share - basic and diluted   $      (0.30)   $      (0.29)   $      (0.10)
                                                    ============    ============    ============

           Weighted average number of shares           2,847,000       2,847,000       2,847,000
                                                    ============    ============    ============


         The accompanying notes are an integral part of these statements


                                       F-5




                                                Nutrition Management Services Company and Subsidiaries

                                                     CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

                                                          For the three years ended June 30, 2004




                                   Class A                   Class B
                                 Common stock               Common stock                         Treasury stock
                           ----------------------  ------------------------                   -------------------         Total
                           Number                      Number                  Retained       Number                   stockholders
                           of shares     Amount        of shares   Amount      earnings       of shares    Amount         equity
                         -----------  -----------  -----------  -----------  -----------   -----------   -----------   -----------

Balance - June 30, 2001    2,747,000  $ 3,801,926      100,000  $        48  $ 3,283,871      (253,000)  $  (499,563)  $ 6,586,282

Net loss                           -            -            -            -     (286,724)            -             -      (286,724)
                         -----------  -----------  -----------  -----------  -----------   -----------   -----------   -----------

Balance - June 30, 2002    2,747,000    3,801,926      100,000           48    2,997,147      (253,000)     (499,563)    6,299,558


Net loss                           -            -            -            -     (819,441)            -             -      (819,441)
                         -----------  -----------  -----------  -----------  -----------   -----------   -----------   -----------


Balance - June 30, 2003    2,747,000    3,801,926      100,000           48    2,177,706      (253,000)     (499,563)    5,480,117


Net loss                           -            -            -            -     (850,434)            -             -      (850,434)
                         -----------  -----------  -----------  -----------  -----------   -----------   -----------   -----------

Balance - June 30, 2004    2,747,000  $ 3,801,926      100,000  $        48  $ 1,327,272      (253,000)  ($  499,563)  $ 4,629,683


         The accompanying notes are an integral part of these statements

                                       F-6




                        Nutrition Management Services Company and Subsidiaries

                                 CONSOLIDATED STATEMENTS OF CASH FLOWS

                                            Year ended June 30,

                                                                         2004          2003            2002
                                                                    -----------    -----------    -----------
Operating activities
     Net loss                                                       $  (850,434)   $  (819,441)   $  (286,724)
     Adjustments to reconcile net (loss) income to net cash
              provided by operating activities
         Depreciation and amortization                                  620,199        775,057        847,727
         Amortization of bond costs                                      14,567         14,566         14,567
         Provision for bad debts                                        585,000        389,262        900,000
         Amortization of deferred gain                                        -              -            (50)
         Unrealized gain on trading securities                           (2,627)             -              -
         (Benefit) for deferred taxes                                  (201,700)      (436,565)      (156,690)
     Changes in assets and liabilities
         Accounts receivable                                             14,682      2,290,854       (135,361)
         Unbilled revenue                                               (38,116)        (4,642)       131,462
         Inventory                                                       (3,236)        74,293          2,631
         Prepaid and other                                               (7,390)       (76,479)       127,930
         Income tax refund                                                    -        (63,348)             -
         Accounts payable                                               420,451       (590,629)      (726,630)
         Accrued expenses                                               (17,229)      (139,727)       102,198
         Accrued payroll                                                (24,446)       (14,239)       (12,356)
         Accrued income taxes                                                 -              -              -
         Other                                                           42,415         45,687        (54,812)
                                                                    -----------    -----------    -----------
              Net cash provided by  operating activities                552,136      1,444,749        753,892
                                                                    -----------    -----------    -----------
Investing activities
     Purchase of property and equipment                                 (80,314)       (74,800)      (243,698)
     Purchase of marketable securities                                 (200,342)             -              -
     (Advances) repayments  to employees and officers                         -         88,207       (194,503)
                                                                    -----------    -----------    -----------

              Net cash (used in) provided by investing activities      (280,656)        13,407       (438,201)
                                                                    -----------    -----------    -----------
Financing activities
     Restricted cash                                                   (250,000)             -              -
     Proceeds from long-term borrowings                               4,225,000      1,775,900      1,217,000
     Repayment of long-term borrowings                               (4,084,783)    (2,129,866)    (1,054,268)
     Repayment of long-term accounts payable                           (575,686)      (336,988)      (336,988)
                                                                    -----------    -----------    -----------

         Net cash used in financing activities                         (685,469)      (690,954)      (174,256)
                                                                    -----------    -----------    -----------
              NET (DECREASE)/INCREASE  IN CASH AND
                  CASH EQUIVALENTS                                     (413,989)       767,202        141,435

Cash and cash equivalents - beginning of year                         1,360,512        593,310        451,875
                                                                    -----------    -----------    -----------
Cash and cash equivalents - end of year                             $   946,523    $ 1,360,512    $   593,310
                                                                    ===========    ===========    ===========
Supplemental disclosures of cash flow information

     Cash paid during the years for
         Interest                                                   $   185,000    $   213,625    $   270,483
         Income taxes                                               $     2,040    $     6,475    $  (113,473)


         The accompanying notes are an integral part of these statements

                                       F-7





             Nutrition Management Services Company and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A - ORGANIZATION AND BUSINESS

     Nutrition  Management  Services  Company (the  "Company")  was organized on
     March 28,  1979,  to provide  professional  management  expertise  and food
     services to  continuing  care and health care  facilities  in the  domestic
     United States.  The Company competes mainly with regional and national food
     service  management  companies as well as self-managed  departments.  Apple
     Management   Services   Company  ("Apple   Management"),   a  wholly  owned
     subsidiary,  was  organized  on November 25,  1991,  to provide  management
     service  expertise.  The  Collegeville  Inn Conference and Training Center,
     Inc. (Collegeville Inn located in Lower Providence Township, Pennsylvania),
     a wholly owned  subsidiary,  was organized on April 29, 1994. This facility
     opened  in  September  1997,  and is used  as a  showroom  for  prospective
     customers,  comprehensive training facility,  and retail restaurant.  Apple
     Fresh Foods,  Ltd.  ("Apple  Fresh  Foods"),  was organized on November 14,
     1997, to develop a cook-chill  food  preparation  technology for use in the
     Company's food service business. Apple Fresh Food's operation is located in
     the Collegeville Inn.

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     1.  BASIS OF FINANCIAL STATEMENT PRESENTATION

     The accompanying  consolidated financial statements include the accounts of
     the Company and its wholly owned  subsidiaries.  Intercompany  transactions
     and balances have been eliminated in consolidation.

     2.  CASH AND CASH EQUIVALENTS

     Cash equivalents are comprised of certain highly liquid investments with an
     original  maturity of three months or less when purchased.  Restricted cash
     is comprised of a  certificate  of deposit  which is pledged as  additional
     collateral against the revolver note.

     3.  MARKETABLE SECURITIES
     Nutrition   Management  Services  Company  classifies  its  investments  in
     marketable  securities  as  trading,  which are carried at their fair value
     based upon the quoted  market  prices of those  investments  at period end.
     Accordingly,  net  realized  and  unrealized  gains of  $2,969  on  trading
     securities are included in net earnings as of June 2004.

                                               Cost         Fair Value
                                             ---------      ---------
         Common and Preferred Stock          $ 119,284      $ 122,187
         Mutual Funds                        $  80,716      $  80,782
                                             ---------      ---------
               Total                         $ 200,000      $ 202,969
                                             =========      =========

     4.  Accounts Receivable and Allowance for Doubtful Accounts

     The Company's  accounts  receivable  are primarily  related to food service
     management  fees.  Credit is extended  based on prior  experience  with the
     customer and  evaluation  of a  customer's  financial  condition.  Accounts
     receivable are generally due within thirty days. The allowance for doubtful
     accounts represents an estimate of amounts considered  uncollectible and is
     determined based on specifically  identified  amounts that we believe to be
     based on historical  collection  experience,  adverse  situations  that may
     affect the customer's ability to repay and prevailing economic  conditions.
     If our actual collections  experience  changes,  revisions to our allowance
     may be  required.  In the fourth  quarter  2004,  the  Company  recorded an
     adjustment of $330,000 to increase the allowance for doubtful accounts. Due
     to the  passage of time,  the  Company  made a  decision  to  increase  the
     provision  for  doubtful  accounts  with  respect  to  certain   delinquent
     customers.  The Company  believes it will be successful  in its  collection
     efforts related to these outstanding balances.

     5.   Unbilled Revenue

     Unbilled revenue represents  amounts for services provided,  but not billed
     as of the balance sheet date.

     6.   Inventory

     Inventory, which consists primarily of food, is stated at the lower of cost
     (first-in,  first-out method) or market.  The Company records inventory for
     contracts which require goods to be owned by the Company. For the remaining
     customers, the Company purchases inventory on their behalf and a payable or
     receivable is recorded for the change in the value of these goods, which is
     then  collected  from or paid to  customers.  As of June 30, 2004 and 2003,
     inventory is $159,181 and $155,945,  respectively.  As of June 30, 2004 and
     2003,   inventory   receivable   from  customers  is  $17,186  and  $21,730
     respectively,  while  inventory  payable  to  customers  is $0 and  $15,525
     respectively.


                                       F-8




             Nutrition Management Services Company and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

     7. REVENUE RECOGNITION

     The Company  recognizes  revenue when  services  have been rendered and the
     contract price is determinable,  and collectibility is reasonably  assured.
     Revenue is generated  primarily  from fees for food service  management and
     facilities  management at continuing care and health care  facilities,  and
     the  Collegeville  Inn restaurant.  Revenue is recognized when services are
     performed.  Revenues are recorded net of discounts and rebates. The Company
     has no other  obligation  with  respect to its services  once  services are
     performed.

     8.  PROPERTY AND EQUIPMENT

     Property and equipment are stated at cost.  Depreciation  and  amortization
     are provided using the straight-line method over the estimated useful lives
     of the related assets or the remaining lease term.

     9.  DEFERRED FINANCING COSTS

     Debt  financing  costs  incurred in  connection  with the bonds payable are
     deferred and  amortized,  using the interest  method,  over the term of the
     related debt and are classified as other assets on the balance sheet.

     10.  ACCOUNTING FOR STOCK-BASED COMPENSATION

     The Company follows the disclosure  provisions of SFAS No. 148, "Accounting
     for Stock-Based  Compensation-Transaction  and Disclosure,  an amendment of
     FASB  Statement  123" ("SFAS 148") for its stock  options.  SFAS 148 amends
     FASB Statement No. 123, Accounting for Stock-Based Compensation, to provide
     alternative methods of transition for an entity that voluntarily changes to
     the  fair  value  based  method  of  accounting  for  stock-based  employee
     compensation. It also amends the disclosure provisions of that Statement to
     require prominent disclosure about the effects on reported net income of an
     entity's  accounting policy decisions with respect to stock-based  employee
     compensation.  Finally,  this Statement amends Accounting  Principles Board
     Opinion No. 28, Interim Financial  Reporting,  to require  disclosure about
     those  effects in interim  financial  information.  The Company  expects to
     continue to utilize the intrinsic  valuation  method for recoding  employee
     stock  based  compensation.  There are no  elements  of  compensation  that
     require disclosure.

     11.  INCOME TAXES

     The Company  determines  its provision for income taxes using the asset and
     liability  method.  Under this method,  deferred tax assets and liabilities
     are  recognized  for the future tax  effects of  temporary  differences  of
     existing assets and liabilities and their respective tax bases.  Future tax
     benefits  of tax loss and  credit  carryforwards  also  are  recognized  as
     deferred tax assets.  When necessary,  deferred tax assets are reduced by a
     valuation   allowance  to  the  extent  the  Company   concludes  there  is
     uncertainty  as to their  ultimate  realization.  Deferred  tax  assets and
     liabilities  are measured using enacted tax rates in effect for the year in
     which those temporary  differences are expected to be recovered or settled.
     The  effect on  deferred  taxes of a change in tax rates is  recognized  in
     income in the period that the change is enacted.

     As of June 30, 2004 and 2003,  the Company  maintained a deferred tax asset
     of $1,623,841 and $1,422,141,  respectively. The Company has not provided a
     valuation  allowance against its deferred tax assets after consideration of
     a future gain on the disposal of certain land adjacent to its  Collegeville
     facility and anticipated future profitable operating results.  However, the
     amount  realizable may be reduced if future taxable income is reduced or is
     insufficient  to utilize  the  entire  deferred  tax asset.  See Note G for
     additional information.


                                       F-9




             Nutrition Management Services Company and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

     12.  EARNINGS/LOSS PER SHARE

     The Company  follows the provisions of SFAS No. 128,  "Earnings Per Share."
     Basic earnings/loss per share excludes dilution and is computed by dividing
     income/loss available to common shareholders by the weighted average common
     shares outstanding during the period. Diluted earnings/loss per share takes
     into account the potential dilution that could occur if securities or other
     contracts to issue common stock were  exercised and  converted  into common
     stock.

     Options to purchase  82,750,  82,750 and 89,750  shares of common  stock at
     $4.00 per share were outstanding during 2004, 2003 and 2002,  respectively.
     The  Company  has  sustained  a net  loss  for  each  of the  fiscal  years
     presented.  As a result,  the common  stock  equivalents  of stock  options
     issued  and  outstanding  at  June  30,  2004  were  not  included  in  the
     computation of diluted earnings per share for the three years then ended as
     they were antidilutive.

     13.  ADVERTISING COSTS

     It is the Company's  policy to expense  advertising  costs in the period in
     which they are incurred.  Advertising  expense for the years ended June 30,
     2004, 2003 and 2002 was $112,404, $53,196 and $62,448, respectively.

     14.  RECLASSIFICATION

     Certain  2003 and 2002  items  have been  reclassified  to  conform  to the
     current year presentation.

     15.  USE OF ESTIMATES

     In preparing the Company's financial statements,  management is required to
     make estimates and assumptions  that affect the reported  amounts of assets
     and liabilities, the disclosure of contingent assets and liabilities at the
     date of the financial statements,  and the reported amounts of revenues and
     expenses  during the  reporting  period.  Actual  results could differ from
     those estimates.

     16.  FAIR VALUE OF FINANCIAL INSTRUMENTS

     We used the following  methods and assumptions in estimating our fair value
     disclosures for financial instruments:

     Cash and cash  equivalents:  The carrying  amounts we have  reported in the
     accompanying balance sheet for cash and cash equivalents  approximate their
     fair values.

     Investments:  We estimate  the fair values of  investments  based on quoted
     market  prices.  The  carrying  amounts are  reported  in the  accompanying
     balance sheet for investments in contracts approximate their fair values.

     Long- and short-term  debt: We base the fair values of debt  instruments on
     quoted market prices.  Where quoted prices are not  available,  we base the
     fair  values  on the  present  value of future  cash  flows  discounted  as
     estimated  borrowing  rates for similar  debt  instruments  or on estimated
     prices  based on current  yields for debt  issues of  similar  quality  and
     terms. The carrying amounts are reported in the accompanying  balance sheet
     for debt approximate  their fair values.  See footnotes E and F for further
     discussion.

     17.  IMPAIRMENT OR DISPOSAL OF LONG LIVED ASSETS

     The Company adopted SFAS 144, "ACCOUNTING FOR THE IMPAIRMENT OR DISPOSAL OF
     LONG-LIVED  ASSETS" ("SFAS 144").  Under the  requirements of SFAS 144, the
     Company assesses the potential impairment of property,  plant and equipment
     whenever  events or changes in  circumstances  indicate  that the  carrying
     value may not be recoverable.  An asset's value is impaired if management's
     estimate  of the  aggregate  future cash  flows,  undiscounted  and without
     interest  charges,  to be generated by the asset are less than the carrying
     value of the  asset.  Such cash flows  consider  factors  such as  expected
     future  operating income and historical  trends,  as well as the effects of
     demand and  competition.  To the extent  impairment has occurred,  the loss
     will be measured as the excess of the carrying amount of the asset over the
     fair value of the asset.  Such  estimates  require the use of judgment  and
     numerous subjective assumptions,  which, if actual experience varies, could
     result in material differences in the requirements for impairment charges.


                                       F-10




             Nutrition Management Services Company and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

     18.   RESEARCH AND DEVELOPMENT

     The  Company  incurred  research  and  development  costs  related  to  the
     Company's  Cook-Chill  food  preparation   technology  in  the  amounts  of
     $159,893,  $138,605 and $43,730 for the years ended June 30, 2004, 2003 and
     2002, respectively.

     19.    NEW ACCOUNTING PRONOUNCEMENTS

     In January 2003 the FASB issued Financial Interpretation No. 46 ("FIN 46"),
     "CONSOLIDATION OF VARIABLE INTEREST ENTITIES" and in December 2003 the FASB
     issued   Financial   Interpretation   No.  46  (revised)   ("FIN   46(R)"),
     "CONSOLIDATION   OF   VARIABLE   INTEREST   ENTITIES   (REVISED)".    These
     interpretations  of  Accounting  Research  Bulletin  No. 51,  "CONSOLIDATED
     FINANCIAL  STATEMENTS,"  address  consolidation by business  enterprises of
     certain variable interest  entities where there is a controlling  financial
     interest in a variable  interest entity or where the variable interest does
     not have  sufficient  equity  at risk to  finance  its  activities  without
     additional  subordinated financial support from other parities. The Company
     will apply the consolidation  requirement of FIN 46 and FIN 46(R) in future
     periods if the Company  should own any  interest in any  variable  interest
     entity.

NOTE C - BUSINESS CONDITIONS

     The  Company's  primary  sources of  revenues  are the  management  fees it
     receives  from  contracts  to provide  food and  housekeeping  services  to
     continuing care facilities,  hospitals, and retirement communities, as well
     as the  Collegeville Inn which includes the Conference and Training Center,
     Catering  facilities and the Cook Chill operations.  See Note P for segment
     reporting information.  The Company has a business plan in place to improve
     the operating  results from the  Collegeville  Inn  Conference and Training
     Center.

     On September 8, 2004 the Company  entered into an agreement of sale for the
     land adjacent to its  Collegeville  Inn Conference & Training  Center.  The
     agreement provides for an initial deposit of $10,000 within ten days of the
     effective date of the agreement,  with  additional  deposits of $50,000 and
     $25,000  payable to the  Company  upon the  occurrence  of certain  events,
     including,   but  not  limited  to,  zoning  approvals.  The  deposits  are
     non-refundable upon the end of a 120-day inspection period, which commenced
     on the date the Buyer received a fully  executed  original of the agreement
     of sale.  Pursuant to the terms of the  agreement of sale,  the Company may
     realize gross proceeds of not less than  $1,710,000.  However,  the Company
     may realize gross proceeds in excess of $1,710,000, if the buyer is able to
     maximize the yield of the  property.  The  agreement of sale  provides that
     settlement  occur within  twenty-four  months of the date of the agreement,
     however, upon payment of additional deposits, settlement may be extended an
     additional  twelve  months.  Upon closing of the  transaction,  the Company
     plans on using the proceeds to retire a proportional  amount of outstanding
     debt associated with the parcel of land. There can be no assurance that the
     sale of this land will be  completed  in  accordance  with the terms of the
     agreement of sale.

     The Company realizes that in order to reduce continuing operating losses it
     may  have  to  dispose  of  certain  assets,  including  its  research  and
     development facility,  the Collegeville Inn Conference and Training Center.
     The  Company is  exploring  all  reasonable  alternatives  to  improve  its
     operating  results,  including but not limited to,  increasing food service
     revenues with targeted marketing efforts, increasing revenues from the sale
     of the Company's Cook Chill  products,  the sale or lease of all or part of
     the Collegeville Inn Conference and Training Center, sale of excess land at
     the  Collegeville  Inn  Conference  and  Training  Center and  reduction of
     operating  expenses.  There can be no assurance as to the success of any or
     all of these alternatives.

     Management believes that operating cash flow, the proceeds from the sale of
     the land, available cash and available credit resources will be adequate to
     make repayments of  indebtedness,  meet the working capital needs,  satisfy
     the needs of its operations,  and to meet anticipated capital  expenditures
     during the next twelve months ending June 30, 2005.


                                      F-11



             Nutrition Management Services Company and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


NOTE C - BUSINESS CONDITIONS-continued

     At June 30, 2004 the Company was not in compliance with its bank covenants,
     which have been waived. The Company has amended its agreement with the bank
     that has extended the terms of the Company's  credit line through  December
     31, 2005. See Note E for additional information.

NOTE D - PROPERTY AND EQUIPMENT

     The following details the composition of property and equipment.

                                                                 Estimated
                                                                useful lives      2004           2003
                                                                               -----------   -----------
Property and equipment
     Land                                                               -      $   497,967   $   497,967
     Building                                                          40        7,491,984     7,491,984
     Machinery and equipment                                          2-8        3,864,941     3,812,628
     Furniture and fixtures                                           2-8          749,434       749,434
     Other, principally autos and trucks                             2-10          407,117       379,119
                                                                               -----------   -----------
                                                                                13,011,443    12,931,132
     Less accumulated depreciation                                               5,447,875     4,827,676
                                                                               -----------   -----------
                                                                               $ 7,563,568   $ 8,103,456
                                                                               ===========   ===========

NOTE E - LONG- TERM DEBT

     Long-term debt consisted of the following:

                                                                                  2004           2003
                                                                               -----------   -----------

Bank revolving  credit,  interest due monthly at the National  Consumer
     rate minus .25% (effectively 4.1% as of June 30, 2004),  secured by
     all corporate  assets and limited  personal  guarantee of the Chief
     Executive Officer; matures on December 31, 2005                           $ 2,846,922   $2,505,922

Note payable,  term loan incurred in connection with purchased computer
     equipment,  payable in equal  monthly  installments  of $6,722 at a
     fixed  rate of  interest  at 7.4%,  maturing  on May 1,  2004;  the
     acquired equipment was pledged as collateral                                        0       65,782

Industrial Revenue Bonds (Collegeville Inn Projects) (see bonds payable)         1,940,000    2,030,000

    Industrial Revenue Bonds (Apple Fresh Foods Projects) (see bonds
       payable)                                                                    735,000      780,000
                                                                               -----------   -----------
                                                                                 5,521,922    5,381,704
    Less current maturities                                                        145,000      196,813
                                                                               -----------   -----------
                                                                                $5,376,922   $5,184,891
                                                                               ===========   ===========


                                  F-12




         Nutrition Management Services Company and Subsidiaries

         NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


NOTE E - LONG- TERM DEBT-continued

     In February 2001,  the Company  executed a loan agreement with a bank for a
     revolving   credit  and  two  irrevocable   letters  of  credit  issued  in
     conjunction  with the issuance of the Industrial  Revenue  Bonds,  totaling
     $4,000,000  and  $3,065,000,  respectively.  In  October  2003 the  Company
     entered into an amended credit agreement  whereby the $4,000,000  Revolving
     Credit Loan Facility was reduced to $3,500,000 and $500,000 was placed in a
     cash collateral  account and pledged as additional  collateral  against the
     revolving  credit  line.  At June  30,  2004,  the  Company  had  available
     approximately  $653,078  under the  revolving  credit.  Advances  under the
     revolving credit are used for working capital purposes.

     These credit  agreements  contain  covenants that include the submission of
     specified  financial  information and the maintenance of insurance coverage
     for the pledged  assets during the term of the loans.  The  covenants  also
     include  the  maintenance  of a certain  consolidated  fixed  debt  service
     coverage  ratio,  ratio of total  consolidated  liabilities to consolidated
     tangible  net worth,  and  minimum  working  capital.  At June 30, 2004 the
     Company was not in compliance with these covenants. As of June 30, 2004 and
     2003 the Company  maintained  restricted  cash balances of $250,000 and $0,
     respectively,  which was not available for operating purposes.  On December
     15,  2004  the  Company  entered  into an  amended  agreement  whereby  the
     non-compliance  was  waived and new  financial  covenants  were  negotiated
     through  June 30,  2005,  which  reflect the  Company's  current  operating
     projections.  As  part  of  the  amended  agreement,  the  Company's  Chief
     Executive  Officer was required to execute a limited personal  guarantee in
     the amount of $3,000,000.

Bonds  Payable - In  December  1996,  the  Company,  through  its  subsidiaries,
authorized two industrial revenue bond issues.

     ISSUE #1
     --------

     Title - Montgomery  County  Industrial  Development  Authority,  $2,500,000
     aggregate  principal  amount,  federally taxable variable rate demand/fixed
     rate revenue bonds (Collegeville Inn Project) Series of 1996

     Rate - Variable,  to a maximum of 17%  (Variable  Rate at June 30, 2004 was
     1.6%)

     Term - 20 years (2016)

Purpose - Rehabilitate, furnish and equip the Collegeville Inn facility

     ISSUE #2
     --------

     Title - Montgomery  County  Industrial  Development  Authority,  $1,000,000
     aggregate  principal  amount,  federally taxable variable rate demand/fixed
     rate revenue bonds (Apple Fresh Foods, Ltd. Project) Series of 1996

     Rate - Variable,  to a maximum of 15%  (Variable  Rate at June 30, 2004 was
     1.25%)

     Term - 20 years (2016)

     Purpose - Develop a cook-chill food preparation technology

Each series of bonds is guaranteed by the Company and each of its  subsidiaries.
The assets of  Collegeville  Inn and Apple Fresh Foods are pledged as collateral
for both series of bonds.

The Company's bank has issued irrevocable letters of credit in favor of the bond
trustee  for the full amount of both bond  issues.  The letters of credit have a
term of four years and can be renewed on an annual  basis by the bank.  The bank
holds the mortgage on the Collegeville Inn building and property. The letters of
credit are guaranteed by the parent company.


                                  F-13




     Nutrition Management Services Company and Subsidiaries

     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

NOTE E - LONG- TERM DEBT-continued

     The sinking fund requirements of the bonds are as follows:

                                Collegeville      Apple Fresh
                                     Inn             Foods             Total
                                    -------           ------            -------

     2004                          $100,000          $45,000           $145,000
     2005                           105,000           45,000            150,000
     2006                           115,000           50,000            165,000
     2007                           120,000           50,000            170,000
     2008                           130,000           50,000            180,000


Maturities of principal due in the following years are set forth below:

         Year ending June 30,

                2005                             $   150,000
                2006                               3,011,922
                2007                                 170,000
                2008                                 180,000
                2009                                 190,000
                Thereafter                         1,675,000
                                                 -----------


                                                 $ 5,376,922
                                                 ===========

NOTE F - LONG-TERM NOTE PAYABLE

     The Company  entered into an agreement with a third party in July 2000. The
     agreement calls for the following payment terms:  $100,000 due on August 1,
     2000,  followed by 37 monthly payments of $28,000,  $323,000 due on October
     1, 2003,  and the  remaining  balance  paid at a rate of $28,000  per month
     until  paid in full.  The  payment  schedule  includes  total  payments  of
     $154,453 in 2005.

NOTE G - INCOME TAXES

     The components of income tax (benefit) expense are:                Year Ended June 30,
                                                                     -----------------------------------
                                                                        2004          2003       2002
                                                                     ---------    ---------    ---------
      Current
           Federal                                                   $       0    $ (47,422)   $  24,736
           State                                                             0      (13,400)      41,975
                                                                     ---------    ---------    ---------

                                                                             0      (60,822)      66,711
                                                                     ---------    ---------    ---------
      Deferred
           Federal                                                    (157,662)    (345,191)    (125,650)
           State                                                       (44,038)     (91,374)     (31,040)
                                                                     ---------    ---------    ---------

                                                                      (201,700)    (436,565)    (156,690)
                                                                     ---------    ---------    ---------


                                                                     $(201,700)   $(497,387)   $ (89,979)
                                                                     =========    =========    =========


                                      F-14




             Nutrition Management Services Company and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

NOTE G - INCOME TAXES-continued

     The tax  effects of  temporary  differences  that give rise to  significant
     portions  of the  deferred  tax assets and  deferred  tax  liabilities  are
     approximately:

                                                               June 30
                                                           2004          2003
                                                       ----------   ----------

         Deferred tax assets
              Provision for doubtful accounts          $1,095,349   $1,093,627
              Excess of tax over financial statement
                  basis of investments in contracts       147,970      184,825

              Vacation accrual                            114,956      115,827
              Charitable contribution carryforward         36,690       26,905
              Federal net operating loss                  324,893      165,322
              Other                                       107,879       63,842
                   Total deferred tax assets            1,827,737    1,650,348
                                                       ----------   ----------

Deferred tax liabilities

         Depreciation                                     203,896      228,207
                                                       ----------   ----------
              Net deferred tax assets                  $1,623,841   $1,422,141
                                                       ==========   ==========

     These amounts are classified in the balance sheet as follows:

                                                               June 30
                                                          2004           2003
                                                       ----------   ----------
         Current asset                                 $  405,320   $1,209,454
         Non-current asset                              1,218,521      212,687
                                                       ----------   ----------
                                                       $1,623,841   $1,422,141

The Company has not  provided a valuation  allowance  against its  deferred  tax
assets  after  consideration  of a future gain on the  disposal of certain  land
adjacent  to  its  Collegeville   facility  and  anticipated  future  profitable
operating results.


The following reconciles the tax provision with the U.S. statutory tax rates:

                                                   Year Ended June 30
                                               2004      2003        2002
                                               ----      ----        ----

   Income taxes at U.S. statutory rates       34.0%      34.0%      34.0%
   States taxes, net of federal tax benefit   (4.2)       5.3       (7.4)
   Nondeductible expenses                    (10.2)      (3.5)      (8.6)
   Other                                       (.4)       2.0        5.9
                                              ----       ----       ----
                                              19.2%      37.8%      23.9%
                                              ====       ====       ====


The Company  also has a federal  net  operating  loss carry  forward of $755,565
expiring on December 31, 2017.  The Company has  charitable  contribution  carry
forwards  in the amount of  $85,326,  which  begin to expire in the fiscal  year
2004.


                                      F-15




             Nutrition Management Services Company and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


NOTE H - RELATED PARTY TRANSACTIONS

     The Company leases its corporate  offices,  located at 725 Kimberton  Road,
     Kimberton,  Pennsylvania, which consists of approximately 8,500 square feet
     from Ocean 7, Inc., a corporation controlled by the Chief Executive Officer
     of the Company,  The initial term of the lease expired on June 30, 2003 and
     continues  on a month to month  lease based on terms  generally  similar to
     those prevailing to unrelated parties. The Company leases an apartment from
     a corporation controlled by a related party to accommodate visiting clients
     and employees. See Note I for additional information.

     Joseph V.  Roberts,  Chief  Executive  Officer and Director of the Company,
     received long term advances of which $375,373 remain outstanding as of June
     30,  2004 and  2003,  respectively.  Kathleen  A.  Hill,  President,  Chief
     Operating Officer and Director of the Company,  received long term advances
     of  which  $59,910  remain  outstanding  as of  June  30,  2004  and  2003,
     respectively.  The Company will enter into a shareholder  note as part of a
     compensation  agreement,  currently  being  reviewed  by  the  compensation
     committee,  for all  notes to be  repaid  over  a five-year  period  at the
     Federal adjusted interest rate.

NOTE I - COMMITMENTS AND CONTINGENCIES

     The Company leases its corporate  office building from the  above-mentioned
     related  party  under a  month-to-month  lease  based on  terms  management
     believes to be generally similar to those prevailing to unrelated  parties.
     During the years  ended June 30,  2004,  2003 and 2002,  rent  expense  was
     $273,043, $255,587 and $248,252, respectively.

     1.  OPERATING LEASES

     The Company  leases real estate  facilities  from a corporation  owned by a
     principal stockholder under month-to-month operating leases.

     The Company is also obligated under various  operating leases for operating
     equipment for periods  expiring  through 2007.  During the years ended June
     30, 2004, 2003 and 2002, rent expense was $287,440,  $260,698 and $275,054,
     respectively, for all operating leases.

     Minimum annual rentals under non-cancelable  operating leases subsequent to
     June 30, 2004, are as follows:

                                                     Operating
        Year ending June 30,                         equipment

             2005                                    $   41,702
             2006                                        41,702
             2007                                        16,366
             2008                                             0


     2.  LITIGATION

     On February 7, 2001, the Company filed a suit against a major client in the
     Court of  Common  Pleas in  Chester  County,  Pennsylvania.  This  suit has
     subsequently  been  removed to the  United  States  District  Court for the
     Eastern  District of  Pennsylvania.  In the lawsuit,  NMSC has made various
     claims,  including  among  others a claim  that the  client  failed  to pay
     approximately  $2.1  million in invoiced  amounts,  a claim that the client
     failed to pay  approximately $1 million in other amounts owing, a claim for
     reimbursement  for start up costs in an amount  in  excess of  $400,000,  a
     claim for over $2 million in lost profits (or,  alternatively,  a claim for
     reimbursement  for over  $300,000  in credits  issued in  exchange  for the
     promise to extend the arrangement), a claim in the nature of treble damages
     and counsel  fees,  and other claims.  The client has filed a  counterclaim
     which the Company is  contesting  as part of the overall  proceedings.  The
     case is currently docketed for trial in early 2005.


                                      F-16




             Nutrition Management Services Company and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


NOTE I - COMMITMENTS AND CONTINGENCIES-continued

     The  Company is  involved  in  litigation  with two  separate  construction
     contractors  related to the renovations of Collegeville  Inn Conference and
     Training  Center.  The Company  denies each claim and has asserted  offsets
     against the amounts claimed. One case is docketed for early 2005, while the
     other case is in discovery.

     Although it is not possible to predict with  certainty the outcome of these
     unresolved  legal  actions or the range of possible  loss or recovery,  the
     Company  believes these  unresolved  legal actions will not have a material
     effect on its financial position or results of operations.

     In addition to the litigation  described  above,  the Company is exposed to
     asserted  and  unasserted  claims.  In  the  opinion  of  management,   the
     resolution of these matters will not have a material  adverse effect on the
     Company's financial position, results of operations or cash flows.

NOTE J - STOCKHOLDERS' EQUITY

     1.  CLASS A COMMON STOCK

     The  Company is  authorized  to issue  10,000,000  shares of Class A Common
     Stock,  no par value,  of which  holders  of Class A Common  Stock have the
     right  to cast  one  vote for each  share  held of  record  in all  matters
     submitted to a vote of holders of Class A Common Stock.  The Class A Common
     Stock and  Class B Common  Stock  vote  together  as a single  class on all
     matters  on which  shareholders  may  vote,  except  when  class  voting is
     required by applicable law.

     Holders of Class A Common Stock are entitled to  dividends,  together  with
     the holders of Class B Common Stock, pro rata based on the number of shares
     held.  In the event of the  liquidation,  dissolution  or winding up of the
     affairs of the Company, all assets and funds of the Company remaining after
     the payment to creditors and to holders of Preferred  Stock,  if any, shall
     be distributed, pro rata, among the holders of the Class A Common Stock and
     Class B Common Stock.

     2.  CLASS B COMMON STOCK

     The Company has authorized  100,000 shares of Class B Common Stock,  all of
     which were issued to the Chief Executive  Officer and majority  shareholder
     of the  Company,  in exchange for 100,000  shares of Class A Common  Stock.
     Each  share of  Class B Common  Stock  is  entitled  to seven  votes on all
     matters  on  which  shareholders  may  vote,   including  the  election  of
     directors.  The Class A Common Stock and Class B Common Stock vote together
     as a single  class on all matters on which  shareholders  may vote,  except
     when class voting is required by applicable law.

     Each share of Class B Common Stock also is convertible at any time upon the
     option of the holder into one share of Class A Common  Stock.  There are no
     preemptive,  redemption,  conversion or cumulative voting rights applicable
     to the Class B Common Stock.

     3.  PREFERRED STOCK

     The Company is authorized to issue 2,000,000  shares of Preferred Stock, no
     par value, of which no shares have been issued.  The Preferred Stock may be
     issued by the Company's Board of Directors from time to time in one or more
     series.


                                      F-17




             Nutrition Management Services Company and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

NOTE K - STOCK OPTIONS AND EMPLOYEE STOCK PURCHASE PLAN

     1.  STOCK OPTIONS

     In  September  1991,  the Company  adopted  the 1991 Stock  Option Plan for
     officers,  directors and key employees to receive  incentive stock options.
     The options are  exercisable for a period up to 10 years from date of grant
     at an exercise price not less than fair market value of the common stock at
     date of grant.  The Plan expired in September 2001. There have been 500,000
     shares of common stock reserved for the Plan.

     The following is a summary of transactions:

                                             Number
                                           of options       Non-                   Weighted
                                           outstanding    qualified                 average
                                            incentive       stock                  exercise
                                          stock options    options       Total       price
                                          -------------    -------       -----       -----

     Outstanding at June 30, 2001            44,750        45,000       89,750       4.00
     Exercisable at June 30, 2001            44,750        45,000       89,750       4.00

     Outstanding at June 30, 2002            44,750        45,000       89,750       4.00
     Exercisable at June 30, 2002            44,750        45,000       89,750       4.00
     Forfeited/exercised                     (7,000)            -       (7,000)      4.00
                                             -------       -------      -------      -----

     Outstanding at June 30, 2003            37,750        45,000       82,750       4.00
     Exercisable at June 30, 2003            37,750        45,000       82,750       4.00

     Outstanding at June 30, 2004            37,750        45,000       82,750       4.00
     Exercisable at June 30, 2004            37,750        45,000       82,750       4.00

     All options were granted at exercise prices above market price. In addition
     the Company has not granted any stock options since 1998.

     The remaining  contractual  life of outstanding and exercisable  options is
     approximately  four years with respect to the  incentive  stock options and
     three years with respect to non-qualified stock options.

2.   Employee Stock Purchase Plan

     The Company has a stock purchase plan that allows  participating  employees
     to purchase,  through payroll  deductions,  shares of the Company's  common
     stock at 85 percent of the fair market  value at specified  dates.  At June
     30, 2004, all employees were eligible to participate in the plan. A summary
     of stock purchased under the plan is shown below.

                                    2004               2003             2001
                                   ------            --------       ---------

     Aggregate purchase$           $  -              $   720        $   4,445
     Shares purchased                 -                4,235           19,202
     Employee participants           14                   14               16

The Company  accounts for employee stock plans under the intrinsic  value method
prescribed  by  Accounting  Principles  Board  ("APB") No. 25. The effect of the
pro-forma  information in accordance with Financial  Accounting  Standards Board
SFAS  No.  123,  "Accounting  for  Stock-Based   Compensation,"  was  determined
immaterial.


                                      F-18




             Nutrition Management Services Company and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

NOTE L - DEFINED CONTRIBUTION PENSION PLAN

     The Company  sponsors a 401(k) plan for all employees who have attained the
     age of  twenty-one  and  have  completed  one  year  of  service.  Eligible
     employees  may  contribute  up to 15% of their annual  compensation  to the
     plan.  The  Company  can  match  100% up to the first 6% of  employee  plan
     contributions.  Participants  are  vested  20% for  each  year  of  service
     beginning  after year 3 and are fully  vested  after seven  service  years.
     During the years ended June 30, 2004, 2003 and 2002, Company  contributions
     to the plan,  which were charged to expense,  amounted to $23,889,  $23,649
     and $25,630, respectively.

NOTE M - CONCENTRATION OF CREDIT RISK

     Financial   instruments,   which   potentially   subject   the  Company  to
     concentrations  of  credit  risk,  consist  principally  of cash  and  cash
     equivalents and accounts receivable. A substantial portion of the Company's
     revenues are dependent upon the payment by customers who are dependent upon
     third-party  payers,  such as state  governments,  Medicare  and  Medicaid.
     Generally,  the Company does not require  collateral  or other  security to
     support customer receivables.  The Company routinely assesses the financial
     strength of its customers  and, based upon factors  surrounding  the credit
     risk of its customers,  establishes an allowance for uncollectible accounts
     and, as a consequence,  believes that its accounts  receivable  credit risk
     exposure beyond such allowances is limited.

     As of June 30, 2004,  the Company has cash accounts with various  financial
     institutions  having  high  credit  standings  and  periodically  has  cash
     balances subject to credit risk beyond insured  amounts.  As a consequence,
     it believes  that its exposure to credit risk loss is limited.  The Company
     does not  require  collateral  and  other  security  to  support  financial
     instruments subject to credit risk.

NOTE N - MAJOR CUSTOMERS

     The  Company's  Food Service  Management  Segment had sales to one customer
     representing approximately 28%, 26% and 15% of total revenues for the years
     ending  June  30,  2004,  2003  and  2002,  respectively.  The loss of such
     customer  could  have a material  adverse  effect on the  Company's  future
     results of operations.

NOTE O - MAJOR SUPPLIERS

     The Company's Food Service Management Segment purchased  approximately 34%,
     23% and 24% of its food and non-food products from one vendor for the years
     ending  June 30,  2004,  2003 and  2002,  respectively.  In the  event of a
     disruption in the Company's relationship with this vendor or any disruption
     in the vendor's  business,  the Company has alternate sources of supply for
     its food and non-food products.

NOTE P - BUSINESS SEGMENTS

     The Company follows the disclosure  provisions of SFAS No. 131, Disclosures
     about Segments of an Enterprise and Related  Information.  This  management
     approach  focuses  on  internal  financial  information  that  is  used  by
     management to assess performance and to make operating decisions.  SFAS No.
     131 also requires  disclosures about products,  services,  geographic areas
     and major  customers.


                                      F-19





             Nutrition Management Services Company and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

NOTE P - BUSINESS SEGMENTS-continued

     The financial  information of the Company's  reportable  segments have been
     compiled utilizing the accounting policies described in Note A Organization
     and  Business.  The  Company's  reportable  segments  are (1) food  service
     management and (2) training and conference  center.  Deferred taxes are not
     allocated to segments.  The  management  accounting  policies and processes
     utilized in compiling segment  financial  information are highly subjective
     and, unlike financial accounting,  are not based on authoritative  guidance
     similar to accounting principles generally accepted in the United States of
     America.  As  a  result,  reported  segment  results  are  not  necessarily
     comparable with similar information reported by other similar companies.

                                                                Training and
                                               Food Service     Conference
                                                Management        Center          Total
                                              ------------    ------------    ------------

As of and for the year ended June 30, 2004:
    Food service revenue                      $ 27,074,155    $    925,750    $ 27,999,905
    Depreciation and amortization                  123,193         497,007         620,199
    Income (loss) from operations                  568,029      (1,424,886)       (856,851)
    Interest expense                              (117,524)        (69,175)       (186,699)
    Interest income                                  9,564               -           9,564
    Loss before taxes (benefit)                   (623,018)       (429,116)     (1,052,134)
    Net loss                                      (421,318)       (429,116)       (850,434)
    Total assets                                 6,427,248       7,852,047      14,279,295
    Capital expenditures                            60,785          19,529          80,314

As of and for the year ended June 30, 2003:
    Food service revenue                      $ 26,462,980    $    843,050    $ 27,306,030
    Depreciation and amortization                  253,328         521,729         775,057
    Income (loss) from operations                  452,565      (1,552,000)     (1,099,435)
    Interest expense                              (116,558)        (95,395)       (211,953)
    Interest income                                  9,763               -           9,763
    Loss before taxes (benefit)                   (726,133)       (590,695)     (1,316,828)
    Net loss                                      (228,746)       (590,695)       (819,441)
    Total assets                                 6,881,864       8,260,850      15,142,714
    Capital expenditures                            40,392          34,408          74,800

As of and for the year ended June 30, 2002:
    Food service revenue                      $ 28,951,584    $    955,047    $ 29,906,632
    Depreciation and amortization                  322,245         525,482         847,726
    Income (loss) from operations                1,129,630      (1,215,717)        (86,087)
    Interest expense                              (147,652)       (113,385)       (261,037)
    Interest income                                  9,131               -           9,131
    Loss before taxes (benefit)                   (177,199)       (199,504)       (376,703)
    Net loss                                       (87,220)       (199,504)       (286,724)
    Total assets                                 8,612,981       8,739,035      17,352,016
    Capital expenditures                            29,323         214,375         243,698


                                      F-20




             Nutrition Management Services Company and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


NOTE P - QUARTERLY FINANCIAL DATA (UNAUDITED)

     The following quarterly financial data is unaudited,  but in the opinion of
     management  includes all necessary  adjustments for a fair  presentation of
     the interim results.

                                                                Fiscal 2004
                                           --------------------------------------------------------
                                           September 30,  December 31,     March 31,       June 30,
                                           -----------    -----------    -----------    -----------

     Revenues                              $ 6,706,854    $ 7,175,557    $ 7,141,972    $ 6,975,523
     Gross profit                            1,313,334      1,339,557      1,341,253      1,263,377
     Net income (loss)                        (125,956)      (116,649)      (120,378)      (487,451)
     Net income (loss) per share - basic
          and diluted                      $     (0.04)   $     (0.04)   $     (0.04)   $     (0.22)


                                                             Fiscal 2003
                                           --------------------------------------------------------
                                          September 30,    December 31,   March 31,        June 30,
                                           -----------    -----------    -----------    -----------

     Revenues                              $ 7,256,400    $ 7,166,653    $ 6,358,301    $ 6,524,676
     Gross profit                            1,312,420      1,217,980      1,097,190        994,000
     Net income (loss)                        (174,945)      (282,217)      (306,759)       (55,520)
     Net income (loss) per share - basic
          and diluted                      $     (0.06)   $     (0.10)   $     (0.11)   $     (0.02)

     The  Company's  net loss for the quarter  ending June 30, 2004 includes the
     increase in reserve for  allowance for doubtful  accounts of $330,000.  See
     Note  B-Accounts   Receivable  and  Allowance  for  Doubtful  Accounts  for
     additional information. In addition, an adjustment to recorded income taxes
     amounting to $201,700 was also recorded in the fourth quarter.  See Note G-
     Income Taxes for additional information.


                                      F-21




                            SUPPLEMENTAL INFORMATION









             Nutrition Management Services Company and Subsidiaries

                         SCHEDULE OF VALUATION ACCOUNTS

                     For the three years ended June 30, 2004


The following sets forth the activity in the Company's valuation accounts:

                                                                   Allowance for
                                                                 Doubtful Accounts
                                                                 -----------------

Balance at June 30, 2001                                            $ 1,175,596

        Provision for bad debts                                         900,000

        Write-offs                                                     (300,843)
                                                                    -----------

Balance at June 30, 2002                                              1,774,753

         Provision for bad debts                                        389,262

         Recovery net of write-offs                                     128,321
                                                                    -----------

Balance at June 30, 2003                                              2,292,336

       Provision for bad debts                                          585,000

        Write-offs                                                            -
                                                                    -----------

Balance at June 30, 2004                                            $ 2,877,336
                                                                    ===========


                                      F-23

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)

	x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934 (Fee required)
		For Fiscal year ended June 30, 2009

	o	TRANSITION REPORT PURSUANT TO SECTION 13 or 15(D)OF THE SECURITIES EXCHANGE ACT OF 1934 (No fee required)


		For the transition period from _____ to _____

Commission file Number 0-19824

NUTRITION MANAGEMENT SERVICES COMPANY

(Exact name of registrant as specified in its charter)

Pennsylvania	23-2095332
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

725 Kimberton Road, Kimberton, Pennsylvania 19442

(Address of principal executive office) (Zip Code)

Registrant’s telephone number, including area code: 610-935-2050

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

Name of Each Exchange on Which Registered	Title of Each Class

None

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

Title of Each Class

Shares of Class A Common Stock (no par value)

(Cover Page 1 of 3 pages)

Indicate by checkmark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

YES o NO x

Indicate by checkmark if the registrant is not required to file reports pursuant to Section 13 or Section 15 (2) of the Act

YES o NO x

Indicate by checkmark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchanges 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 o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 605 of Regulation S –T (§232.405 of this chapter) during the previous 12 months (or for such shorter period that the registrant was required to submit and post such files).

YES o NO o

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 the 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

Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definition of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

LARGE ACCELERATED FILER		o		ACCELERATED FILER		o
NON-ACCELERATED FILER		o		SMALLER REPORTING COMPANY		x

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

YES o NO x

(Cover page 2 of 3 pages)

The aggregate market value of voting stock (Class A Common Stock, no par value) held by non-affiliates of the Registrant as of December 31, 2008 was approximately $17,141.

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: At October 13, 2009, there was outstanding 2,747,000 shares of the Registrant’s Class A Common Stock, no par value, and 100,000 shares of the Registrant’s Class B Common Stock, no par value.

DOCUMENTS INCORPORATED BY REFERENCE

The information required by Part III for Form 10-K will be incorporated by reference to certain portions of a definitive proxy statement which is expected to be filed by the Registrant pursuant to Regulation 14A within 120 days after the close of its Fiscal year.

This report consists of consecutively numbered pages (inclusive of all exhibits and including this cover page). The Exhibit Index appears on page 24.

(Cover page 3 of 3 pages)

PART I

ITEM 1 - BUSINESS

General

Nutrition Management Services Company (the “Company” or the “Registrant”) provides food, facilities operations and housekeeping management services to continuing care facilities, hospitals, retirement communities and schools.

The Company was incorporated under the laws of the Commonwealth of Pennsylvania on March 28, 1979, and focuses on the continuing care and health-care segments of the food service market. Its customers include continuing care facilities, hospitals, retirement communities and schools.

On November 25, 1991, the Company organized Apple Management Services Company to provide management service expertise.

On May 31, 1994, the Company purchased twenty-two (22) acres of land containing a 40,000 square foot building formerly used as a restaurant and banquet facility. The Company renovated the property to serve as a comprehensive training facility for Company employees. In addition, the facility serves as a showroom for prospective customers who can observe the Company's programs for nursing and retirement home dining and hospital cafeteria operations. In September 1997, the Company opened the retail restaurant portion of the Collegeville Inn Conference & Training Center. In connection therewith, the Company expended approximately $6,000,000 in renovation work through the issuance of two twenty-year bonds dated December 1996 and its internal working capital. The Company opened the banquet and training division during its second quarter of Fiscal year 1998. The remaining division of the project was available for operations in the third quarter of Fiscal 2000. Effective June 27, 2005, the Company closed the buffet restaurant at the Collegeville Inn Conference and Training Center to make the facility available for catered events.

On November 14, 1997, the Company organized Apple Fresh Foods, Ltd. to develop a cook-chill food preparation technology for use in the Company’s food service business. Apple Fresh Foods, Ltd. operations are located in the Collegeville Inn.

The Company owns approximately twenty-two acres of land in Collegeville, Montgomery County, Pennsylvania. In 1997, the Company completed its renovations of an existing 40,000 square foot building to serve as a training facility and conference center. On October 8, 2008, the Company entered into an agreement of sale for certain tracts or parcels of land, together with the building, Collegeville Inn Conference and Training Center, for the sum of $5,500,000. The Agreement of Sale was contingent upon the Buyer being able to obtain all necessary permits and approvals for the development of an age restricted living facility on the property. In April 2009, it became apparent to the Buyer that the permit and approval process was going to take longer than originally anticipated and that it would not be able to meet its target deadlines. As a result, the Company and the Buyer executed a mutual release, releasing both parties from any further obligations under the Agreement of Sale. The Company continues to protect the zoning of the property so as to permit future development. Immediately following the execution of the mutual release, the Company listed the property for sale with a nationwide commercial real estate brokerage.

Financial Information About Industry Segments

See Note P on page F-21 of the Consolidated Financial Statements.

Description of Services

The Company provides contract food, facilities operations and housekeeping services to continuing care facilities, hospitals, retirement communities and schools. The Company provides complete management and supervision of the dietary, facilities and housekeeping operations in its customers’ facilities through the use of on-site management staff, quality and cost-control programs, and training and education of dietary staff. The Company’s operational districts are supported by Regional Managers, District Managers, Registered Dietitians and Quality Assurance staff.

The Company seeks to provide its services at a lower cost than self-managed facilities, while maintaining or improving existing service, nutritional care standards and regulatory compliance.

Marketing and Sales

The Company’s customers include continuing care facilities, hospitals, retirement communities as well as schools, which range in size from small individual facilities to large multi-facility operations. Although many facilities perform their own food service functions without relying upon outside management firms such as the Company, the Company expects the market for its services to grow as facilities increasingly seek to contain costs and are required to comply with increased governmental regulations.

The Company’s services are marketed at the corporate level by its Chief Executive Officer, its President, and its Operating Personnel. The Company’s services are marketed primarily through in-person solicitation of facilities. The Company also utilizes direct mail and participates in industry trade shows.

Market for Services

The market for the Company’s services consists of a large number of facilities involved in various aspects of the continuing care and health care fields, including nursing homes, retirement communities, hospitals and rehabilitation centers. Such facilities may be specialized or general, privately owned or publicly traded, for profit or not-for-profit and may serve residents and patients on a continuing or short-term basis.

Service Agreements

The Company provides its services under several different financial arrangements including a fee basis and guaranteed rate basis. As of June 30, 2009, the Company provided services under various service agreements at thirty eight (38) facilities. At some of these facilities, the Company has contracts to provide vending services and housekeeping services in addition to the contract to provide food services. Most of these contracts have one year terms and are automatically renewable at the end of each service year. The agreements generally provide that either party may cancel the agreement upon ninety (90) days written notice.

In consideration for providing its services, the Company expects to be paid by its clients in accordance with the credit terms agreed upon which range from 30 days to 90 days.

Major Customers

The Company’s Food Service Management Segment had sales to one customer representing approximately 9%, 8% and 8% of the total revenues for the years ending June 30, 2009, 2008 and 2007, respectively. Sales to one other customer represented 8%, 7% and 7% of the total sales for the years ending June 30, 2009, 2008 and 2007, respectively.

The loss of any of these customers could have a material adverse effect on the Company’s future results of operations.

Competition

The Company competes mainly with regional and national food service management companies operating in the continuing care and health care industries, as well as with the self-managed departments of its potential clients.

Although the competition to service these facilities is intense, the Company believes that it competes effectively for new agreements as well as for renewals of existing agreements based upon the quality and dependability of its services. The Company's ability to compete successfully depends upon its ability to maintain and improve quality, service and reliability, to attract and retain qualified employees and to continue to expand its marketing and service activities.

Employees

At June 30, 2009, the Company employed a total of approximately 289 employees. Approximately 103 of those employees serve in various executive, management, administrative, quality assurance and sales capacities. The remaining 186 employees are primarily dietary and housekeeping workers. Approximately 121 (65%) of the Company’s dietary and housekeeping workers are covered by a collective bargaining agreement. The Company’s collective bargaining agreements cover various food service and housekeeping facilities. Their terms cover various time periods. The Company makes contributions to the unions’ benefits funds as required by the collective bargaining agreements. The Company considers its relationships with its employees and unions to be satisfactory.

Purchasing

For the year June 30, 2009, the Company purchased approximately 28% of its food and non-food products from one vendor. Purchases from two other vendors amounted to 32% and 11% of the total purchases for the year ended June 30, 2008; the same two vendors represented 29% and 18% of the total purchases for the year ended June 30, 2007, respectively.

While the Company maintains a good relationship with these vendors, in the event of a disruption in the Company’s relationship with these vendors or any disruption in the vendors’ business, the Company has alternate sources of supply for its food and non-food products.

Financial Information About Foreign and Domestic Operations and Export Sales

Not applicable.

ITEM 1A – RISK FACTORS

Investors should be aware of several risks before investing in the Company including but not limited to (i) the Company had a net loss of $424,404 for the Fiscal year ended June 30, 2008 (ii) the Company’s Class A Common stock is traded on the Pink Sheets and hence there is limited liquidity of the Company’s Class A Common Stock, (iii) the Company has never paid any dividends and its credit facility prohibits it from paying any cash dividends, and (iv) the Company’s Chief Executive Officer is the holder of in excess of 70% of the Company’s voting stock.

ITEM 1B – UNRESOLVED STAFF COMMENTS

The Company is unaware of any unresolved staff comments.

ITEM 2 - PROPERTIES

The Company leases its corporate offices, located at 2071 Kimberton Road, Kimberton, Pennsylvania, which consists of approximately 8,500 square feet from Ocean 7, Inc., a corporation controlled by the Chief Executive Officer of the Company. Currently the lease is on a month-to-month basis on terms generally similar to those prevailing to unrelated parties.

During the three years ended June 30, 2009, 2008 and 2007, the Company paid the related party entity rent in the amounts of $258,414, $259,347 and $265,283, respectively. The Company leases an apartment from the same company to accommodate visiting clients and employees.

In addition, the Company is provided with office space at each of its client facilities.

For a further description of issues relating to the properties refer to the Management’s Discussion and Analysis-Liquidity and Capital Resources.

The Company presently owns food service equipment, computers, office furniture, and equipment, automobiles and trucks. Management believes that all properties and equipment are sufficient for the conduct of the Company's current operations.

ITEM 3 - LEGAL PROCEEDINGS

The Company is involved in litigation with a construction contractor related to the renovations of Collegeville Inn Conference and Training Center. The Company denies the claims and has asserted offsets against the amounts claimed. The case is in discovery.

Although it is not possible to predict with certainty the outcome of the unresolved legal action, or the range of possible loss or recovery, the Company believes these unresolved legal actions will not have a material effect on its financial position or results of operations.

In addition to the litigation described above, the Company is exposed to asserted and unasserted claims in the normal course of business. In the opinion of management, the resolution of these matters will not have a material adverse effect on the Company’s financial position, results of operations or cash flows.

ITEM 4 – SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not applicable.

PART II

ITEM 5 – MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

The Company’s Class A Common Stock No Par Value, (the “Class A Common Stock”) is currently trading on the OTC Pink Sheets (Ticker Symbol – NMSCA.PK) and is a penny stock. The Company’s Class A Common Stock traded on the OTC Bulletin Board until January 7, 2005, at which time trading commenced on the OTC Pink Sheets. Securities and Exchange Commission regulations generally define a penny stock to be an equity security that is not listed on NASDAQ or a national securities exchange and that has a market price of less than $5.00 per share, subject to certain exceptions. The regulations of the Securities and Exchange Commission require broker-dealers to deliver to a purchaser of the Company’s Class A Common Stock a disclosure schedule explaining the penny stock market and the risks associated with it. Various sales practice requirements are also imposed on broker-dealers who sell penny stocks to persons other than established customers and accredited investors (generally institutions). In addition, broker-dealers must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer’s account.

The following table shows the range of high and low bid quotations as reported on the OTC Electronic Bulletin Board or the OTC Pink Sheets for the quarters ending during the last two Fiscal years for the Class A Common Stock:

Fiscal 2009

High

Low

Fourth Quarter	$0.06	$0.04
Third Quarter	0.10	0.03
Second Quarter	0.25	0.02
First Quarter	0.25	0.24

Fiscal 2008

High

Low

Fourth Quarter	$0.24	$0.24
Third Quarter	0.25	0.24
Second Quarter	0.40	0.22
First Quarter	0.45	0.40

The prices presented are bid prices, which represent prices between broker-dealers and do not include retail mark-ups and mark-downs or any commission to the broker-dealer. The above prices do not reflect prices in actual transactions.

Holders

As of October 1, 2009, there were approximately thirty-seven (37) holders of record of the Class A Common Stock.

Dividends

The Company has not paid any dividends on its Class A or Class B Common Stock. It is not expected that the Company will pay any dividends in the foreseeable future. The Company’s credit facilities prohibit it from paying any cash dividends.

ITEM 6 - SELECTED FINANCIAL DATA

The selected historical financial data presented below should be read in conjunction with, and is qualified in its entirety by reference to, the Consolidated Financial Statements and the notes thereto.

	Year ended June 30,
	2009			2008			2007			2006			2005
Revenue	$	20,013,903		$	20,860,543		$	20,911,939		$	23,366,435		$	26,602,121
Gross Profit		4,298,008			3,993,436			3,877,032			4,273,467			4,914,568
Income (Loss) from Operations		366,897			(78,118	)		(699,461	)		(1,151,505	)		(770,800	)
Other Income / (Expense)		(281,528	)		(346,286	)		(333,261	)		(198,203	)		1,854,038
Net Income / (Loss)		85,369			(424,404	)		(771,147	)		(820,442	)		775,657

Per share of Common Stock (basic and diluted):
Net Income / (Loss)	$	0.03		$	( 0.15	)	$	( 0.27	)	$	( 0.29	)	$	0.27

Weighted average Common Shares Outstanding (basic and diluted)		2,847,000			2,847,000			2,847,000			2,847,000			2,847,000

	As of June 30,
		2009			2008			2007			2006			2005
Working Capital	$	2,195,335		$	2,272,753		$	( 3,519,962	)	$	687,126		$	1,581,159
Total Assets		12,663,486			12,717,855			13,274,851			13,967,438			16,190,634
Long-Term Debt		2,089,146			1,865,000			2,045,000			5,714,922			5,604,921
Stock Holders Equity		3,474,716			3,389,347			3,813,751			4,584,898			5,413,580

ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

This Form 10-K contains certain forward looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934 as amended, which are intended to be covered by the safe harbors created thereby. Although the Company believes that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be inaccurate, and therefore, there can be no assurance that the forward-looking statements included in this Form 10-K will prove to be accurate.

In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by the Company or any other person that the objectives and plans of the Company will be achieved.

Result of Operations Year Ended June 30, 2009 Compared to year Ended June 30, 2008

Revenues for the year ended June 30, 2009 (“Fiscal 2009”) were $20,013,903, a decrease of $846,640 compared to revenues of $20,860,543 for the year ended June 30, 2008 (“Fiscal 2008”). This decrease is attributable to a decrease in revenues from Collegeville Inn operations. Revenue from new food service accounts during the current year has not been sufficient to offset any contracts terminating in the current year. Revenues at ongoing facilities increased slightly year over year.

Cost of operations for Fiscal 2009 was $15,715,895 compared to $16,867,107 in Fiscal 2008, a decrease of $1,151,212 or 6.83%. The decrease is due to lower revenues during the period and the expenses associated with those revenues over the same period. Improved operating performance also contributed to the reduced costs.

Gross profit for Fiscal 2009 was $4,298,008 or 21.5% of revenue, compared to $3,993,436 or 19.1% of revenue in Fiscal 2008, an increase of $304,572 or 7.63%. The increase in gross profit is due to improved operating processes as well as the net impact of new contracts and lost contracts, which was partially offset by the renegotiation of contract rates in the normal course of business.

General and administrative expenses for Fiscal 2009 were $3,845,120 or 19.21% of revenue, compared to $3,979,501 or 19.0% of revenue for Fiscal 2008, a decrease of $134,381 or 3.4%. This decrease is due to lower payroll and related expenses as well as a reduction in travel and related costs.

Depreciation and amortization for Fiscal 2009 was $25,353, compared to $28,985 for Fiscal 2008.

Bad debt expense for Fiscal 2009 was $51,735 compared to $63,068 for Fiscal 2008. Bad debt expense represents an amount considered uncollectible based on specifically identified amounts that we believe to be based on historical collection experience, adverse situations that may affect the customers ability to repay and prevailing economic conditions.

Income from operations for Fiscal 2009 was $366,897 or 1.8% of revenue compared to a loss of $78,118 or 0.37% of revenue for Fiscal 2008, an improvement of $445,015 or 569.7%. This improvement is the result of cost effectiveness and performance offsetting reduced revenues as well as a reduction of general and administrative expenses.

Interest expense for Fiscal 2009 was $278,876 or 1.4% of revenue, compared to $334,190 or 1.6% of revenue for Fiscal 2008. This decrease in interest expense is the result of a reduction in long term debt.

Other income/(expense) for Fiscal 2009 was ($4,302) or .02% of revenue compared to ($29,028) or .1% of revenue for Fiscal 2008.

For the reasons stated above, net income before income taxes for Fiscal 2009 was $94,272 or 0.47% of revenue compared to net loss before income taxes of $424,404 or 2.0% of revenue for Fiscal 2008.

The net income for Fiscal 2009 was $85,369 or $0.03 per share compared to a net loss of $424,404 or $0.15 per share for Fiscal 2008.

Liquidity and Capital Resources

The Company’s requirement for capital is to fund (i) sales growth, (ii) food purchases and wage costs at certain facilities in advance of customer reimbursement, and (iii) financing for acquisitions. Our primary source of financing during 2009 and 2008 was cash flow from operations.

At June 30, 2009, the Company had positive working capital of $2,609,481 as compared to positive working capital of $2,272,753 at June 30, 2008. Cash used by operations for Fiscal 2009 was $428,319, compared to $401,877 used by operations for Fiscal 2008. This activity was primarily attributed to changes in accounts receivable and accounts payable.

Investing activities provided $32,745 during Fiscal 2009 compared to $170,372 used in cash during Fiscal 2008. Fiscal 2009 included capital expenditures of $2,606 while Fiscal 2008 included capital expenditures of $18,757. Fiscal 2009 included repayment of employee advances of $27,416. Fiscal 2009 also included the sale of assets for $7,935. During Fiscal 2009, financing activities provided $140,281 which included the repayment of $273,831 in long term debt and proceeds of $414,146 from a related party. Fiscal 2008 used $162,449 financing activities which included the repayment of $170,000 in long term debt.

The Company has certain credit facilities with its bank including a revolving credit of $3,500,000. At June 30, 2009 the Company had approximately $3,400,000 outstanding under its revolving credit. The Company issued two series of Industrial Bonds totaling $3,560,548 in December 1996. The outstanding balance on the bonds was $1,865,000 as of June 30, 2009. In December 2008, the Company entered into an agreement whereby the credit loan facility was extended to December 31, 2009. The Company is currently negotiating to replace or retire this debt with alternate financing.

	Payment Due By Period
Contractual Obligations	Total	Less than 1 year	2 – 3 years	4 – 5 years	After 5 years
Total Debt *	$5,270,283	$3,595,283	$415,000	$465,000	$795,000

Total Contractual Cash Obligations	$5,270,283	$3,595,283	$415,000	$465,000	$795,000

* Long-Term Debt includes approximately $3,400,00 outstanding on the revolving credit facility.

The Company is exploring all reasonable alternatives to improve its operating results, including but not limited to, increasing food service revenues with targeted marketing efforts, and increasing revenues from the sale of the Company’s Cook Chill products. On October 8, 2008, the Company entered into an agreement of sale for certain tracts or parcels of land, together with the building, Collegeville Inn Conference and Training Center, for the sum of $5,500,000. The Agreement of Sale was contingent upon the Buyer being able to obtain all necessary permits and approvals for the development of an age restricted living facility on the property. In April 2009, it became apparent to the Buyer that the permit and approval process was going to take longer than originally anticipated and that it would not be able to meet its target deadlines. As a result, the Company and the Buyer executed a mutual release, releasing both parties from any further obligations under the Agreement of Sale. The Company continues to protect the zoning of the property so as to permit future development. Immediately following the execution of the mutual release, the Company listed the property for sale with a nationwide commercial real estate brokerage.

The Company's financial statements as of June 30, 2009, have been presented on the basis that it is a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

Based upon its present plans, management believes that operating cash flow, available cash, proceeds from the sale or lease of certain assets and available credit resources will be adequate to make repayments of indebtedness described herein, to meet the working capital cash needs of the Company, satisfy the needs of its operations and to meet anticipated capital expenditure needs during the twelve months ending June 30, 2010.

In view of the matters described above, recoverability of a major portion of the recorded asset amounts shown in the Company's accompanying balance sheet is dependent upon continued operations of a continuing basis, to maintain present financing, and to succeed in its future operations. The Company's financial statements do not include any adjustment relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should the Company be unable to continue in existence.

In an effort to extend its current bank debt, the Company may seek to access the public equity markets whenever conditions are favorable, even if it does not have an immediate need for additional capital at that time. Any additional funding may result in significant dilution and could involve the issuance of securities with rights, which are senior to those of existing stockholders. The Company may also need additional funding earlier than anticipated, and its cash requirements, in general, may vary materially from those now planned, for reasons including, but not limited to, competitive advances and higher than anticipated expenses and lower than anticipated revenues from operations.

NEW AUTHORITATIVE PRONOUNCEMENTS

In May 2009, the FASB issued SFAS No. 165, "Subsequent Events" ("SFAS 165"). SFAS 165 establishes general standards of accounting for and disclosures of subsequent events that occurred after the balance sheet date but prior to the issuance of financial statements. SFAS 165 is effective for financial statements issued for interim or Fiscal years ending after June 15, 2009. The adoption of SFAS 165, effective June 2009, did not affect the consolidated financial position, results of operations or cash flows of the Company.

In April 2009, the FASB issued FSP No. FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial Instruments. This FSP amends FASB Statement No. 107, Disclosures about Fair Value of Financial Instruments, to require disclosures about fair value of financial instruments for interim reporting periods of publicly traded companies as well as in annual financial statements. This FSP also amends APB Opinion No. 28, Interim Financial Reporting, to require those disclosures in summarized financial information at interim reporting periods. This FSP shall be effective for interim reporting periods ending after June 15, 2009.

In April 2009, the FASB issued FSP No. FAS 115-2 and FAS 124-2, Recognition and Presentation of Other-Than-Temporary Impairments. This FSP amends the other-than-temporary impairment guidance in U.S. GAAP for debt securities to make the guidance more operational and to improve the presentation and disclosure of other-than-temporary impairments on debt and equity securities in the financial statements. The FSP does not amend existing recognition and measurement guidance related to other-than-temporary impairments of equity securities. The FSP shall be effective for interim and annual reporting periods ending after June 15, 2009.

In April 2009, the FASB issued FSP No. FAS 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly. This FSP amends FASB Statement No. 157, Fair Value Measurements to provide additional guidance on estimating fair value when the volume and level of transaction activity for an asset or liability have significantly decreased in relation to normal market activity for the asset or liability. The FSP also provides additional guidance on circumstances that may indicate that a transaction is not orderly. This FSP supersedes FSP No. FAS 157-3, Determining the Fair Value of a Financial Asset When the Market for That Asset is Not Active and requires additional disclosures about fair value measurements in annual and interim reporting periods. FSP No. FAS 157-4 is effective for interim and annual reporting periods ending after June 15, 2009.

In April 2009, the SEC released Staff Accounting Bulletin No. 111 ("SAB 111"), which amends SAB Topic 5-M. SAB 111 notes that FSP No. 115-2 and FAS 124-2 were scoped to debt securities only, and the FSP referred readers to SEC SAB Topic 5-M for factors to consider with respect to other-than-temporary impairments for equity securities. With the amendments in SAB 111, debt securities are excluded from the scope of Topic 5-M, but the SEC staff’s views on equity securities are still included within the topic.

In June 2009, the FASB issued Statement of Financial Accounting Standards No. 168, "The FASB Accounting Standards Codification(TM) and the Hierarchy of Generally Accepted Accounting Principles - a replacement of FASB Statement No. 162" ("SFAS 168"). SFAS 168 establishes the FASB Accounting Standards Codification(TM) ("Codification") as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in preparing financial statements in conformity with generally accepted accounting principles in the United States. Once effective, all guidance in the Codification will carry the same level of authority, and all future changes or additions to U.S. generally accepted accounting principles will be issued as Accounting Standards Updates. SFAS 168 does not make any changes to existing accounting guidance that will impact the Company's accounting and financial reporting. It is effective for financial statements issued for interim and annual periods ending after September 15, 2009.

The Public Company Accounting Oversight Board voted on July 28, 2009 to adopt Auditing Standard No. 7, "Engagement Quality Review" ("EQR"), and to issue a Concept Release on requiring the engagement partner to sign the audit report. The EQR standard provides a framework for the engagement quality reviewer to objectively evaluate the significant judgments made and related conclusions reached by the engagement team in forming an overall conclusion about the engagement.

The Sarbanes-Oxley Act of 2002 directs the Board to include in its auditing standards a requirement that each registered public accounting firm "provide a concurring or second partner review and approval of [each] audit report (and other related information), and concurring approval in its issuance, by a qualified person (as prescribed by the Board) associated with the public accounting firm, other than the person in charge of the audit, or by an independent reviewer (as prescribed by the Board)." The Board initially proposed the auditing standard on February 26, 2008, and re-proposed it on March 4, 2009.

Auditing Standard No. 7 applies to all audit engagements, and engagements to review interim financial information, conducted pursuant to the standards of the PCAOB. The standard supersedes the Board's quality control standard, SECPS Requirements of Membership, Section 1000.08(f); 1000.39, Appendix E. The standard, if approved by the U.S. Securities and Exchange Commission (SEC), will become effective for both the EQR of audits and the EQR of interim reviews for Fiscal years beginning on or after December 15, 2009.

Separately, the Board also is seeking comment on a Concept Release to consider the effects of a potential requirement for the engagement partner to sign the audit report. Any such requirement would be in addition to the existing requirement for the audit firm to sign its name on the audit report. The Board is seeking comment on the Concept Release for a 45-day period.

CRITICAL ACCOUNTING POLICIES

The discussion and analysis of our financial condition and results of operations are based upon the Company's consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires the Company to make estimates and judgments that affect the reported amount of assets and liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities at the date of the Company’s financial statements. Actual results may differ from these estimates under different assumptions or conditions.

Critical accounting policies are defined as those that are reflective of significant judgments and uncertainties, and potentially result in materially different results under different assumptions and conditions. The Company believes that its critical accounting policies include those described below.

Revenue Recognition

Revenue is generated primarily from fees for food service management and facilities management at continuing care and health care facilities, schools and the Collegeville Inn Conference and Training Center.

The Company provides its services under several different financial arrangements including a fee basis and guaranteed rate basis. For Fee Contracts, certain expenses are paid directly by the Customer and certain expenses are paid by the Company and billed to the Customer. The Company recognizes revenue in the amount of the expenses billed and the fees for providing services.

For Guaranteed Rate Contracts, the Company charges Customers an established amount for services provided (for example, per patient day) and is responsible for all the expenses related to the delivery of those services. The amount of the billing is recorded as revenue and the delivery costs are recorded as cost of sales.

Regardless of the different financial arrangements, the Company recognizes revenue when services have been rendered and the contract price is determinable, and collectability is reasonably assured. Ongoing assessments of the credit worthiness of customers provide the Company reasonable assurance of collectability upon performance of services. The Company has no other obligation with respect to its services once services are performed.

Accounts Receivable

The Company performs ongoing credit evaluations of its customers and adjusts credit limits based on payment history and the customer's current credit worthiness, as determined by a review of their current credit information. The Company continuously monitors collections and payments from its customers and maintains a provision for estimated credit losses based on historical experience and any specific customer collection issues that have been identified. While such credit losses have historically been within the Company’s expectations and the provisions established, the Company cannot guarantee that it will continue to experience the same credit loss rates that it has in the past.

Impairment or Disposal of Long Lived Assets

The carrying value of property, plant, and equipment is evaluated based upon current and anticipated undiscounted operating cash flows before debt service charges. An impairment is recognized when it is probable that such estimated future cash flows will be less than the carrying value of the assets. Measurement of the amount of impairment, if any, is based upon the difference between the net carrying value and the fair value, which is estimated based upon anticipated undiscounted operating cash flows before debt service charges. Based upon a review of its long-lived assets, the Company did not recognize an impairment loss for the Fiscal year ended June 30, 2009; however, there can be no assurance that the Company will not recognize an impairment loss on its long-lived assets in future periods.

Income Tax Accounting

The Company determines its provision for income taxes using the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax effects of temporary differences of existing assets and liabilities and their respective tax bases. Future tax benefits of tax loss and credit carry forwards also are recognized as deferred tax assets. When necessary, deferred tax assets are reduced by a valuation allowance to the extent the Company concludes there is uncertainty as to their ultimate realization. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. The effect on deferred taxes of a change in tax rates is recognized in income in the period that the change is enacted.

As of June 30, 2009 and 2008, the Company maintained a deferred tax asset of $2,265,908, respectively. The Company has provided a valuation allowance $88,752 for the year ended June 30, 2009 and in $125,461 for the year ended June 30, 2008, against its deferred tax assets after consideration of a future gain on the disposal of certain land and assets relative to its Collegeville facility and anticipated future profitable operating results. However, the amount realizable may be reduced if future taxable income is reduced or is insufficient to utilize the entire deferred tax asset.

Employment Contracts

For the Fiscal years ended June 30, 2009, 2008 and 2007, the Company paid a base salary of $296,310, $298,758 and $290,344 to Joseph Roberts, Chairman and Chief Executive Officer and $218,824, $222,127 and $213,544 to Kathleen Hill, President and Chief Operating Officer, respectively. The Company currently has no employment contracts with either of such individuals, as all previous employment contracts with such individuals expired. The Compensation Committee of the Board of Directors is currently engaged in discussions with Mr. Roberts and Ms. Hill with respect to their compensation for the Fiscal year ending June 30, 2010.

Capital Expenditures

The Company has no other material commitments for capital expenditures and believes that its existing cash and cash equivalents, cash from operations and available revolving credit will be sufficient to satisfy the needs of its operations and its capital commitments for the next twelve months. However, if the need arose, the Company would seek to obtain capital from such sources as continuing debt financing or equity financing.

Effects of Inflation

Substantially all of the Company's agreements with its customers allow the Company to pass through to its customers its increases in the cost of labor, food and supplies. The Company believes that it will be able to recover increased costs attributable to inflation by continuing to pass through cost increases to its customers.

Medicare and Medicaid Reimbursements

A substantial portion of the Company’s revenue is dependent upon the payment of its fees by customer health care facilities, which, in turn, are dependent upon third-party payers such as state governments, Medicare and Medicaid. Delays in payment by third party payers, particularly state and local governments, may lead to delays in collection of accounts receivable.

ITEM 7A – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The Financial Statements and Supplementary Data to be provided pursuant to this Item 8 are included under Part IV, Item 15, of this Form 10-K.

ITEM 9 – CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Not applicable.

ITEM 9A (T).

Controls and Procedures

As of the end of the period covered by this report, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Principal Financial Manager, on the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Exchange Act Rule 13a-15(e) and 15d-15(e). Based upon that evaluation, the Chief Executive Officer and Principal Financial Manager concluded that, as of June 30, 2009, such controls and procedures were effective.

In making this evaluation, management considered, among other matters, the material weaknesses in the Company’s internal control over financial reporting that have been identified. See “Management’s report on Internal Control over Financial Reporting” below.

There have been no significant changes in the Company’s internal controls over financial reporting or in other factors that could significantly affect these controls subsequent to the date of their evaluation.

Management’s Report on Internal Control Over Financial Reporting

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting, and for performing an assessment of the effectiveness of internal control over financial reporting as of June 30, 2009. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Company’s system of internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the Company’s assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of the Company’s management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on its financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

The Company’s management performed an assessment of the effectiveness of the Company’s internal control over financial reporting as of June 30, 2009, based upon criteria in Internal Control—Integrated Framework issued by COSO. Based on the Company’s assessment, management has concluded that its internal control over financial reporting was not effective as of June 30, 2009, based on the criteria in Internal Control—Integrated Framework issued by COSO.

ITEM 9B – OTHER INFORMATION

Not applicable.

PART III

ITEM 10 – DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

This information will be contained in the Proxy Statement of the Company for the 2009 Annual Meeting of Shareholders under the caption “Directors and Executive Officers of the Registrant”, and is incorporated herein by reference.

ITEM 11 - EXECUTIVE COMPENSATION

This information will be contained in the Proxy Statement of the Company for the 2009 Annual Meeting of Shareholders under the caption “Executive Compensation and Compensation of Directors” and is incorporated herein by reference.

ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND ANAGEMENT AND RELATED STOCKHOLDER MATTERS

This information will be contained in the Proxy Statement of the Company for the 2009 Annual Meeting of Shareholders under the caption “Security Ownership” and “Election of Directors” and is incorporated herein by reference.

ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

This information will be contained in the Proxy Statements of the Company for the 2009 Annual Meeting of Shareholders under the caption “Certain Relationships and Related Transactions” and is incorporated herein by reference.

ITEM 14 – PRINCIPAL ACCOUNTANT FEES AND SERVICES

The accounting firm of MSPC, Certified Public Accountants and Advisors, A Professional Corporation (“MSPC”) served as the Company’s independent registered public accounting firm for the Fiscal years ended June 30, 2009, 2008, and 2007, respectively. Such firm has no other relationship to the Company or its affiliates.

Audit Fees

MSPC billed the Company $55,000 for audit fees for the Company’s annual consolidated financial statements for the Fiscal year ended June 30, 2009, $50,000 for Fiscal year ended June 30, 2008 and June 30, 2007.

Audit Related Fees

MSPC billed the Company $24,000 for audit related services for the Fiscal year ended June 30, 2009, 2008 and 2007.

Tax Fees

MSPC billed the Company $12,000 for tax services during the Fiscal year ended June 30, 2009, 2008 and 2007.

All Other Fees

MSPC did not bill the Company for any other professional services for the Fiscal years ended June 30, 2009, 2008, and 2007, respectively.

Pre-approval Policies and Procedures

All audit and non-audit services to be performed by the Company’s independent accountant must be approved in advance by the Audit Committee. Consistent with applicable law, limited amounts of services, other than audit, review or attest services, may be approved by one or more members of the Audit Committee pursuant to authority delegated by the Audit Committee, provided each such approved service is reported to the full Audit Committee at its next meeting.

All of the engagements and fees for the Company’s Fiscal year ended June 30, 2009 were approved by the Audit Committee.

The Audit Committee of the Board of Directors considered whether the provision of non-audit services by MSPC was compatible with its ability to maintain independence from an audit standpoint and concluded that MSPC independence was not compromised.

PART IV

ITEM 15 – EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(A)	Consolidated Financial Statements

	Reports of Independent Registered Public Accounting Firm		F-2

	Consolidated Balance Sheets as of June 30, 2009 and 2008		F-3

	Consolidated Statements of Operations for the Years Ended June 30, 2009, 2008 and 2007		F-4

	Consolidated Statements of Stockholders' Equity for the Years Ended June 30, 2009, 2008 and 2007		F-5

	Consolidated Statements of Cash Flows for the Years Ended June 30, 2009, 2008 and 2007		F-6

	Notes to Consolidated Financial Statements		F-7

	Schedule of Valuation Accounts		F-23

(B)	Exhibits
	The following Exhibits are filed as part of this report (references are to Reg. S-K Exhibit Numbers):

	3.1	Amended and Restated Certificate of Incorporation of Company (Incorporated by reference to Exhibit 3.1 of the Company’s Statement on Form S-1 (File No. 33-4281).

	3.2	By-laws of the Company (Incorporated by reference to Exhibit 3.2 of the S-1).

	4.1	Specimen Stock Certificate of the Company (Incorporated by reference to Exhibit 4.1 of the S-1).

	4.5	Registration Rights Agreement between the Company and Kathleen Hill (Incorporated by reference to Exhibit 4.5 of the S-1).

	10.4	Company's 1991 Stock Option Plan (Incorporated by reference to Exhibit 10.4 of the S-1).

	10.8	Guaranty Agreement between the Company and Joseph Roberts (Incorporated by reference to Exhibit 10.9 Annual Report on Form 10-K filed September 27, 1992).


	10.9	Lease Agreement Between the Company and Ocean 7, Inc. (Incorporated by reference to Exhibit 10.11 Annual Report of Form10-K filed September 27, 1992).

	10.14	Loan Agreement between the Montgomery County Industrial Development Authority and Collegeville Inn Conference & Training Center, Inc. (a wholly-owned subsidiary of the Company). (Incorporated by reference to exhibit 10.14, annual report on Form 10-K Filed on September 27, 1997).

	10.15	Trust Indenture between Montgomery County Industrial Development Authority and Dauphin Deposit Bank and Trust Company, as Trustee. (Incorporated by reference to exhibit 10.15, annual report on Form 10-K filed September 27, 1997).

	10.16	Loan Agreement between Montgomery County Industrial Development Authority and Apple Fresh Foods Limited (a wholly-owned subsidiary of the Company). (Incorporated by reference to exhibit 10.16, annual report on Form 10-K Filed on September 27, 1997).

	10.17	Trust Indenture between the Montgomery County Development Authority and Dauphin Deposit Bank and Trust Company, as Trustee. (Incorporated by reference to exhibit 10.17, annual report on Form 10-K Filed on September 27, 1997).

	10.19	Fourth Amendment to Revolving Credit Note between the Company and Wilmington Trust of Pennsylvania (Incorporated by reference to exhibit 10.19, annual report on Form 10-K filed on September 28, 2005).

	10.20	Ninth Amendment to Loan Agreement between the Company and Wilmington Trust of Pennsylvania (Incorporated by reference to exhibit 10.20, annual report on Form 10-K filed on September 28, 2005).

	10.21	Guaranty and Suretyship of Joseph V. Roberts (Incorporated by reference to exhibit 10.21, annual report on Form 10-K filed on September 28, 2005).

	31.1	Section 302 Certification of Principal Executive Officer

	31.2	Section 302 Certification of Principal Financial Manager

	32.1	Section 906 Certification of Chief Executive Officer

	32.2	Section 906 Certification of Principal Financial Manager (the Company does not have a Chief Financial Officer).

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 annual report to be signed on its behalf by the undersigned, thereunto duly authorized.

Nutrition Management Services Company

(Registrant)

/s/ Joseph V. Roberts

Joseph V. Roberts,

Chief Executive Officer and Director

Date: October 13, 2009

Pursuant to the requirements of the Securities and Exchange Act of 1934, as amended, this annual report has been signed by the following persons on behalf of the registrant and in the capacities indicated as of October 13, 2009.



/s/ Joseph V. Roberts		/s/ Kathleen A. Hill
Joseph V. Roberts, Chief		Kathleen A. Hill, President and
Executive Officer and Director		Director
(Principal Financial Officer)


/s/ Samuel R. Shipley		/s/ Jane Scaccetti
Samuel R. Shipley, Director		Jane Scaccetti, Director


/s/ Michael M. Gosman
Michael M. Gosman, Director

Financial Statements and Report of Registered Public Accounting Firm

Nutrition Management Services Company and Subsidiaries

June 30, 2009, 2008 and 2007

TABLE OF CONTENTS

	Page

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM	F – 2

CONSOLIDATED BALANCE SHEETS	F - 3

CONSOLIDATED STATEMENTS OF OPERATIONS	F - 4

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY	F - 5

CONSOLIDATED STATEMENTS OF CASH FLOWS	F - 6

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS	F – 7

SUPPLEMENTAL INFORMATION

SCHEDULE OF VALUATION ACCOUNTS	F - 23

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of

Nutrition Management Services Company and Subsidiary

We have audited the consolidated balance sheets of Nutrition Management Services Company and Subsidiary as of June 30, 2009 and 2008, and the related consolidated statements of operations, stockholders’ equity and cash flows for each of the three years in the period ended June 30, 2009. These financial statements are the responsibility of the Nutrition Management Services 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly we express no such opinion. 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 consolidated financial statements referred to above present fairly, in all material respects, the financial position of Nutrition Management Services Company and Subsidiary as of June 30, 2009 and 2008, and the results of their operations and their cash flows for each of the three years in the period ended June 30, 2009, in conformity with U.S. generally accepted accounting principles.

MSPC

Certified Public Accountants and Advisors,

A Professional Corporation

Cranford, New Jersey

October 13, 2009

F-2

Nutrition Management Services Company and Subsidiaries

CONSOLIDATED BALANCE SHEETS

June 30,

	2009			2008
Current Assets
Cash and cash equivalents	$	52,609		$	307,902
Accounts receivable (net of allowance for doubtful accounts of $860,346 and $808,887 in 2009 and 2008, respectively)		2,494,193			2,648,181
Inventory		143,213			142,073
Prepaid and other current assets		311,178			342,655
Assets held for sale		6,295,450			6,295,450
Total Current Assets		9,296,643			9,736,261

Property and Equipment – Net		74,217			104,939

Other Assets
Advances to Officers		210,965			238,381
Deferred Income Taxes		2,265,908			2,265,908
Bond Issue Costs (net of accumulated amortization of $183,290 and $168,724 in 2009 and 2008, respectively)		109,234			123,800
Other Assets		294,057			248,566
Total Other Assets		2,880,164			2,876,655
Total Assets		12,251,024			12,717,855

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Current portion of Long-Term Debt	$	190,000		$	180,000
Current portion of Line of Credit		3,405,283			3,499,114
Current portion of Note Payable		7,517			7,551
Accounts Payable		2,758,410			3,196,032
Accrued Expenses		179,231			266,727
Accrued Payroll		69,742			208,366
Other		76,979			105,718
Total Current Liabilities		6,687,162			7,463,508

Long- Term Liabilities
Long-Term Debt – Net of current portion		1,675,000			1,865,000
Note Payable Related Party		414,146			-
Total Long-Term Liabilities		2,089,146			1,865,000

Commitments and Contingencies
Stockholders’ Equity
Preferred Stock – no Par, 2,000,000 shares authorized, none issued and outstanding
Common Stock
Class A – no par, 10,000,000 shares authorized; 3,000,000 issued, 2,747,000 outstanding		3,801,926			3,801,926
Class B – no par, 100,000 shares authorized; 100,000 shares issued and outstanding		48			48
Retained Earnings		172,305			86,936
		3,974,279			3,888,910
Less Treasury Stock – (Common – Class A: 253,000 shares – at cost)		(499,563	)		(499,563	)
Total Stockholders’ Equity		3,474,716			3,389,347
Total Liabilities and Stockholders’ Equity	$	12,251,024		$	12,717,855

The accompanying notes are an integral part of these statements

F-3

Nutrition Management Services Company and Subsidiaries

CONSOLIDATED STATEMENTS OF OPERATIONS

Year ended June 30,

	2009			2008			2007

Food Service Revenue	$	20,013,903		$	20,860,543		$	20,911,939

Cost of Operations
Payroll and Related Expenses		9,727,407			9,913,066			8,816,497
Other Costs of Operations		5,988,488			6,954,041			8,218,410
Cost of Operations		15,715,895			16,867,107			17,034,907
Gross Profit		4,298,008			3,993,436			3,877,032

Expenses
General and Administrative Expenses		3,854,023			3,975,501			4,278,885
Depreciation and Amortization		25,353			28,985			275,980
Bad Debt Expense		51,735			63,068			21,628
Total Expenses		3,931,111			4,071,554			4,576,493

Income (Loss) from Operations		366,897			(78,118	)		(699,461	)

Other Income / (Expense)
Interest Expense		(278,876	)		(334,190	)		(472,454	)
Interest Income		1,650			16,932			72,136
Other		(4,302	)		(29,028	)		67,057
Other Income / (Expense) – Net		(281,528	)		(346,286	)		(333,261	)

Income / (Loss) before Income Taxes		85,369			(424,404	)		(1,032,722	)

Income Tax (Benefit) / Expense		-			-			(261,575	)

Net Income (Loss)		85,369			(424,404	)		(771,147	)

Net Income / (Loss) per Share – Basic and Diluted	$	0.03		$	(0.15	)	$	(0.27	)

Weighted Average Number of Shares – Basic and Diluted		2,847,000			2,847,000			2,847,000

The accompanying notes are an integral part of these statements

F-4

Nutrition Management Services Company and Subsidiaries

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

For the three years ended June 30, 2009

	Class A Common Stock				Class B Common Stock							Treasury Stock
	Number of Shares		Amount		Number of Shares		Amount		Retained Earnings			Number of Shares			Amount			Total Stockholders’ Equity
Balance June 30, 2006		2,747,000	$	3,801,926		100,000	$	48	$	1,282,487			(253,000	)	$	(499,563	)	$	4,584,898
Net Loss		-		-		-		-		(771,147	)		-			-			(771,147	)
Balance-June 30, 2007		2,747,000	$	3,801,926		100,000	$	48	$	511,340			(253,000	)	$	(499,563	)	$	3,813,751
Net loss		-		-		-		-		(424,404	)		-			-			(424,404	)
Balance-June 30, 2008		2,747,000	$	3,801,926		100,000	$	48	$	86,936			(253,000	)	$	(499,563	)	$	3,389,347
Net Income		-		-		-		-		85,369			-			-			85,369
Balance-June 30, 2009		2,747,000	$	3,801,926		100,000	$	48	$	172,305			(253,000	)	$	(499,563	)	$	3,474,716

The accompanying notes are an integral part of these statements

F-5

Nutrition Management Services Company and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

Year ended June 30,

	2009			2008			2007

Operating Activities
Net Income / (Loss)	$	85,369		$	(424,404	)	$	(771,147	)
Adjustment to reconcile Net Income / (Loss) to net cash provided by Operating Activities
Depreciation and Amortization		25,353			28,985			275,980
Amortization of Bond Costs		14,564			14,559			14,564
Provision for Bad Debts		51,735			63,038			21,628
(Benefit) / Expense for Deferred Taxes		-			-			(261,575	)

Changes in Assets and Liabilities
Accounts Receivable		102,253			149,513			(417,924	)
Inventory		(1,140	)		848			(701	)
Prepaid and Other		(13,974	)		(264,306	)		(47,399	)
Accounts Payable		(437,622	)		194,489			3,494
Accrued Expenses		(87,496	)		(15,976	)		68,820
Accrued Payroll		(138,624	)		(51,818	)		33,574
Other		(28,737	)		(96,837	)		118,061

Net Cash Provided by Operating Activities		(428,319	)		(401,879	)		(962,625	)

Investing Activities
Purchase of Property and Equipment		(2,606	)		(18,757	)		(49,482	)
Sale of Property and Equipment		7,935			-			-
Repayments / (Advances) by employees and officers		27,416			189,129			(4,216	)
Net Cash Provided by / (used in) investing activities		32,745			170,372			(53,698	)

Financial Activities
Restricted Cash		-			-			250,000
Proceeds from Financing		102,585			327,413			297,659
Proceeds from Related Party		414,146			-			-
Repayment of Long-Term Borrowings		(180,000	)		(170,000	)		(165,808	)
Repayment of Line of Credit		(93,831	)		-			-
Repayment of Financing		(102,619	)		(319,862	)		(277,237	)
Net Cash Provided by / (used in) Financing Activities		140,281			(162,449	)		104,614

NET (DECREASE) / INCREASE IN CASH AND CASH EQUITIES		(255,293	)		(393,956	)		(911,709	)

Cash and Cash Equivalents – Beginning of Year		307,902			701,858			1,613,567

Cash and Cash Equivalents – End of Year	$	52,609		$	307,902		$	701,858

Supplemental Disclosures of Cash Flow Information
Cash Paid During the Years for
Interest	$	254,135		$	348,705		$	445,220
Income Taxes	$	10,129		$	19,432		$	38,459

The accompanying notes are an integral part of these statements

F-6

Nutrition Management Services Company and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A - ORGANIZATION AND BUSINESS

Nutrition Management Services Company (the “Company”) was organized on March 28, 1979, to provide professional management expertise and food services to continuing care and health care facilities in the domestic United States. The Company competes mainly with regional and national food service management companies as well as self-managed departments. Apple Management Services Company (“Apple Management”), a wholly owned subsidiary, was organized on November 25, 1991, to provide management service expertise. The Collegeville Inn Conference and Training Center, Inc. (“Collegeville Inn” located in Lower Providence Township, Pennsylvania), a wholly owned subsidiary, was organized on April 29, 1994. This facility opened in September 1997, and is used as a showroom for prospective customers and a comprehensive training facility. Effective June 27, 2005, the Company closed the buffet restaurant at the Collegeville Inn to make the entire facility available for catered events. Apple Fresh Foods, Ltd. (“Apple Fresh Foods”) was organized on November 14, 1997, to develop a cook-chill food preparation technology for use in the Company’s food service business. Apple Fresh Foods operations are located at the Collegeville Inn.

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

1. Basis of Financial Statement Presentation

The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. Intercompany transactions and balances have been eliminated in consolidation.

2. Cash and Cash Equivalents

Cash equivalents are comprised of certain highly liquid investments with an original maturity of three months or less when purchased.

3. Marketable Securities

The Company classifies its investments in marketable securities as available for sale, which are carried at the lower of cost or market based upon the quoted market prices of those investments at period end. As of June 30, 2009 there were no marketable securities.

4. Accounts Receivable and Allowance for Doubtful Accounts

The Company’s accounts receivable are primarily related to food service management fees. Credit is extended based on prior experience with the customer and evaluation of a customer’s financial condition. Accounts receivable are generally due within thirty to sixty days. The allowance for doubtful accounts represents an estimate of amounts considered uncollectible and is determined based on specifically identified amounts that we believe to be based on historical collection experience, adverse situations that may affect the customer’s ability to repay and prevailing economic conditions. If our actual collections experience changes, revisions to our allowance may be required. The Company believes it will be successful in its collection efforts related to its outstanding balances.

5. Inventory

Inventory, which consists primarily of food, is stated at the lower of cost (first-in, first-out method) or market. The Company records inventory for contracts which require goods to be owned by the Company. For the remaining customers, the Company purchases inventory on their behalf and a payable or receivable is recorded for the change in the value of these goods, which is then collected from or paid to customers. As of June 30, 2009 and 2008, inventory was $143,213 and $142,073, respectively. As of June 30, 2009 and 2008, inventory receivable from customers was $12,503 and $19,558 respectively, while inventory payable to customers was $9,545 and $18,225 respectively.

F-7

Nutrition Management Services Company and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- CONTINUED

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued

6. Revenue Recognition

The Company recognizes revenue when services have been rendered and the contract price is determinable, and collectability is reasonably assured. Revenue is generated primarily from fees for food service management and facilities management at continuing care and health care facilities, schools and the Collegeville Inn Conference and Training Center. The Company provides its services under several different financial arrangements including a fee basis and guaranteed rate basis. For Fee Contracts, certain expenses are paid directly by the Customer and certain expenses are paid by the Company and billed to the Customer. The Company recognizes Revenue in the amount of the expenses billed and the fees for providing services. For a Guaranteed Rate Contract, the Company charges Customers an established amount for services provided (for example, per Patient Day) and is responsible for all the expenses related to the delivery of those services. The amount of the billing is recorded as Revenue and the delivery costs are recorded as Cost of Sales. Regardless of the different financial arrangements, the Company recognizes revenue when services have been rendered and the contract price is determinable, and is reasonably assured. Ongoing assessments of the credit worthiness of customers provide the Company reasonable assurance of upon performance of services. The Company has no other obligation with respect to its services once services are performed.

7. Property and Equipment

Property and equipment are stated at cost. Depreciation and amortization are provided using the straight-line method over the estimated useful lives of the related assets or the remaining lease term, if less.

8. Assets Held for Sale

The Company continues its efforts to sell or lease all or part of the Collegeville Inn Conference and Training Center and or certain excess land adjacent to the facility. The Company has reclassified these assets as held for sale.

9. Bond Issue Costs

Bond issue costs incurred in connection with the bonds payable are deferred and amortized, using the interest method, over the term of the related debt and are classified as other assets on the balance sheet.

10. Accounting for Stock-Based Compensation

Stock Options issued to Employees – On July 1, 2005 we adopted the fair value recognitions provisions of SFAS No. 123 R, “Share-Based Payments”, under the modified prospective transition method. Prior to July 1, 2005, we applied the Accounting Principles Board (APB) Opinion No. 25 intrinsic value accounting method for its stock incentive plans. Under the modified prospective transition method, the fair value recognition provisions apply only to new awards or awards modified after July 1, 2005. Additionally, the fair value of existing unvested awards at the date of adoption is recorded in compensation expense over the remaining requisite service period.

11. Income Taxes

As of June 30, 2009 and 2008, the Company maintained a deferred tax asset of $2,265,908, respectively. The Company has provided a valuation allowance $88,752 for the year ended June 30, 2009 and in $125,461 for the year ended June 30, 2008 against its deferred tax asset after consideration of a future gain on the disposal of certain land and assets relative to its Collegeville facility and anticipated future profitable operating results. However, the amount realizable may be reduced if future taxable income is reduced or is insufficient to utilize the entire deferred tax asset. See Note G for additional information.

F-8

Nutrition Management Services Company and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- CONTINUED

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued

12. Accumulated Other Comprehensive Income/(Loss)

Based on the Company’s current activities, there is no accumulated other comprehensive income.

13. Earnings/(Loss) Per Share

The Company has adopted the provisions of SFAS No. 128. Basic earnings per share is computed by dividing income available to common stockholders by the weighted average number of common shares outstanding during the period. SFAS No. 128 also requires a dual presentation of basic and diluted earnings per share on the face of the statement of operations for all companies with complex capital structures. Diluted earnings per share reflects the amount of earnings for the period available to each share of common stock outstanding during the reporting period, while giving effect to all dilutive potential common shares that were outstanding during the period, such as common shares that could result from the potential exercise into common stock.

The computation of diluted earnings per share does not assume exercise of securities that would have an antidilutive effect on per share amounts (i.e., increasing earnings per share or reducing loss per share). The dilutive effect of outstanding options are reflected in dilutive earnings per share by the application of the treasury stock method which recognizes the use of proceeds that could be obtained upon exercise of options and warrants in computing diluted earnings per share. It assumes that any proceeds would be used to purchase common stock at the average market price during the period. Options will have a dilutive effect only when the average market price of the common stock during the period exceeds the exercise price of the options. Options that may have a dilutive effect in the future are listed in Note J.

14. Advertising Costs

It is the Company’s policy to expense advertising costs in the period in which they are incurred. Advertising expense for the years ended June 30, 2009, 2008 and 2007 was $4,647, $8,845 and $5,247 respectively.

15. Reclassification

Certain 2007 items have been reclassified to conform to the current year presentation.

16. Use of Estimates

In preparing the Company’s financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

17. Fair Value of Financial Instruments

The Company used the following methods and assumptions in estimating our fair value disclosures for financial instruments:

Cash and cash equivalents: The carrying amounts the Company has reported in the accompanying balance sheet for cash and cash equivalents approximate their fair values.

Investments: The Company estimates the fair values of investments based on quoted market prices. The carrying amounts the Company has reported in the accompanying balance sheet for investments in contracts approximate their fair values.

Long- and short-term debt: The Company bases the fair values of debt instruments on quoted market prices. Where quoted prices are not available, the Company bases the fair values on the present value of future cash flows discounted as estimated borrowing rates for similar debt instruments or on estimated prices based on current yields for debt issues of similar quality and terms. The carrying amounts the Company has reported in the accompanying balance sheet for debt approximate their fair values. See footnote F for further discussion.

F-9

Nutrition Management Services Company and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- CONTINUED

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued

18. Impairment or Disposal of Long Lived Assets

The Company adopted SFAS 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS 144”). Under the requirements of SFAS 144, the Company assesses the potential impairment of property, plant and equipment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. An asset’s value is impaired if management’s estimate of the aggregate future cash flows, undiscounted and without interest charges, to be generated by the asset are less than the carrying value of the asset. Such cash flows consider factors such as expected future operating income and historical trends, as well as the effects of demand and competition. To the extent impairment has occurred, the loss will be measured as the excess of the carrying amount of the asset over the fair value of the asset. Such estimates require the use of judgment and numerous subjective assumptions, which, if actual experience varies, could result in material differences in the requirements for impairment charges.

19. New Authoritative Pronouncements

F-10

Nutrition Management Services Company and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- CONTINUED

The Sarbanes-Oxley Act of 2002 directs the Board to include in its auditing standards a requirement that each registered public accounting firm "provide a concurring or second partner review and approval of [each] audit report (and other related information), and concurring approval in its issuance, by a qualified person (as prescribed by the Board) associated with the public accounting firm, other than the person in charge of the audit, or by an independent reviewer (as prescribed by the Board)."The Board initially proposed the auditing standard on February 26, 2008, and re-proposed it on March 4, 2009.

F-11

Nutrition Management Services Company and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- CONTINUED

NOTE C – BUSINESS CONDITIONS

The Company's primary sources of revenues are the management fees it receives from contracts to provide food and housekeeping services to continuing care facilities, hospitals, retirement communities and schools, as well as the Collegeville Inn, which includes the Conference and Training Center, Catering facilities and the Cook Chill operations. The Company has a business plan in place to improve the operating results from the Collegeville Inn while it continues its sale/lease efforts. See Note O for segment reporting information. Effective June 27, 2005, the Company closed the buffet restaurant at the Collegeville Inn to make the facility available for catered events.

The Company owns approximately twenty-two acres of land in Collegeville, Montgomery County, Pennsylvania. In 1997, the Company completed its renovations of an existing 40,000 square foot building to serve as a training facility and conference center. On October 8, 2008, the Company entered into an agreement of sale for certain tracts or parcels of land, together with the building, Collegeville Inn Conference and Training Center, for the sum of $5,500,000.00. The Agreement of Sale was contingent upon the Buyer being able to obtain all necessary permits and approvals for the development of an age restricted living facility on the property. In April of 2009, it became apparent to the Buyer that the permit and approval process was going to take longer than originally anticipated and that it would not be able to meet its target deadlines. As a result, the Company and the Buyer executed a mutual release, releasing both parties from any further obligations under the Agreement of Sale. The Company continues to protect the zoning of the property so as to permit future development. Immediately following the execution of the mutual release, the Company listed the property for sale with a nationwide commercial real estate brokerage.

The Company's financial statements as of June 30, 2009 have been presented on the basis that it is a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

Management believes that operating cash flow, the possible proceeds from the sale or lease of certain assets, available cash and available credit resources will be adequate to make repayments of indebtedness, meet the working capital needs, satisfy the needs of its operations, and to meet anticipated capital expenditures during the next twelve months ending June 30, 2010.

F-12

Nutrition Management Services Company and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- CONTINUED

NOTE D - PROPERTY AND EQUIPMENT

The following details the composition of property and equipment.

	Estimated Useful Lives		2009		2008

Building		40	$	7,829	$	7,829
Machinery and Equipment		2 – 8		2,347,273		2,352,735
Furniture and Fixture		2 – 8		26,374		26,374
Other, Principally Autos and Trucks		2 – 10		211,335		211,335
				2,592,811		2,598,273
Less: Accumulated Depreciation				2,518,594		2,493,334
			$	74,217	$	104,939

NOTE E – ASSETS HELD FOR SALE

The following details the composition of assets held for sale.

	Estimated Useful Lives		2009		2008

Property and Equipment
Land		-	$	497,967	$	497,967
Building		40		7,491,263		7,491,263
Other, Principally Equipment, Furniture and Fixtures		2 – 8		2,386,716		2,386,717
				10,375,946		10,375,946
Less: Accumulated Depreciation				4,080,496		4,080,496
			$	6,295,450	$	6,295,450

F-13

Nutrition Management Services Company and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- CONTINUED

NOTE F - LONG- TERM DEBT

Long-Term Debt Consisted of the Following:	2009		2008
Bank revolving credit, interest due monthly at the National Consumer rate 4 minus .25% (effectively 4.00% as of June 30, 2009), secured by all corporate assets and personal guarantee of the Chief Executive Officer; matures on December 31, 2009	$	3,405,283	$	3,499,114
Industrial Revenue Bonds (Collegeville Inn Projects) (See bonds payable)		1,365,000		1,495,000
Industrial Revenue Bonds (Apple Fresh Foods Projects) See bonds payable)		500,000		550,000
		5,270,283		5,544,114
Less: Current Maturities (includes bank revolving credit)		3,595,283		3,679,114

	$	1,675,000	$	1,865,000

In February 2001, the Company executed a loan agreement with a bank for a revolving credit and two irrevocable letters of credit issued in conjunction with the issuance of the Industrial Revenue Bonds, totaling $4,000,000 and $3,065,000, respectively. In October 2003, the Company entered into an amended credit agreement whereby the $4,000,000 Revolving Credit Loan Facility was reduced to $3,500,000 and $500,000 was placed in a cash collateral account and pledged as additional collateral against the revolving credit line. As of June 30, 2009 all of the cash collateral account has been released and is available for operations.

At June 30, 2009, the Company had approximately $3,400,000 outstanding under the revolving credit. Advances under the revolving credit are used for working capital purposes.

These credit agreements contain covenants that include the submission of specified financial information and the maintenance of insurance coverage for the pledged assets during the term of the loans. The Company and the bank reached an agreement in December 2008 which maintains the revolving credit line in place to December 31, 2009. The Company is currently negotiating to replace or retire this debt with alternate financing.

Bonds Payable - In December 1996, the Company, through its subsidiaries, authorized two industrial revenue bond issues.

Issue #1

Title - Montgomery County Industrial Development Authority, $2,500,000 aggregate principal amount, federally taxable variable rate demand/fixed rate revenue bonds (“Collegeville Inn Project”) Series of 1996

Rate - Variable, to a maximum of 17% (Variable Rate at June 30, 2009 was 6.00%)

Term - 20 years (2016)

Purpose - Rehabilitate, furnish and equip the Collegeville Inn

Issue #2

Title - Montgomery County Industrial Development Authority, $1,000,000 aggregate principal amount, federally taxable variable rate demand/fixed rate revenue bonds (“Apple Fresh Foods, Ltd. Project”) Series of 1996

Rate - Variable, to a maximum of 15% (Variable Rate at June 30, 2009 was 6.00%)

Term - 20 years (2016)

Purpose - Develop a cook-chill food preparation technology

F-14

Nutrition Management Services Company and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- CONTINUED

NOTE F - LONG- TERM DEBT - Continued

The Company issued two series of Industrial Revenue Bonds totaling $3,560,548 in December 1996, one to Collegeville Inn and one to Apple Fresh Foods. The outstanding balance on the bond issues was $1,865,000 as of May 2009. Both bond issues were secured in part by Letters of Credit issued by Wilmington Trust. In February of 2009, both Moody’s and Standard and Poors downgraded the credit rating of Wilmington Trust, which downgrade had no relationship to any business Wilmington Trust was doing with NMSC or its subsidiaries. As a result of this downgrade, Janney, Montgomery Scott, the remarketer, began experiencing difficulty selling the Bonds to the institutional investors. Janney began inventorying the Bonds while continuing to try to find buyers. On April 24, 2009, Moody’s further downgraded the credit rating of Wilmington Trust. Again, this had no direct relationship to any business with NMSC. This action prompted Janney to send a Notice to M&T Bank, the Trustee for the Bonds, that if no buyers were found by May 4, 2009, they would be tendering the Bonds for redemption. With no buyers coming forward, Janney tendered the Bonds on May 4, 2009, which caused M&T Bank to initiate a draw down on the LOCs in the amounts of $1,365,000 (Collegeville) and $500,000 (Apple Fresh) respectively. Thus, the two LOCs have now been converted to direct loans to Collegeville Inn and Apple Fresh Foods.

Each series of bonds is guaranteed by the Company and each of its subsidiaries. The assets of Collegeville Inn and Apple Fresh Foods are pledged as collateral for both series of bonds.

The Company’s bank has issued irrevocable letters of credit in favor of the bond trustee for the full amount of both bond issues. The letters of credit have a term of four years and can be renewed on an annual basis by the bank. The bank holds the mortgage on the Collegeville Inn building and property. The letters of credit are guaranteed by the parent company.

The sinking fund requirements of the bonds are as follows:

	Collegeville Inn		Apple Fresh Foods		Total
2010		135,000		55,000		190,000
2011		145,000		55,000		200,000
2012		155,000		60,000		215,000
2013		165,000		60,000		225,000
2014		175,000		65,000		240,000
Thereafter		590,000		205,000		795,000
Total		1,365,000		500,000		1,865,000

Maturities of principal due in the following years are set forth below:

Year ending June 30,
2010			$3,595,283
2011			200,000
2012			215,000
2013			225,000
2014			240,000
Thereafter			795,000
			$ 5,270,283

F-15

Nutrition Management Services Company and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- CONTINUED

NOTE G - INCOME TAXES

The components of income tax (benefit)/expense are:

	Year Ended June 30,
	2009		2008		2007
Current
Federal	$	0	$	0	$	(266,597	)
State		0		0		(47,046	)
	$	0	$	0	$	(313,643	)

Deferred
Federal	$	0	$	0	$	44,258
State		0		0		7,810
	$	0	$	0	$	52,068
	$	0	$	0	$	(261,575	)

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are approximately:

F-16

Nutrition Management Services Company and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- CONTINUED

NOTE G - INCOME TAXES – continued

	June 30
	2009			2008

Deferred Tax Assets
Provision for doubtful accounts	$	369,949		$	347,839
Excess of tax over financial statement basis of investments in contracts		94,650			94,650
Vacation Accrual		27,529			99,008
Charitable Contribution Carry-Forward		17,199			48,919
Federal Net Operating Loss		1,895,138			1,831,968
Other		(35,258	)		74,181
Total Deferred Tax Assets		2,369,207			2,496,565

Deferred Tax Liabilities
Depreciation		14,547			105,196

Allowance		88,752			125,461

Net Deferred Tax Assets	$	2,265,908		$	2,265,908

The deferred tax amounts are classified on the balance sheet as follows:

	June 30,
	2009		2008
Current Assets	$	--	$	--
Non-Current Assets		2,265,908		2,265,908
	$	2,265,908	$	2,265,908

The Company also has a federal net operating loss carry forward of approximately $4,740,000 expiring on various dates beginning in the year 2026. The Company has charitable contribution carry forwards in the amount of $117,340.

The Company has provided a valuation allowance of $88,752 against its deferred tax assets after consideration that the future gain on the disposal of certain land and assets relative to the Collegeville Inn and anticipated future profitable operating results.

The following reconciles the tax provision with the U.S. statutory tax rates:

	Year Ended June 30
	2009			2008			2007
Income Taxes, at U.S. Statutory Rates		(34.0	)%		(34.0	)%		(34.0	)%
State Taxes, Net of Federal Tax Benefit		(5.0	)		(5.0	)		(5.0	)
Nondeductible Expenses		8.0			10.0			10.0
Other		3.3			3.7			3.7
Effect of NOLs		27.7			-			-
Tax Expense / (Benefit)		0	%		(25.3	)%		(25.3	)%

F-17

Nutrition Management Services Company and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- CONTINUED

NOTE H - RELATED PARTY TRANSACTIONS

The Company leases its corporate offices, located at 2071 Kimberton Road, Kimberton, Pennsylvania, which consists of approximately 8,500 square feet from Ocean 7, Inc., a corporation controlled by the Chief Executive Officer of the Company, The initial term of the lease expired on June 30, 2003 and continues on a month to month lease based on terms generally similar to those prevailing to unrelated parties. The Company leases an apartment from the same company to accommodate visiting clients and employees.

Joseph V. Roberts, Chief Executive Officer and Director of the Company, received long term advances of which $165,749 and $187,503 remains outstanding as of June 30, 2009 and 2008, respectively. Kathleen A. Hill, President, Chief Operating Officer and Director of the Company, received long term advances of which $45,215 and $50,567 remains outstanding as of June 30, 2009 and 2008, respectively. Interest for Fiscal year ended June 30, 2009 of $1,270 has been included in the outstanding amounts. These amounts are currently under agreement whereby monthly payments are being made to reduce the outstanding amounts.

As of June 30, 2009, included in long term liabilities a related party is owed $414,146 to Joseph V. Roberts an officer and director of the company. Amounts due to and from officers are unsecured, interest bearing at 4%.

NOTE I – COMMITMENTS AND CONTINGENCIES

1. Operating Leases

The Company leases real estate facilities from a corporation owned by a principal stockholder under month-to-month operating leases, including its corporate office building under a month-to-month lease based on terms management believes to be generally similar to those prevailing to unrelated parties. During the years ended June 30, 2009, 2008 and 2007, rent expense paid to the related party was $258,414, $259,347 and $265,283, respectively.

The Company is also obligated under various operating leases for operating equipment for periods expiring through 2009. During the years ended June 30, 2009, 2008 and 2007, rent expense was $271,746, $323,114 and $334,845, respectively, for all operating leases.

Minimum annual rentals under non-cancelable operating leases subsequent to June 30, 2009 are as follows:

Year Ending June 30,	Operating Equipment
2010	4,445

2. Litigation

The Company is involved in litigation with a construction contractor related to the renovations of Collegeville Inn. The Company denies the claims and has asserted offsets against the amounts claimed. The case is in discovery.

Although it is not possible to predict with certainty the outcome of these unresolved legal actions or the range of possible loss or recovery, the Company believes these unresolved legal actions will not have a material effect on its financial position or results of operations.

In addition to the litigation described above, the Company is exposed to asserted and unasserted claims. In the opinion of management, the resolution of these matters will not have a material adverse effect on the Company’s financial position, results of operations or cash flows.

F-18

Nutrition Management Services Company and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- CONTINUED

NOTE I – COMMITMENTS AND CONTINGENCIES - continued

3. Employment Contracts

NOTE J - STOCKHOLDERS’ EQUITY

1. Class A Common Stock

The Company is authorized to issue 10,000,000 shares of Class A Common Stock, no par value, of which holders of Class A Common Stock have the right to cast one vote for each share held of record in all matters submitted to a vote of holders of Class A Common Stock. The Class A Common Stock and Class B Common Stock vote together as a single class on all matters on which shareholders may vote, except when class voting is required by applicable law.

Holders of Class A Common Stock are entitled to dividends, together with the holders of Class B Common Stock, pro rata based on the number of shares held. In the event of the liquidation, dissolution or winding up of the affairs of the Company, all assets and funds of the Company remaining after the payment to creditors and to holders of Preferred Stock, if any, shall be distributed, pro rata, among the holders of the Class A Common Stock and Class B Common Stock.

2. Class B Common Stock

The Company has authorized 100,000 shares of Class B Common Stock, all of which were issued to the Chief Executive Officer and majority shareholder of the Company, in exchange for 100,000 shares of Class A Common Stock. Each share of Class B Common Stock is entitled to seven votes on all matters on which shareholders may vote, including the election of directors. The Class A Common Stock and Class B Common Stock vote together as a single class on all matters on which shareholders may vote, except when class voting is required by applicable law.

Each share of Class B Common Stock also is convertible at any time upon the option of the holder into one share of Class A Common Stock. There are no preemptive, redemption, conversion or cumulative voting rights applicable to the Class B Common Stock.

3. Preferred Stock

The Company is authorized to issue 2,000,000 shares of Preferred Stock, no par value, of which no shares have been issued. The Preferred Stock may be issued by the Company’s Board of Directors from time to time in one or more series.

NOTE K - STOCK OPTIONS AND EMPLOYEE STOCK PURCHASE PLAN

1. Employee Stock Purchase Plan

The Company has a stock purchase plan that allows participating employees to purchase, through payroll deductions, shares of the Company’s common stock at 85 percent of the fair market value at specified dates. At June 30, 2009, all employees were eligible to participate in the plan. During the years ended June 2009, 2008 and 2007 there were fourteen participants and no shares purchased.

F-19

Nutrition Management Services Company and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- CONTINUED

NOTE L - DEFINED CONTRIBUTION PENSION PLAN

The Company sponsors a 401(k) plan for all employees who have attained the age of twenty-one and have completed one year of service. Eligible employees may contribute up to 15% of their annual compensation to the plan. The Company can match 100% up to the first 4% of employee plan contributions. Participants are vested 20% for each year of service beginning after year three and are fully vested after seven service years. During the years ended June 30, 2009, 2008 and 2007, Company contributions to the plan, which were charged to expense, amounted to $12,910, $16,471 and $20,081 respectively.

NOTE M - CONCENTRATION OF CREDIT RISK

Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of cash and cash equivalents and accounts receivable. A substantial portion of the Company’s revenues are dependent upon the payment by customers who are dependent upon third-party payers, such as state governments, Medicare and Medicaid. Generally, the Company does not require collateral or other security to support customer receivables. The Company routinely assesses the financial strength of its customers and, based upon factors surrounding the credit risk of its customers, establishes an allowance for uncollectible accounts and, as a consequence, believes that its accounts receivable credit risk exposure beyond such allowances is limited.

NOTE N - MAJOR CUSTOMERS

The loss of any such customer could have a material adverse effect on the Company’s future results of operations.

NOTE O – MAJOR SUPPLIERS

In the event of a disruption in the Company’s relationship with these vendors or any disruption in the vendor’s business, the Company has alternate sources of supply for its food and non-food products.

F-20

Nutrition Management Services Company and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- CONTINUED

NOTE P - BUSINESS SEGMENTS

The Company follows the disclosure provisions of SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information. This management approach focuses on internal financial information that is used by management to assess performance and to make operating decisions. SFAS No. 131 also requires disclosures about products, services, geographic areas and major customers.

The financial information of the Company’s reportable segments have been compiled utilizing the accounting policies described in Note A Organization and Business. The Company’s reportable segments are (1) food service management and (2) training and conference center. Deferred taxes are not allocated to segments. The management accounting policies and processes utilized in compiling segment financial information are highly subjective and, unlike financial accounting, are not based on authoritative guidance similar to accounting principles generally accepted in the United States of America. As a result, reported segment results are not necessarily comparable with similar information reported by other similar companies.

	Food Service Management			Training and Conference Center			Total
As of and for the year ended June 30, 2009:
Food Service Revenue	$	19,779,084		$	234,819		$	20,013,903
Depreciation and Amortization		20,570			4,783			25,353
Income / (Loss) from Operations		731,530			(364,633	)		366,897
Interest Expense		(193,021	)		(85,855	)		(278,876	)
Interest Income		1,650			-			1,650
Income / (Loss) before Tax Expense / (Benefit)		539,326			(453,957	)		85,369
Net Income / (Loss)		539,326			(453,957	)		85,369
Total Assets		5,716,969			6,534,055			12,251,024
Capital Expenditures		2,606			-			2,606

As of and for the year ended June 30, 2008:
Food Service Revenue	$	20,463,614		$	396,929		$	20,860,543
Depreciation and Amortization		24,202			4,783			28,985
Income / (Loss) from Operations		313,111			(391,229	)		(78,118	)
Interest Expense		(251,138	)		(83,052	)		(334,190	)
Interest Income		16,932			-			16,932
Income / (Loss) before Tax Expense / (Benefit)		67,901			(492,305	)		(424,404	)
Net Income / (Loss)		67,901			(492,305	)		(424,404	)
Total Assets		5,832,385			6,885,470			12,717,855
Capital Expenditures		18,757			-			18,757

As of and for the year ended June 30, 2007:
Food Service Revenue	$	20,246,350		$	665,589		$	20,911,939
Depreciation and Amortization		37,417			238,563			275,980
Income / (Loss) from Operations		12,101			(711,561	)		(699,460	)
Interest Expense		(307,488	)		(164,966	)		(472,454	)
Interest Income		72,136			-			72,136
Income / (Loss) before Tax Expense / (Benefit)		(966,548	)		(66,173	)		(1,032,721	)
Net Income / (Loss)		(704,973	)		(66,173	)		(771,146	)
Total Assets		5,934,042			7,340,809			13,274,851
Capital Expenditures		35,627			13,855			49,482

F-21

Nutrition Management Services Company and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- CONTINUED

NOTE Q - QUARTERLY FINANCIAL DATA (UNAUDITED)

The following quarterly financial data is unaudited, but in the opinion of management includes all necessary adjustments for a fair presentation of the interim results.

	Fiscal 2009
	September 30,			December 31,		March 31,		June 30,
Revenues	$	5,354,538		$	5,246,936	$	4,748,742	$	4,663,687
Gross Profit		1,040,354			1,062,688		1,020,452		1,174,514
Net Income (Loss)		(74,928	)		47,604		18,841		93,852
Net Income (Loss) per share – basic and diluted	$	(0.03	)	$	0.02	$	0.01	$	0.03

	Fiscal 2008
	September 30,			December 31,			March 31,			June 30,
Revenues	$	5,040,863		$	5,283,004		$	5,118,571		$	5,418,105
Gross Profit		994,020			993,648			932,972			1,072,796
Net Income (Loss)		(214,771	)		(179,489	)		(181,298	)		151,153
Net Income (Loss) per share – basic and diluted	$	(0.08	)	$	(0.06	)	$	(0.06	)	$	0.05

F-22

SUPPLEMENTAL INFORMATION

Nutrition Management Services Company and Subsidiaries

SCHEDULE OF VALUATION ACCOUNTS

For the three years ended June 30, 2009

The following sets forth the activity in the Company’s valuation accounts:

	Allowance for Doubtful Accounts
Balance at June 30, 2006		964,188
Provisions for bad debts		21,628
Write-offs		(230,038	)

Balance at June 30, 2007		755,778
Provisions for bad debts		63,068
Write-offs		(9,959	)

Balance at June 30, 2008		808,887
Provision for bad debts		51,735
Write-offs		(276	)
Balance as of June 30, 2009	$	860,346

F-23

Filing Compare · NUTRITION MANAGEMENT SERVICES CO/PA