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

                                    FORM 10-K-A

 (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, 2005
                                                      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
          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 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 June 30, 2005 was
     approximately $342,826.

     Indicate the number of shares  outstanding of each of the issuer's  classes
     of common stock, as of the latest  practicable  date: At September 9, 2005,
     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
     20.


                            (COVER PAGE 2 OF 2 PAGES)




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

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.  On January 10, 2005, the Company retained Moore Stephens
as its independent  certified  accountants in place of BDO Seidman, who resigned
as the Company's  independent auditors effective December 23, 2004. The decision
to retain Moore Stephens 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 two most recent fiscal year ended June 30,
2004 and the subsequent  interim period through December 23, 2004, there were no
disagreements  between the  Company and BDO Seidman on any matter of  accounting
principles or practices,  financial statement  disclosure,  or auditing scope or
procedure which, if not resolved to the satisfaction of BDO Seidman,  would have
caused BDO Seidman 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.

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,  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 fiscal year ended June
30, 2004.

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 Seidman 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  Seidman.  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  hired a Director of Finance  with
relevant  education  and work  experience  who  assumed  responsibility  for the
preparation of all of the income tax analyses.

The  report of BDO  Seidman  on the  consolidated  financial  statements  of the
Company as of and for the two most recent  fiscal  years ended June 30, 2004 did
not  contain  any  adverse  opinion  or  disclaimer  of  opinion,  nor were they
qualified or modified as to uncertainty, audit scope, or accounting principles.

The foregoing  disclosures  were previously  reported in Item 4 of the Company's
current  report on Form 8-K filed with the SEC on January 10, 2005.  The Company
provided BDO Seidman with a copy of the foregoing disclosures and requested that
BDO Seidman furnish the Company with a letter  addressed to the SEC stating that
it agreed with such statements. A copy of such letter, dated January 7, 2005 was
filed as Exhibit 16.1 to Form 8-K, dated January 10, 2005.

During the two most recent fiscal years ended June 30, 2004 and through December
23, 2004, neither the Company nor someone on its behalf consulted Moore Stephens
regarding  (i)  the   application  of  accounting   principles  to  a  specified
transaction,  either  completed or proposed;  or (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

Based on their  evaluation,  as of the end of the period covered by this report,
the  Company's  Chief  Executive  Officer and Principal  Financial  Manager have
concluded the Company's  disclosure controls and procedures (as defined in Rules
13a-14 and 15d-14  under the  Securities  Exchange  Act of 1934) are  effective.
There have been no significant  changes in internal controls or in other factors
that could  significantly  affect these controls subsequent to the date of their
evaluation,   including  any  corrective  actions  with  regard  to  significant
deficiencies and material weaknesses.

It should be noted that the Company had been advised by BDO Seidman LLP that the
Company should not have included the  independent  audit report prepared by such
firm for the fiscal years ended June 30, 2004 and June 30,2003 in this Form 10-K
for the fiscal year ended June 30, 2005.  As a result,  the Company filed a Form
8-K on October  11, 2005 under Item 4.02 -  Non-Reliance  on  Previously  Issued
Financial  Statements or a Related  Audited Report or Completed  Interim Review.
Management  believes its  disclosure  controls  and  procedures  are  effective,
despite the filing of this Form 8-K because a) the date of the audit report from
the previous  auditors was not changed from the report included in the Company's
Form 10-K for the fiscal  year ended June 30,  2004 and b) the  Company  was not
aware of any  information  which would  change the  information  included in the
audit for the fiscal year ended June 30,  2004.  Management  is taking the steps
necessary  to ensure a timely  re-audit for the Fiscal Years ended June 30, 2004
and June 30, 2003.

ITEM 9B - OTHER INFORMATION

As disclosed in Item 3-Legal Proceedings, the Company received $2,500,000 in the
quarter  ended June 30, 2005,  as a result of the  successful  resolution of its
litigation  against a former client.  For the year ended June 30, 2005, the jury
award is reported as Other Income, net of legal fees and related expenses in the
amount of $378,762.



PART IV

ITEM 15 - EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(A)1.   Consolidated Financial Statements

        Reports of Independent Registered Public Accounting Firms        F-2

        Consolidated Balance Sheets as of June 30, 2005
        and 2004 (unaudited)                                             F-3

        Consolidated Statements of Operations for the
        Years Ended June 30, 2005, 2004 (unaudited)
        and 2003 (unaudited)                                             F-4

        Consolidated Statements of Stockholders' Equity for the
        Years Ended June 30, 2005, 2004 (unaudited)
        and 2003 (unaudited)                                             F-5

        Consolidated Statements of Cash Flows for the
        Years Ended June 30, 2005, 2004 (unaudited)
        and 2003 (unaudited)                                             F-6

        Notes to Consolidated Financial Statements                       F-7 to F-21

        Schedule of Valuation Accounts                                   F-22

(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.  (Previously  filed  with the
               initial filing of this Form 10-K)

      10.20    Ninth  Amendment  to  Loan  Agreement  between  the  Company  and
               Wilmington  Trust of  Pennsylvania.  (Previously  filed  with the
               initial filing of this Form 10-K)

      10.21    Guaranty and  Suretyship of Joseph V. Roberts  (Previously  filed
               with the initial filing of this Form 10-K)

      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 18, 2005






FINANCIAL STATEMENTS AND REPORTS OF REGISTERED PUBLIC ACCOUNTING FIRMS
NUTRITION MANAGEMENT SERVICES COMPANY AND SUBSIDIARIES
JUNE 30, 2005, 2004 (UNAUDITED) AND 2003 (UNAUDITED)



                                TABLE OF CONTENTS

                                                                     Page
                                                                     ----

REPORTS OF INDEPENDENT REGISTERED PUBLIC
     ACCOUNTING FIRMS                                                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 to F-21

SUPPLEMENTAL INFORMATION

     SCHEDULE OF VALUATION ACCOUNTS                                  F-22





REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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



We have  audited  the  accompanying  consolidated  balance  sheet  of  Nutrition
Management  Services  Company  and  Subsidiaries  as of June 30,  2005,  and the
related consolidated  statements of operations,  stockholders'  equity, and cash
flows for the year then ended.  We have also audited the schedule  listed in the
accompanying   index.   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 audit.

We conducted  our audit 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
consolidated  financial statements are free of material  misstatement.  An audit
includes  examining,  on a test  basis,  evidence  supporting  the  amounts  and
disclosures in the  consolidated  financial  statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall consolidated  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  financial  position  of
Nutrition  Management Services Company and Subsidiaries as of June 30, 2005, and
the  consolidated  results of their operations and their cash flows for the year
ended, in conformity with U.S. generally accepted accounting principles.

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


                                          /S/ MOORE STEPHENS, P. C.
                                          -------------------------
                                          MOORE STEPHENS, P. C.
                                          Certified Public Accountants.

Cranford, New Jersey
September 15, 2005






                                       Nutrition Management Services Company and Subsidiaries
                                                     CONSOLIDATED BALANCE SHEETS
                                                              June 30,

                                                                                                                         Unaudited
                                                                                                      2005                 2004
                                                                                                  ------------         -------------
Current assets
     Cash and cash equivalents                                                                    $  2,889,616         $    946,523
     Marketable securities                                                                             213,561              202,969
     Accounts receivable (net of allowance for doubtful accounts of $958,702
         and $2,877,336 in 2005 and 2004, respectively)                                              3,063,514            2,259,582
     Deferred income taxes                                                                                --                405,320
     Inventory                                                                                         128,949              159,181
     Prepaid and other                                                                                 413,922              462,208
     Income tax refund                                                                                  43,730               63,348
                                                                                                  ------------         ------------
       Total current assets                                                                          6,753,292            4,499,131
                                                                                                  ------------         ------------

Property and equipment - net                                                                         6,989,627            7,563,568
                                                                                                  ------------         ------------


Other assets
     Restricted cash                                                                                   250,000              250,000
     Note receivable                                                                                   129,702              120,608
     Advances to officers                                                                              434,283              435,283
     Deferred income taxes                                                                           1,456,114            1,218,521
     Bond issue costs (net of accumulated amortization of $125,029
         and $110,461 in 2005 and 2004, respectively)                                                  166,295              180,863
     Other assets                                                                                       11,321               11,321
                                                                                                  ------------         ------------
         Total other assets                                                                          2,447,715            2,216,596
                                                                                                  ------------         ------------
         Total assets                                                                             $ 16,190,634          $ 14,279,295
                                                                                                  ============         ============
              LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities
     Current portion of long-term debt                                                            $    150,000         $    145,000
     Current portion of note payable                                                                        --              154,453
     Accounts payable                                                                                3,991,267            3,303,947
     Accrued expenses                                                                                  673,642              286,527
     Accrued payroll                                                                                   257,319              222,176
     Other                                                                                              75,190              160,588
                                                                                                  ------------         ------------
         Total current liabilities                                                                   5,313,707            4,272,691
                                                                                                  ------------         ------------

Long-term liabilities
     Long-term debt - net of current portion                                                         5,604,921            5,376,921
                                                                                                  ------------         ------------
         Total long-term liabilities                                                                 5,604,921            5,376,921
                                                                                                  ------------         ------------

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
         Accumulated other comprehensive income (net of tax)                                             8,240                   --
     Retained earnings                                                                               2,102,929            1,327,272
                                                                                                  ------------         ------------
                                                                                                     5,044,548            5,129,246
Less treasury stock - (common - Class A: 253,000 shares - at cost )                                   (499,563)            (499,563)
                                                                                                  ------------         ------------
         Total stockholders' equity                                                                  5,413,580            4,629,683
                                                                                                  ------------         ------------
         Total liabilities and stockholders' equity                                               $ 16,190,634         $ 14,279,295
                                                                                                  ============         ============


                                   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,



                                                                                        Unaudited        Unaudited
                                                                           2005            2004            2003
                                                                       ------------    ------------    ------------

Food service revenue                                                   $ 26,602,161    $ 27,999,905    $ 27,306,030

Cost of operations
     Payroll and related expenses                                        10,789,982      11,178,474      10,938,468
     Other costs of operations                                           10,897,611      11,563,911      11,745,972
                                                                       ------------    ------------    ------------

     Cost of operations                                                  21,687,593      22,742,385      22,684,440
                                                                       ------------    ------------    ------------

Gross profit                                                              4,914,568       5,257,520       4,621,590
                                                                       ------------    ------------    ------------

Expenses
     General and administrative expenses                                  4,943,466       4,909,172       4,556,706
     Depreciation and amortization                                          576,902         620,199         775,057
     Provision for doubtful accounts                                        165,000         585,000         389,262
                                                                       ------------    ------------    ------------

     Total Expenses                                                       5,685,368       6,114,371       5,721,025
                                                                       ------------    ------------    ------------

     Loss from operations                                                  (770,800)       (856,851)     (1,099,435)
                                                                       ------------    ------------    ------------

Other income/(expense)
     Interest expense                                                      (279,245)       (186,699)       (211,953)
     Interest income                                                         12,045           9,564           9,763
     Other                                                                2,121,238         (18,148)        (15,203)
                                                                       ------------    ------------    ------------

     Other income/(expense)- net                                          1,854,038        (195,283)       (217,393)
                                                                       ------------    ------------    ------------

Income/(loss) before income taxes                                         1,083,238      (1,052,134)     (1,316,828)

Income tax expense/(benefit)                                                307,580        (201,700)       (497,387)
                                                                       ------------    ------------    ------------

Net income/(loss)                                                           775,657        (850,434)       (819,441)

Other comprehensive income/(loss) (net of tax):
     Unrealized holding gains/(losses) arising during period                  8,240            --              --
     Less: Reclassification adjustment for realized gains
           included in net income                                              --              --              --
                                                                       ------------    ------------    ------------

     Total other comprehensive income                                         8,240            --              --
                                                                       ------------    ------------    ------------

Comprehensive income/(loss)                                            $    783,897   $   (850,434)   $   (819,441)
                                                                       ============    ============    ============

Net (loss) per share - basic and diluted                               $       0.27   $      (0.30)   $      (0.29)
                                                                       ============    ============    ============


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-4


                                       Nutrition Management Services Company and Subsidiaries
                                                      CONSOLIDATED STATEMENT OF
                                                        STOCKHOLDERS' EQUITY
                                                         For the three years
                                                         ended June 30, 2005

                          Class A Common Stock        Class B Common Stock
                          --------------------        --------------------
                                                                                               Accumulated
                                                                                                  Other
                          Number of                    Number                   Retained      Comprehensive
                           Shares        Amount       of Shares      Amount     Earnings         Income

Balance-June 30, 2002(a)  2,747,000   $ 3,801,926       100,000      $  48     $ 2,997,147    $      --

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

Balance-June 30, 2003(a)  2,747,000   $ 3,801,926       100,000      $  48     $ 2,177,706           --

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

Balance June 30, 2004(a)  2,747,000   $ 3,801,926       100,000      $   48      1,327,272           --

Net Income                     --            --            --            --        775,657          --
Other
Comprehensive Income           --            --            --            --            --           8,240
                          ---------   -----------       -------      --------  -----------    -------------

Balance-June 30, 2005     2,747,000   $ 3,801,926       100,000      $   48    $ 2,102,929    $     8,240
                          =========   ===========       =======      ========  ===========    ==============



                                     Treasury Stock
                                     --------------
                                                                        Total
                                     Number                         Stockholders'
                                     of Shares        Amount           Equity

Balance-June 30, 2002(a)             (253,000)     $  (499,563)     $ 6,299,558

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

Balance-June 30, 2003(a)             (253,000)     $  (499,563)       5,480,117

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

Balance June 30, 2004(a)             (253,000)     $  (499,563)       4,629,683

Net Income                               --               --            775,657
Other
Comprehensive Income                     --               --              8,240
                                     --------      -----------      -----------
Balance-June 30, 2005                (253,000)     $  (499,563)       5,413,580
                                     ========      ===========      ===========


(a) Unaudited. See Note A.

                                   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,


                                                                                        Unaudited        Unaudited
                                                                          2005            2004             2003
                                                                     -------------    ------------     ------------
Operating activities
Net income/(loss)                                                    $   (92,938)     $  (850,434)     $  (819,441)
Adjustments to reconcile net income/(loss) to net cash
         provided by operating activities
     Depreciation and amortization                                       576,902          620,199          775,057
     Amortization of bond costs                                           14,568           14,567           14,566
     Provision for bad debts                                             165,000          585,000          389,262
     Expense/(benefit) for deferred taxes                                167,727         (201,700)        (436,565)

Changes in assets and liabilities
     Accounts receivable                                                (978,026)          14,682        2,290,854
     Inventory                                                            30,232           (3,236)          74,293
     Prepaid and other                                                    48,286          (45,506)         (81,121)
     Income tax refund                                                    19,618             --            (63,348)
     Accounts payable                                                    687,320          420,451         (590,628)
     Accrued expenses                                                    411,830          (17,229)        (139,727)
     Accrued payroll                                                      35,143          (24,446)         (14,239)
     Other                                                               (85,398)          42,415           45,786
                                                                     -----------      -----------      -----------

         Net cash provided by operating activities                     1,868,859          554,763        1,444,749

Investing activities
     Purchase of property and equipment                                   (2,961)         (80,314)         (74,800)
     Purchase of marketable securities                                   (38,660)        (202,969)            --
     Sale of marketable securities                                        36,308             --               --
     Repayments by employees and officers                                  1,000             --             88,207
                                                                     -----------      -----------      -----------
         Net cash Provided by (Used In)                                   (4,313)        (283,283)          13,407

Financing activities
     Restricted cash                                                        --           (250,000)            --
     Proceeds from long-term borrowings                                  436,000        4,225,000        1,775,900
     Repayment of long-term borrowings                                  (203,000)      (4,084,783)      (2,129,866)
     Repayment of note payable                                          (154,453)        (575,686)        (336,988)
                                                                     -----------      -----------      -----------

         Net cash Provided by/(Used in)                                   78,547         (685,469)        (690,954)
                                                                     -----------      -----------      -----------

NET (DECREASE)/INCREASE IN CASH AND
              CASH EQUIVALENTS                                         1,943,093         (413,989)         767,202

Cash and cash equivalents - beginning of year                            946,523        1,360,512          593,310
                                                                     -----------      -----------      -----------
Cash and cash equivalents - end of year                              $ 2,889,616      $   946,523      $ 1,360,512
                                                                     ===========      ===========      ===========

Supplemental disclosures of cash flow information
     Cash paid during the years for
         Interest                                                    $   217,764      $   185,000      $   213,625
         Income taxes                                                $     3,014      $     2,040      $     6,475


                                   The accompanying notes are an integral part of these statements
                                                                 F-6



             NUTRITION MANAGEMENT SERVICES COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (See Note A)


NOTE A -

     Certain  figures  reported in the Financial  Statement and the Notes hereto
     are not audited,  and are so labeled.  These amounts are solely  associated
     with the fiscal years ended June 30, 2004 and June 30,  2003.  Such amounts
     are identical to what had been  previously  reflected in the Company's Form
     10-K  for the  Fiscal  Year-ended  June 30,  2004.  The  Company's  current
     auditor,  Moore  Stephens,  P.C. will audit those periods and their results
     will be included in a future filing of this document.

NOTE B - 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 C - 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
         ---------------------

     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.
     Accordingly,  net unrealized  gains of $8,240 on marketable  securities are
     included in accumulated other comprehensive income as of June 30, 2005.

     As of June 30, 2005, marketable securities consist of the following:

                                    Gross        Unrealized
                               Unrealized Gain      Loss              Fair Value
                               ---------------   ----------           ----------

            Common Stock          $  13,793       $    --             $ 213,561

     As of June 30, 2004, marketable securities consist of the following:

                                    Gross        Unrealized
                               Unrealized Gain      Loss              Fair Value
                               ---------------   ----------           ----------

            Common Stock          $     --        $    --             $ 202,969

     During the years ended June 30,  2005,  2004 and 2003,  sales  proceeds and
     gross realized  gains and losses on securities  classified as available for
     sale were as follows:

                                           2005           2004           2003
                                         ---------      ---------      ---------

          Sales proceeds                 $  36,308      $    --        $    --
                                         =========      =========      =========

          Gross realized gains           $    --        $    --        $    --
                                         =========      =========      =========

          Gross realized losses          $    --        $    --        $    --
                                         =========      =========      =========


                                       F-7


             NUTRITION MANAGEMENT SERVICES COMPANY AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


NOTE C - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

     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.  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, 2005 and 2004,
     inventory is $100,611 and $159,181,  respectively.  As of June 30, 2005 and
     2004,   inventory  receivable  from  customers  is  $  19,324  and  $17,186
     respectively,  while  inventory  payable  to  customers  is  $8,289  and $0
     respectively.

     6.  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.

     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.  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.

     9.  Accounting for Stock-Based Compensation
         ---------------------------------------

     The Company accounts for stock-based  compensation  utilizing the intrinsic
     value method in accordance  with the  provisions  of Accounting  Principles
     Board Opinion No. 25 ("APB 25"), "ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES"
     and  related  Interpretations.  Accordingly,  no  compensation  expense  is
     recognized  because the exercise  prices of these  employee  stock  options
     equal or exceed the estimated fair market value of the underlying  stock on
     the dates of grant.

     In December 2004, the Financial  Accounting Standards Board ("FASB") issued
     Statement of Financial Accounting Standards ("SFAS") No. 123R, "SHARE-BASED
     PAYMENT".  SFAS No.  123R is a revision of SFAS No.  123,  "ACCOUNTING  FOR
     STOCK BASED  COMPENSATION",  and supersedes APB 25. Among other items, SFAS
     123R  eliminates  the  use of APB 25 and  the  intrinsic  value  method  of
     accounting,  and  requires  companies  to  recognize  the cost of  employee
     services  received in exchange for awards of equity  instruments,  based on
     the grant date fair value of those awards, in the financial statements. The
     effective date of SFAS 123R is the first annual  reporting period beginning
     after June 15, 2006. SFAS 123R requires companies to adopt its requirements
     using a "modified  prospective"  method.  Under the "modified  prospective"
     method, compensation cost is recognized in the financial


                                       F-8


             NUTRITION MANAGEMENT SERVICES COMPANY AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

NOTE C - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued


     9.  Accounting for Stock-Based Compensation-continued
         -------------------------------------------------

     statements  beginning with the effective date, based on the requirements of
     SFAS 123R for all share-based  payments  granted after that date, and based
     on the  requirements  of SFAS 123 for all unvested  awards granted prior to
     the effective date of SFAS 123R. The "modified  retrospective"  method also
     permits entities to restate financial  statements of previous periods based
     on proforma disclosures made in accordance with SFAS 123.

     The Company  currently  utilizes a standard  option  pricing  model  (i.e.,
     Black-Scholes)  to  measure  the fair  value of stock  options  granted  to
     employees.  While SFAS 123R  permits  entities  to  continue  to use such a
     model,  the standard also permits the use of a "lattice" model. The Company
     has not yet determined which model it will use to measure the fair value of
     employee stock options upon the adoption of SFAS 123R.

     SFAS  123R  also  requires  that  the  benefits  associated  with  the  tax
     deductions  in excess of  recognized  compensation  cost be  reported  as a
     financing  cash flow,  rather  than as an  operating  cash flow as required
     under current  literature.  The Company has not yet determined what effect,
     if any, this change will have on future periods.

     The Company  currently  expects to adopt SFAS 123R  effective July 1, 2006;
     however,  it has  not yet determined which of the  aforementioned  adoption
     methods it will use.

     10. 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, 2005 and 2004,  the Company  maintained a deferred tax asset
     of $1,456,114 and $1,623,841,  respectively. The Company has not provided a
     valuation allowance against its deferred tax asset 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 F for
     additional information.

     11. Accumulated Other Comprehensive Income/(Loss)
     -------------------------------------------------

     Based  on  the  Company's  current   activities,   the  only  component  of
     accumulated  other   comprehensive   income  consists  of  changes  in  the
     unrealized gains or losses of marketable securities.

                                            For the year ended June 30,
                                              2005               2004
                                            ---------          ---------
               Beginning balance             $   --            $   --
               Current period change           13,733              --
               Tax effect                      (5,493)             --
                                             --------          ---------
               Ending balance                $  8,240          $   --
                                             ========          =========


                                      F-9

             NUTRITION MANAGEMENT SERVICES COMPANY AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

NOTE C - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

     12. 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 are
     listed in Note J.

     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,
     2005, 2004 and 2003 was $78,789, $112,404 and $53,196, respectively.

     14. Reclassification
         ----------------

     Certain  2004 and 2003  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
          -----------------------------------

     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 are 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 are reported in the  accompanying  balance
     sheet for debt  approximate  their fair values.  See footnote E for further
     discussion.


                                      F-10

             NUTRITION MANAGEMENT SERVICES COMPANY AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

NOTE C - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

     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.

     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 $98,083,
     $159,893 and  $138,605  for the years ended June 30,  2005,  2004 and 2003,
     respectively.

     19. New Accounting Pronouncements
         -----------------------------

     In November 2004, the Financial  Accounting Standards Board ("FASB") issued
     SFAS  No.  151,  "INVENTORY  COSTS  - AN  AMENDMENT  TO ARB NO.  43."  This
     statement  provides guidance to clarify the accounting for abnormal amounts
     of idle facility  expense,  freight  handling  costs,  and wasted  material
     (spoilage),  among other production costs.  Provisions of ARB No. 43 stated
     that  under  some  circumstances,  items  such  as idle  facility  expense,
     excessive  spoilage  and  other  costs  may be so  abnormal  as to  require
     treatment as current period  charges.  This  statement  requires that those
     items be recognized as current  period  charges  regardless of whether they
     meet the criterion of "so  abnormal."  In addition,  SFAS 151 requires that
     allocation  of fixed  production  overheads to the costs of  conversion  be
     based on the normal capacity of the production facilities.  The adoption of
     this statement is required for fiscal years  beginning after June 15, 2005.
     Adoption of the Statement is not expected to have a material  impact on the
     financial statements of the Company.

     In November 2004, the FASB issued SFAS No. 152  "ACCOUNTING FOR REAL ESTATE
     TIME-SHARING  TRANSACTIONS  - AN  AMENDMENT  OF SFAS NO.  66 AND 67".  This
     Statement  amends SFAS No. 66  "ACCOUNTING  FOR SALES OF REAL  ESTATE",  to
     reference the financial  accounting and reporting  guidance for real estate
     time-sharing  transactions  that is provided in AICPA Statement of Position
     (SOP) 04-2,  Accounting  for Real Estate  Time-Sharing  Transactions.  This
     Statement also amends SFAS No. 67, "ACCOUNTING FOR COSTS AND INITIAL RENTAL
     OPERATIONS  OF  REAL  ESTATE  PROJECTS,"  to  state  the  guidance  for (a)
     incidental  costs and (b) costs incurred to sell real estate  projects does
     not apply to real estate  time-sharing  transactions.  The  accounting  for
     those  operations  and costs is subject to guidance in SOP 04-2,  effective
     for financial  statements  with fiscal years beginning after June 15, 2005.
     Adoption of this Statement is not expected to have a material impact on the
     financial statements of the Company.

     In November 2004,  the FASB issued SFAS No. 153,  "EXCHANGES OF NONMONETARY
     ASSETS - AN AMENDMENT TO APB NO. 29." This Statement  amends Opinion No. 29
     to eliminate the exception for nonmonetary  exchanges of similar productive
     assets  and  replaces  it  with  a  general   exception  for  exchanges  of
     nonmonetary  assets that do not have  commercial  substance.  A nonmonetary
     exchange  has  commercial  substance if the future cash flows of the entity
     are  expected  to change  significantly  as a result of the  exchange.  The
     adoption of this  statement is required for fiscal  years  beginning  after
     June  15,  2005.  Adoption  of this  statement  is not  expected  to have a
     material impact on the financial statements of the Company.

     In December 2004, the FASB issued SFAS No. 123 (Revised 2004)  "SHARE-BASED
     PAYMENT." The statement  requires  that the  compensation  cost relating to
     share-based  payment  transactions  be recognized in financial  statements.
     That  cost  will be  measured  based on the fair  value  of the  equity  or
     liability   instrument  issued.  The  statement  covers  a  wide  range  of
     share-based compensation  arrangements including share options,  restricted
     share plans,  performance-based  awards,  share  appreciation  rights,  and
     employee share purchase  plans.  The Company will be required to adopt SFAS
     123 (R) as of July 1, 2006.  The adoption of this statement is not expected
     to have a material impact on the consolidated  financial  statements of the
     Company.

                                      F-11


             NUTRITION MANAGEMENT SERVICES COMPANY AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

NOTE C - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

     19. New Accounting Pronouncements-continued
         ---------------------------------------

     In May 2005,  the FASB  issued SFAS No. 154  "ACCOUNTING  CHANGES AND ERROR
     CORRECTIONS".  This  Statement  replaces  APB  Opinion  No. 20,  Accounting
     Changes, and FASB Statement No. 3, "Reporting Accounting Changes in Interim
     Financial Statements",  and changes the requirements for the accounting for
     and reporting of a change in accounting  principle.  This Statement applies
     to all  voluntary  changes  in  accounting  principle.  It also  applies to
     changes  required by an accounting  pronouncement  in the unusual  instance
     that the  pronouncement  does not include specific  transition  provisions.
     When  a  pronouncement  includes  specific  transition  provisions,   those
     provisions  should be followed.  Adoption of this statement is required for
     fiscal  years  starting  after  December  15,  2005.  The  adoption of this
     statement  is not  expected to have a material  impact on the  consolidated
     financial statements of the Company.

NOTE D - 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 O for segment
     reporting information.  The Company has a business plan in place to improve
     the operating  results from the Collegeville Inn. The agreement of sale for
     the land dated  September  8, 2004 has been  terminated  and the Company is
     currently exploring several alternatives for the land,  including,  but not
     limited  to, the sale of the land.  Effective  June 27,  2005,  the Company
     closed the buffet  restaurant at the  Collegeville Inn to make the facility
     available for catered events.

     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,  sale of excess  land at the  Collegeville  Inn 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, 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 July 1, 2006.

     At June 30, 2005 the Company was in compliance with its bank covenants. The
     Company has amended its agreement with the bank that has extended the terms
     of  the  Company's  credit  line  through  July  1,  2006.  See  Note E for
     additional information.

NOTE E - PROPERTY AND EQUIPMENT

     The following details the composition of property and equipment.

                                           Estimated                  Unaudited
                                          useful lives     2005         2004
                                          ------------ ------------- -----------
     Property and equipment
     Land                                       --     $   497,967   $   497,961
     Building                                     40     7,491,984     7,491,984
     Machinery and equipment                   2 - 8     3,864,266     3,864,941
     Furniture and fixtures                    2 - 8       749,434       749,434
     Other, principally autos and trucks      2 - 10       410,753       407,117
                                                       -----------   -----------
                                                        13,014,404    13,011,443
          Less: accumulated depreciation                 6,024,777     5,447,875
                                                       -----------   -----------
                                                       $ 6,989,627   $ 7,563,568
                                                       ===========   ===========


                                      F-12


             NUTRITION MANAGEMENT SERVICES COMPANY AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


NOTE F - LONG- TERM DEBT

                                                                                                                           Unaudited
     Long-term debt consisted of the following:                                                          2005                2004
                                                                                                      ----------          ----------
     Bank  revolving  credit,  interest due monthly at the National  Consumer
          rate minus .25% (effectively  6.0% as of June 30, 2005), secured by
          all corporate assets and limited  personal  guarantee of the Chief
          Executive  Officer;  matures on July 1, 2006                                                $3,224,921          $2,846,921
     Industrial Revenue Bonds (Collegeville Inn Projects) (see bonds payable)                          1,835,000           1,940,000
     Industrial Revenue Bonds (Apple Fresh Foods Projects) (see bonds payable)                           695,000             735,000
                                                                                                      ----------          ----------
                                                                                                       5,754,921           5,521,921
     Less: current maturities                                                                            150,000             145,000
                                                                                                      ----------          ----------
                                                                                                      $5,604,421          $5,376,921
                                                                                                      ==========          ==========

     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. A portion of the cash  collateral  account has been
     released  and  as of  June  30,  2005  and  2004,  the  Company  maintained
     restricted cash balances of $250,000, respectively, which was not available
     for operating purposes.

     At June 30, 2005,  the Company had available  approximately  $275,079 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, 2005,  the
     Company was in compliance with these covenants.

     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, 2005
         was 3.45%)

         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, 2005 was 2.45%)

         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.


                                      F-13


             NUTRITION MANAGEMENT SERVICES COMPANY AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

NOTE F - LONG-TERM DEBT - continued

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

                      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
                      2009           135,000            55,000           190,000

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

               Year ending June 30,
               --------------------

                      2006          $  165,000
                      2007           3,394,921
                      2008             180,000
                      2009             190,000
                      2010             275,000
                      Thereafter     1,550,000
                                    ----------
                                    $5,754,921
                                    ==========

NOTE G - INCOME TAXES

  The components of income tax
  (benefit)/expense are:                      Year Ended June 30,
                                              -------------------
                                                   (Unaudited)      (Unaudited)
                                    2005              2004             2003
                                ------------      ------------     -------------
     Current
          Federal               $   139,853       $         0       $   (47,422)
          State                           0                 0           (13,400)
                                -----------       -----------       -----------
                                    139,853                 0           (60,822)
                                -----------       -----------       -----------
     Deferred
          Federal                   156,584          (157,662)         (345,191)
          State                      11,143           (44,038)          (91,374)
                                -----------       -----------       -----------
                                    167,727          (201,700)         (436,565)
                                -----------       -----------       -----------

                                $   307,580       $  (201,700)      $  (497,387)
                                ===========       ===========       ===========


                                      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
                                                                     -------
                                                                           (Unaudited)
                                                               2005           2004
                                                            ----------     ----------

     Deferred tax assets
          Provision for doubtful accounts                   $  412,242     $1,095,349
          Excess of tax over financial statement
               basis of investments in contracts               147,970        147,970
          Vacation accrual                                     109,349        114,956
          Bonus accrual                                          2,150           --
          Charitable contribution carryforward                  26,294         36,690
          Federal net operating loss                           871,616        324,893
          Other                                                 96,937        107,879
                                                            ----------     ----------
     Total deferred tax assets                               1,666,358      1,827,737
                                                            ----------     ----------

     Deferred tax liabilities
          Depreciation                                         210,244        203,896
                                                            ----------     ----------

              Net deferred tax assets                       $1,456,114     $1,623,841
                                                            ==========    ===========

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

                                                                     June 30
                                                                     -------
                                                                           (Unaudited)
                                                               2005           2004
                                                            ----------     ----------

          Current asset                                     $     --       $  405,320
          Non-current asset                                  1,456,114      1,218,521
                                                            ----------     ----------
                                                            $1,456,114     $1,623,841
                                                            ==========    ===========

     The Company also has a federal net operating loss carry forward of $855,042
     expiring on December  31,  2017.  The Company has  charitable  contribution
     carry  forwards  in the  amount of  $61,419,  which  begin to expire in the
     fiscal year 2005.

     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  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
                                                         ------------------
                                                     2005      2004       2003
                                                    ------    ------     ------
          Income taxes, at U.S. statutory rates      34.0%    (34.0)%    (34.0)%
          States taxes, net of federal tax benefit   (1.0)      4.2       (5.3)
          Nondeductible expenses                      8.9      10.2        3.5
          Other                                     (13.6)       .4       (2.0)
                                                    ------    ------     ------
                                                     28.3%    (19.2)%     (37.8)%
                                                    ======    ======     ======



                                      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
     the same company to accommodate visiting clients and employees.  See Note H
     for additional information.

     Joseph V.  Roberts,  Chief  Executive  Officer and Director of the Company,
     received  long  term  advances  of  which  $374,373  and  $375,373  remains
     outstanding as of June 30, 2005 and 2004,  respectively.  Kathleen A. Hill,
     President,  Chief Operating  Officer and Director of the Company,  received
     long term advances of which $59,910 remains outstanding as of June 30, 2005
     and 2004,  respectively.  As of June 30,  2005 the  Company  did not have a
     written  agreement with Mr. Roberts or Ms. Hill regarding  repayment of the
     outstanding balances.  The advances are non-interest bearing.

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,  2005,  2004 and 2003,
     rent expense paid to the related party was $259,758, $261,766 and $232,259,
     respectively.

     The Company is also obligated under various  operating leases for operating
     equipment for periods  expiring  through 2007.  During the years ended June
     30, 2005, 2004 and 2003, rent expense was $390,341,  $287,440 and $260,698,
     respectively, for all operating leases.

     Minimum annual rentals under non-cancelable  operating leases subsequent to
     June 30, 2005, are as follows:

                                                         Operating
          Year ending June 30,                           equipment
          --------------------                          -----------

                2006                                    $  44,545
                2007                                       22,065
                2008                                            0
                2009                                            0


     2.  Litigation
         ----------

     On February 7, 2001, the Company filed a suit against a major client in the
     Court  of  Common  Pleas  of  Chester  County,   Pennsylvania,   which  was
     subsequently  removed to the United States  District  Court for the Eastern
     District of Pennsylvania.  On February 25, 2005,  judgment was entered on a
     jury  verdict  in favor of the  Company,  in the  amount of  $2,500,000  in
     damages  related to its claims,  including  but not  limited to,  breach of
     contract and lost profits.  The client's  counterclaim was dismissed by the
     judge. The Company filed an appeal of the jury's failure to award interest.
     Fees due to the Company's legal counsel in the amount of $340,000 have been
     placed in escrow  pending the outcome of the appeal.  The former client did
     not appeal the jury verdict and the Company received  $2,500,000 on June 1,
     2005. For the year ended June 30, 2005, the jury award is reported as Other
     Income, net of legal fees and related expenses in the amount of $378,762.

     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-16


             NUTRITION MANAGEMENT SERVICES COMPANY AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

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.  Stock Options (Unaudited)
         ------------------------

     In September  1991, the Company adopted the 1991 Stock Option Plan ("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. The Company has
     reserved 500,000 shares of common stock 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, 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

         Outstanding at June 30, 2005                      37,750                    45,000            82,750               4.00
         Exercisable at June 30, 2005                      37,750                    45,000            82,750               4.00


                                                                F-17


             NUTRITION MANAGEMENT SERVICES COMPANY AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

NOTE K - STOCK OPTIONS AND EMPLOYEE STOCK PURCHASE PLAN - continued

     1.  Stock Options-continued
         -----------------------

     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, 2005, all employees were eligible to participate in the plan. A summary
     of stock purchased under the plan is shown below.

                                               2005          2004          2003
                                             --------      --------      --------

          Aggregate purchase price            $ --          $ --          $  720
          Shares purchased                      --            --           4,235
          Employee participants                 14            14              14

     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.

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 three and are fully vested after seven service years.
     During the years ended June 30, 2005, 2004 and 2003, Company  contributions
     to the plan,  which were charged to expense,  amounted to $12,886,  $23,889
     and $23,649, 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,  2005,  the  Company  had  cash  balances  of  approximately
     $2,400,000  subject  to credit  risk  beyond  insured  amounts  at  various
     financial  institutions having high credit standings.  The Company 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.


                                      F-18


             NUTRITION MANAGEMENT SERVICES COMPANY AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

NOTE N - MAJOR CUSTOMERS

     The Company's Food Service  Management Segment had sales to three customers
     representing  approximately  29%,  21%  and  11%,  respectively,  of  total
     revenues  for the year ended June 30,  2005.  For the years  ended 2004 and
     2003,  the  Company's  Food  Service  Management  Segment  had sales to one
     customer  representing   approximately  28%  and  26%  of  total  revenues,
     respectively.  The loss of any such customer could have a material  adverse
     effect on the Company's future results of operations.

NOTE O - MAJOR SUPPLIERS

     For the years ended June 30, 2005, 2004 and 2003, respectively, the Company
     purchased the following  percentages of its food and non-food products from
     two vendors:

                                        Years ending June 30,
                                        ---------------------
                                    2005        2004        2003
                                    -----       ----        ----
            Vendor A:                45%         40%         37%
            Vendor B:                19%         18%         18%

     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.

     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.


                                      F-19


                                 NUTRITION MANAGEMENT SERVICES COMPANY AND SUBSIDIARIES
                                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

NOTE P - BUSINESS SEGMENTS - continued
                                                                                     Training and
                                                              Food Service            Conference
                                                               Management               Center                Total
                                                              -------------          ------------          ------------

     As of and for the year ended June 30, 2005:
         Food service revenue                                 $ 25,736,139          $    866,022          $ 26,602,161
         Depreciation and amortization                              78,034               498,868               576,902
         Income/(loss) from operations                             673,250            (1,444,051)             (770,801)
         Interest expense                                         (168,476)             (110,769)             (279,245)
         Interest income                                            12,045                  --                  12,045
         Income/(loss) before tax expense/(benefit)              1,581,374              (498,137)            1,083,237
         Net income/(loss)                                       1,273,794              (498,137)              775,657
         Total assets                                            8,839,079             7,351,555            16,190,634
         Capital expenditures                                       25,139                15,266                40,405

     As of and for the year ended June 30, 2004 (Unaudited):
         Food service revenue                                 $ 27,074,155          $    925,750          $ 27,999,905
         Depreciation and amortization                             123,192               497,007               620,199
         Income/(loss) from operations                             568,029            (1,424,886)             (856,851)
         Interest expense                                         (117,525)              (69,175)             (186,699)
         Interest income                                             9,564                  --                   9,564
         Loss before tax expense/(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 (Unaudited):
         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 tax expense/(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


                                                          F-20


             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 2005
                                                 ----------------------------------------------------------------
                                                 September 30,     December 31,      March 31,         June 30,
                                                 -------------    -------------    -------------    -------------

          Revenues                                $6,769,547       $6,610,033       $6,627,280       $6,595,301
          Gross profit                             1,303,312        1,344,259        1,048,082        1,218,915
          Net income (loss)                         (209,533)         (48,852)        (445,892)       1,479,934
          Net income (loss) per share
               - basic and diluted                $     (.07)      $     (.02)      $     (.16)      $      .52

     The  Company's  net income for the quarter ended June 30, 2005 includes the
     proceeds,  net of legal and related  expenses from the jury verdict related
     to the litigation discussed in Note H.

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

         Revenues                                 $6,706,854       $7,175,557       $7,141,972       $6,975,522
         Gross profit                              1,313,334        1,339,557        1,341,253        1,263,376
         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)      $    (0.18)

     The  Company's  net loss for the quarter  ended 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 F-
     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, 2005

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

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

Balance at June 30, 2002 (Unaudited)                              $1,774,753

     Provision for bad debts                                         389,262

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

Balance at June 30, 2003 (Unaudited)                               2,292,336

     Provision for bad debts                                         585,000

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

Balance at June 30, 2004 (Unaudited)                               2,877,336

     Provision for bad debts                                         165,000

     Recoveries, net of write-offs                                 2,083,634
                                                                  ----------

Balance at June 30, 2005                                          $  958,702
                                                                  ==========


                                      F-22