UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-Q





(Mark
One)





x
            QUARTERLY REPORT PURSUANT TO
      SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934





For the quarterly period
ended March 31, 2009




or





o
            TRANSITION REPORT PURSUANT TO
      SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934





For the
transition period from 
to





Commission File Number:
0-19824





Nutrition
      Management Services Company(Exact
      name of registrant as specified in its
charter)





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





Box 725, Kimberton Road,
      Kimberton, PA
            19442(Address
      of principal executive offices)
            (Zip
      Code)





(610)
      935-2050(Registrant’s
      telephone number, including area code)N/A(Former
      name, former address and former fiscal year, if changed since last
      report)





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




Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).    
Yes o    
No o


Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  See the definitions of “large accelerated filer,” “accelerated
filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. 
(Check one):




Large
      accelerated filer  ̈
              Accelerated
      filer  ̈Non-accelerated
      filer  ̈ (Do
      not check if a smaller reporting company)
              Smaller
      reporting company x
 Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).     Yes o    No
x
  2,747,000
Shares of Registrant’s Class A Common Stock, with no par value, and 100,000
shares of Registrant’s Class B Common Stock, with no par value, are outstanding
as of May 13, 2009.









TABLEOF CONTENTS
  Part
      I.
                  Financial
      Information
                  Page
      No.Item 1. – Financial Information
                  2Consolidated Balance Sheets as of March 31, 2009 (unaudited)
      and June 30, 2008
                  2Consolidated Statements of Operations for the Three Months and
      Nine Months Ended March 31, 2009 (unaudited) and 2008
      (unaudited)
                  3Consolidated Statements of Cash Flows for the Nine Months
      Ended March 31, 2009 (unaudited) and 2008 (unaudited)
                  4Notes to Unaudited Consolidated Financial
      Statements
                  5 -
      10Item 2. – Management’s Discussion and Analysis of Financial
      Condition and Results of Operations
                  11
      - 16Item 3. – Quantitative and Qualitative Disclosure about
      Market Risk
                  16Item 4T. – Controls and Procedures
                  16
      - 17Part
      II.
                  Other Information
                  18Signatures
                  19
  Table of Contents
  NUTRITIONMANAGEMENT SERVICES COMPANY
 CONSOLIDATED
BALANCE SHEETS
  March
      31, 2009(unaudited)
                    
                    
                    June 30, 2008Current
      assets:Cash
      and cash equivalents
                    
                    $
                    22,733
                    
                    
                    $
                    307,902Accounts
      receivable, net of allowance for doubtful accounts of$845,346
      and $808,887, respectively
                    
                    
                    2,603,246
                    
                    
                    
                    2,648,181Inventory
                    
                    
                    151,451
                    
                    
                    
                    142,073Prepaid
      and other
                    
                    
                    703,035
                    
                    
                    
                    342,655Assets
      held for sale
                    
                    
                    6,295,450
                    
                    
                    
                    6,295,450Total
      current assets
                    
                    
                    9,775,915
                    
                    
                    
                    9,736,261Property
      and equipment, net
                    
                    
                    80,519
                    
                    
                    
                    104,939Other
      assets:Advances
      to employees
                    
                    
                    220,106
                    
                    
                    
                    238,381Deferred
      income taxes
                    
                    
                    2,265,908
                    
                    
                    
                    2,265,908Bond
      issue costs, net of accumulated amortization of $180,237 and$168,724, respectively
                    
                    
                    112,287
                    
                    
                    
                    123,800Other
      assets
                    
                    
                    245,964
                    
                    
                    
                    248,566Total
      Other Assets
                    
                    
                    2,844,265
                    
                    
                    
                    2,876,655Total
      assets
                    
                    $
                    12,700,699
                    
                    
                    $
                    12,717,855Current
      liabilities:Current
      portion of long-term debt
                    
                    $
                    180,000
                    
                    
                    $
                    180,000Current
      portion of line of credit
                    
                    
                    3,459,114
                    
                    
                    
                    3,499,114Current
      portion of note payable
                    
                    
                    18,439
                    
                    
                    
                    7,551Accounts
      payable
                    
                    
                    3,313,393
                    
                    
                    
                    3,196,032Accrued
      payroll and related expenses
                    
                    
                    34,252
                    
                    
                    
                    208,366Accrued
      expenses
                    
                    
                    181,950
                    
                    
                    
                    266,727Note
      payable-related parties
                    
                    
                    358,888
                    
                    
                    
                    -Other
                    
                    
                    88,797
                    
                    
                    
                    105,718Total
      current liabilities
                    
                    
                    7,634,833
                    
                    
                    
                    7,463,508Long-Term
      liabilities:Long-term
      debt, net of current portion
                    
                    
                    1,685,000
                    
                    
                    
                    1,865,000Total
      Liabilities
                    
                    
                    9,319,833
                    
                    
                    
                    9,328,508Commitments
      and contingenciesStockholders’
      equity:Undesignated
      preferred stock – no par, 2,000,000 shares authorized,none issued or outstanding.Common
      stock:Class
      A – no par, 10,000,000 shares authorized; 3,000,000 issued,2,747,000 outstanding, and no par 10,000,000 shares
      authorized;3,000,000 issued, 2,747,000 outstanding, respectively
                    
                    
                    3,801,926
                    
                    
                    
                    3,801,926Class
      B – no par, 100,000 shares authorized, issued and
    outstanding
                    
                    
                    48
                    
                    
                    
                    48Retained
      earnings
                    
                    
                    78,455
                    
                    
                    
                    86,936Total
                    
                    
                    3,880,429
                    
                    
                    
                    3,888,910Less:  Treasury
      Stock (Class A Common: 253,000 and 253,000 shares,respectively) – at cost
                    
                    
                    (499,563
                    )
                    
                    
                    (499,563
                    )Total
      stockholders’ equity
                    
                    
                    3,380,866
                    
                    
                    
                    3,389,347Total
      liabilities and stockholders’ equity
                    
                    $
                    12,700,699
                    
                    
                    $
                    12,717,855
  See Notes
to Unaudited Consolidated Financial Statements
  2
 Table of Contents
  NUTRITIONMANAGEMENT SERVICES COMPANY
 CONSOLIDATED
STATEMENTS OF OPERATIONS
 (Unaudited)
  Three
      months ended
                      March
      31,
                    
                    
                    Nine
      months ended
                      March
      31,2009
                    
                    
                    2008
                    
                    
                    2009
                    
                    
                    2008Food
      Service Revenue
                    
                    $
                    4,748,742
                    
                    
                    $
                    5,118,571
                    
                    
                    $
                    15,350,216
                    
                    
                    $
                    15,442,438Cost
      of OperationsPayroll
      and related expenses
                    
                    
                    2,276,427
                    
                    
                    
                    2,490,231
                    
                    
                    
                    7,445,480
                    
                    
                    
                    7,372,148Other
      costs of operations
                    
                    
                    1,451,863
                    
                    
                    
                    1,695,368
                    
                    
                    
                    4,781,242
                    
                    
                    
                    5,159,650Total
      cost of operations
                    
                    
                    3,728,290
                    
                    
                    
                    4,185,599
                    
                    
                    
                    12,226,722
                    
                    
                    
                    12,521,798Gross
      Profit
                    
                    
                    1,020,452
                    
                    
                    
                    932,972
                    
                    
                    
                    3,123,494
                    
                    
                    
                    2,920,640ExpensesGeneral
      and administrative expenses
                    
                    
                    922,064
                    
                    
                    
                    959,916
                    
                    
                    
                    2,883,789
                    
                    
                    
                    2,986,864Depreciation
      and amortization
                    
                    
                    5,573
                    
                    
                    
                    64,584
                    
                    
                    
                    19,051
                    
                    
                    
                    195,939Provision
      for doubtful accounts
                    
                    
                    11,513
                    
                    
                    
                    12,773
                    
                    
                    
                    36,424
                    
                    
                    
                    38,108Total
      expenses
                    
                    
                    939,150
                    
                    
                    
                    1,037,273
                    
                    
                    
                    2,939,264
                    
                    
                    
                    3,220,911Income
      / (loss) from operations
                    
                    
                    81,302
                    
                    
                    
                    (104,301
                    )
                    
                    
                    184,230
                    
                    
                    
                    (300,271
                    )Other
      income / (expense)Other
                    
                    
                    (4,803
                    )
                    
                    
                    (4,510
                    )
                    
                    
                    (13,821
                    )
                    
                    
                    (13,521
                    )Interest
      income
                    
                    
                    150
                    
                    
                    
                    1,767
                    
                    
                    
                    1,697
                    
                    
                    
                    12,196Interest
      expense
                    
                    
                    (57,808
                    )
                    
                    
                    (74,254
                    )
                    
                    
                    (180,587
                    )
                    
                    
                    (273,958
                    )Total
      other income / (expense)
                    
                    
                    (62,461
                    )
                    
                    
                    (76,997
                    )
                    
                    
                    (192,711
                    )
                    
                    
                    (275,283
                    )Income
      / (Loss) before income taxes
                    
                    
                    18,841
                    
                    
                    
                    (181,298
                    )
                    
                    
                    (8,481
                    )
                    
                    
                    (575,554
                    )Provision
      for income taxes
                    
                    
                    0
                    
                    
                    
                    0
                    
                    
                    
                    0
                    
                    
                    
                    0Net
      Income / (Loss)
                    
                    $
                    18,841
                    
                    
                    $
                    ( 181,298
                    )
                    
                    $
                    ( 8,481
                    )
                    
                    $
                    ( 575,554
                    )Net
      loss per share – basic and diluted
                    
                    $
                    0.01
                    
                    
                    $
                    ( 0.06
                    )
                    
                    $
                    ( 0.00
                    )
                    
                    $
                    ( 0.20
                    )Weighted
      average number of share
                    
                    
                    2,847,000
                    
                    
                    
                    2,847,000
                    
                    
                    
                    2,847,000
                    
                    
                    
                    2,847,000
  3
 Table of Contents
 NUTRITIONMANAGEMENT SERVICES COMPANY
 CONSOLIDATED
STATEMENT OF CASH FLOWS
 (Unaudited)
  Nine
      months ended March 31,2009
                    
                    
                    2008Operating
      activities:Net
      loss
                    
                    $
                    ( 8,481
                    )
                    
                    $
                    ( 575,554
                    )Adjustments
      to reconcile net loss to net cash used in operatingactivities:Depreciation
      and amortization
                    
                    
                    19,051
                    
                    
                    
                    195,939Provision
      for bad debts
                    
                    
                    36,424
                    
                    
                    
                    38,108Amortization
      of bond costs
                    
                    
                    10,923
                    
                    
                    
                    10,923Change
      in assets and liabilities:Accounts
      receivable
                    
                    
                    8,511
                    
                    
                    
                    (11,923
                    )Inventory
                    
                    
                    (9,378
                    )
                    
                    
                    (1,730
                    )Prepaid
      and other current assets
                    
                    
                    (357,738
                    )
                    
                    
                    (304,537
                    )Accounts
      payable
                    
                    
                    117,361
                    
                    
                    
                    15,450Accrued
      payroll and related expenses
                    
                    
                    (174,114
                    )
                    
                    
                    (50,025
                    )Accrued
      expenses and other
                    
                    
                    (101,108
                    )
                    
                    
                    (1,224
                    )Net
      cash provided (used) in operating activities
                    
                    
                    (458,549
                    )
                    
                    
                    (684,573
                    )Investing
      Activities:Purchase
      of property and equipment
                    
                    
                    5,329
                    
                    
                    
                    (10,687
                    )Advances
      to employees
                    
                    
                    18,275
                    
                    
                    
                    184,261Net
      cash provided (used) in investing activities
                    
                    
                    23,604
                    
                    
                    
                    173,574Financing
      Activities:Repayments
      of long-term debt
                    
                    
                    (220,000
                    )
                    
                    
                    (170,000
                    )Proceeds
      from note payable-related parties
                    
                    
                    358,888
                    
                    
                    
                    -Proceeds
      from note payable
                    
                    
                    102,585
                    
                    
                    
                    327,413Repayment
      of note payable
                    
                    
                    (91,697
                    )
                    
                    
                    (297,991
                    )Net
      cash provided (used) by financing activities
                    
                    
                    149,776
                    
                    
                    
                    (140,578
                    )Net
      increase (decrease) in cash
                    
                    
                    (285,169
                    )
                    
                    
                    (651,577
                    )Cash
      and cash equivalents – beginning of period
                    
                    
                    307,902
                    
                    
                    
                    701,858Cash
      and cash equivalents – end of period
                    
                    $
                    22,733
                    
                    
                    $
                    50,281Supplemental
      disclosure of cash flow information:Cash
      paid during the period for:Interest
      Paid
                    
                    $
                    177,423
                    
                    
                    $
                    285,370Taxes
      Paid
                    
                    
                    6,507
                    
                    
                    
                    19,432
  4
 Table of Contents
 NUTRITIONMANAGEMENT SERVICES COMPANY
 NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 March
31, 2009
  1.
                  Basis
      of Presentation
 The
accompanying unaudited consolidated financial statements were prepared in
accordance with generally accepted accounting principles for interim financial
information for quarterly reports on Form 10-Q and, therefore, do not include
all of the information and footnotes required by generally accepted accounting
principles for complete financial statements.  However, all
adjustments that, in the opinion of management, are necessary for fair
presentation of the financial statements have been included and such adjustments
are of a normal recurring nature.  The results of operations for the
interim period presented is not necessarily indicative of the results that may
be expected for the entire fiscal year ending June 30, 2009.  The
financial information presented should be read in conjunction with the Company’s
2008 financial statements that were filed under Form 10-K.
  2.
                  New
      Accounting Pronouncements
 In
September 2006, the FASB issued Statement of Financial Accounting Standards
(“SFAS”) No. 157, Fair Value
Measurements (“SFAS 157”) , to define how the fair
value of assets and liabilities should be measured in accounting standards where
it is allowed or required. In addition to defining fair value, the Statement
established a framework within GAAP for measuring fair value and expanded
required disclosures surrounding fair value measurements. In February 2008, the
FASB issued FASB Staff Position (FSP) FAS 157-2, Effective Date of FASB Statement No.
157, which delayed the effective date by one year for all nonfinancial
assets and nonfinancial liabilities, except those that are recognized or
disclosed at fair value in the financial statements on a recurring basis. In
October 2008, the FASB issued FSP FAS 157-3 , Determining the Fair Value of a
Financial Asset When the Market for That Asset Is Not Active , to clarify
the application of SFAS 157 in a market that is not active and provides an
example to illustrate key considerations in determining the fair value of a
financial asset when the market for that financial asset is not active. This FSP
was effective immediately. In April 2009, the FASB issued FSP FAS 157-4, Determining Fair Value When the
Volume and Level of Activity for the Asset or Liability Have Significantly
Decreased and Identifying Transactions That Are Not Orderly , to provide
additional guidance for estimating fair value when the volume and level of
activity for the asset or liability have significantly decreased. This FSP will
be effective for interim and annual reporting periods ending after June 15,
2009. We adopted SFAS 157 for nonfinancial items and financial liabilities on
July 1, 2008, and the adoption did not have a material impact on our financial
position, results of operations, or cash flows. We currently do not have any
financial assets that are valued using inactive markets, and as such are not
impacted by the issuances of FSP 157-3 and FSP 157-4.
  5
 Table of Contents
  In
December 2007, the FASB issued SFAS No. 141(R), Business Combinations (“SFAS
141(R)”). SFAS 141(R)
establishes principles and requirements for how a company (a) recognizes and
measures in their financial statements the identifiable assets acquired, the
liabilities assumed, and any noncontrolling interest (previously referred to as
minority interest); (b) recognizes and measures the goodwill acquired in a
business combination or a gain from a bargain purchase; and (c) determines what
information to disclose to enable users of the financial statements to evaluate
the nature and financial effects of a business combination. SFAS 141(R) requires
fair value measurements at the date of acquisition, with limited exceptions
specified in the Statement. Some of the major impacts of this new standard
include expense recognition for transaction costs and restructuring costs. SFAS
141(R) was effective for fiscal years beginning on or after December 15, 2008
and is applied prospectively. The Corporation does not expect the adoption of
SFAS 141(R) to have a material impact on its financial statements.
  In
December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements, an amendment of ARB No. 51 (“SFAS
160”). SFAS 160 addresses the accounting and reporting for the outstanding
noncontrolling interest (previously referred to as minority interest) in a
subsidiary and for the deconsolidation of a subsidiary. It also establishes
additional disclosures in the consolidated financial statements that identify
and distinguish between the interests of the parent’s owners and of the
noncontrolling owners of a subsidiary. This Statement is effective for fiscal
years beginning on or after December 15, 2008. SFAS 160 requires retroactive
adoption of the presentation and disclosure requirements for existing minority
interests. All other requirements of SFAS 160 are applied prospectively. The
Corporation does not expect the adoption of SFAS 160 to have a material impact
on its financial statements.
  In March
2008, the FASB issued SFAS No. 161, Disclosures about Derivative
Instruments and Hedging Activities (“SFAS 161”). SFAS 161 requires
enhanced disclosures about (a) how and why an entity uses derivative
instruments, (b) how derivative instruments and related hedged items are
accounted for under SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities, and its related interpretations, and
(c) how derivative instruments and related hedged items affect an entity’s
financial position, financial performance, and cash flows. This Statement is
effective for financial statements issued for fiscal years and interim periods
beginning after November 15, 2008. This Statement encourages, but does not
require, comparative disclosures for earlier periods at initial adoption. The
adoption of this Statement requires us to present currently disclosed
information in a tabular format and also expands our disclosures concerning
where derivatives are reported on the balance sheet and where gains/losses are
recognized in the results of operations. The Corporation does not have any
transactions covered by SFAS 161 therefore it has not had a material impact on
the Corporation’s consolidated financial statements.
  In April
2008, the FASB issued FASB FSP No. 142-3, Determination of the Useful Life of
Intangible Assets (“FSP FAS 142-3”). FSP FAS 142-3 removed the
requirement of SFAS No. 142,
Goodwill and Other Intangible Assets (“SFAS 142”), for an entity to consider,
when determining the useful life of an acquired intangible asset, whether the
intangible asset can be renewed without substantial cost or material
modification to the existing terms and conditions associated with the intangible
asset. FSP FAS 142-3 replaces the previous useful life assessment criteria with
a requirement that an entity considers its own experience in renewing similar
arrangements. If the entity has no relevant experience, it would consider market
participant assumptions regarding renewal. This should lead to greater
consistency between the useful life of recognized intangibles under SFAS 142 and
the period of expected cash flows used to measure fair value of such assets
under SFAS No. 141(R), Business
Combinations.  FSP FAS 142-3 is not expected to have a
significant impact on our consolidated financial statements.
  In
November 2008, the Emerging Issues Task Force (“EITF”) issued EITF Issue No.
08-7, Accounting for Defensive
Intangible Assets. EITF Issue No. 08-7 clarifies the accounting for
certain separately identifiable assets, which an acquirer does not intend to
actively use but intends to hold to prevent its competitors from obtaining
access to them. EITF Issue No. 08-7 requires an acquirer to account for a
defensive intangible asset as a separate unit of accounting, which should be
amortized to expense over the period the asset diminishes in value. The
provisions of EITF Issue No. 08-7 were adopted prospectively on January 1, 2009.
This EITF Issue did not impact our financial position, results of operations, or
cash flows during the third quarter 2009.
  6
 Table of Contents
  In
December 2008, the FASB issued FSP FAS 132(R)-1, Employers’ Disclosures about
Postretirement Benefit Plan Assets, which amends Statement No. 132(R) to
require more detailed disclosures about employer’s plan assets, including
investment strategies, major categories of assets, concentrations of risk within
plan assets and valuation techniques used to measure the fair value of assets.
The FSP is effective for fiscal years ending after December 15, 2009. The
Corporation will comply with the additional disclosure requirements.
 In April
2009, the FASB issued FSP No. FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value
of Financial Instruments. This FSP amends FASB Statement No. 107, Disclosures about Fair Value of
Financial Instruments, to require disclosures about fair value of
financial instruments for interim reporting periods of publicly traded companies
as well as in annual financial statements. This FSP also amends APB Opinion No.
28, Interim Financial
Reporting, to require those disclosures in summarized financial
information at interim reporting periods. This FSP shall be effective for
interim reporting periods ending after June 15, 2009. The Corporation will
comply with the additional disclosure requirements beginning in the fourth
quarter of fiscal 2009.
  In April
2009, the FASB issued FSP No. FAS 115-2 and FAS 124-2, Recognition and Presentation of
Other-Than-Temporary Impairments. This FSP amends the
other-than-temporary impairment guidance in U.S. GAAP for debt securities to
make the guidance more operational and to improve the presentation and
disclosure of other-than-temporary impairments on debt and equity securities in
the financial statements. The FSP does not amend existing recognition and
measurement guidance related to other-than-temporary impairments of equity
securities. The FSP shall be effective for interim and annual reporting periods
ending after June 15, 2009. The Corporation currently does not have any
financial assets that are other-than-temporary impaired.
  In April
2009, the SEC released Staff Accounting Bulletin No. 111 (“SAB 111”), which
amends SAB Topic 5-M. SAB 111 notes that FSP No. 115-2 and FAS 124-2 were scoped
to debt securities only, and the FSP referred readers to SEC SAB Topic 5-M for
factors to consider with respect to other-than-temporary impairments for equity
securities. With the amendments in SAB 111, debt securities are excluded from
the scope of Topic 5-M, but the SEC staff’s views on equity securities are still
included within the topic. The Corporation currently does not have any financial
assets that are other-than-temporary impaired.
 In April
2009, the FASB issued FSP No. FAS 141(R)-1, Accounting for Assets Acquired and
Liabilities Assumed in a Business Combination That Arise from
Contingencies, to address some of the application issues under SFAS
141(R). The FSP deals with the initial recognition and measurement of an asset
acquired or a liability assumed in a business combination that arises from a
contingency provided the asset or liability’s fair value on the date of
acquisition can be determined. When the fair value can’t be determined, the FSP
requires using the guidance under SFAS No. 5, Accounting for Contingencies,
and FASB Interpretation (FIN) No. 14, Reasonable Estimation of the Amount
of a Loss. This FSP was effective for assets or liabilities arising from
contingencies in business combinations for which the acquisition date is on or
after January 1, 2009. The adoption of this FSP has not had a material impact on
our financial position, results of operations, or cash flows during the third
quarter of fiscal 2009.
  7
 Table of Contents
  3.
                  Earnings
      Per Common Share
 Earnings
per common share amounts are based on the weighted-average number of shares of
common stock outstanding during the three-month period ended March 31, 2009 and
2008.  The Company did not have any dilutive stock options and
warrants that impacted earnings per share in each period.
  4.
                  Litigation
 The
Company is involved in litigation with a construction contractor related to the
renovations of Collegeville Inn Conference and Training Center.  The
Company denies its liability for the contractor’s claims and has asserted
offsets against the amounts claimed.  The case is currently in
discovery.
  Although
it is not possible to predict with certainty the outcome of the unresolved legal
action, or the range of possible loss or recovery, the Company believes these
unresolved legal actions will not have a material effect on its financial
position or results of operations.
  In
addition to the litigation described above, the Company is exposed to asserted
and unasserted claims in the normal course of business.  In the
opinion of management, the resolution of these matters will not have a material
adverse effect on the Company’s financial position, results of operations or
cash flows.
  5.
                  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
Company’s reportable segments are (1) food service management and (2) training
and conference center.  The Company reports segment performance on an
after-tax basis.  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.
  For
the quarter ended March 31, 2009
  Food
      Service
                      Management
                  
                  
                  Training
      and
                      Conference
      Center
                  
                  
                  TotalFood
      service revenue
                  
                  $
                  4,712,663
                  
                  
                  $
                  36,079
                  
                  
                  
                  4,748,742Depreciation
      and amortization
                  
                  
                  4,376
                  
                  
                  
                  1,197
                  
                  
                  
                  5,573Income
      (loss) from operations
                  
                  
                  182,941
                  
                  
                  
                  (101,639
                  )
                  
                  
                  81,302Interest
      income
                  
                  
                  150
                  
                  
                  
                  0
                  
                  
                  
                  150Interest
      expense
                  
                  
                  (39,904
                  )
                  
                  
                  (17,904
                  )
                  
                  
                  (57,808
                  )Income
      (loss) before taxes (benefit)
                  
                  
                  142,894
                  
                  
                  
                  (124,053
                  )
                  
                  
                  18,841Net
      income (loss)
                  
                  
                  142,894
                  
                  
                  
                  (124,053
                  )
                  
                  
                  18,841Total
      assets
                  
                  $
                  6,231,437
                  
                  
                  $
                  6,469,262
                  
                  
                  $
                  12,700,699
  8
 Table of Contents
  For
the quarter ended March 31, 2008:
  Food
      Service
                      Management
                  
                  
                  Training
      and Conference Center
                  
                  
                  TotalFood
      service revenue
                  
                  $
                  5,026,124
                  
                  
                  $
                  92,447
                  
                  
                  $
                  5,118,571Depreciation
      and amortization
                  
                  
                  6,735
                  
                  
                  
                  57,849
                  
                  
                  
                  64,584Income
      (loss) from operations
                  
                  
                  76,796
                  
                  
                  
                  (181,097
                  )
                  
                  
                  (104,301
                  )Interest
      income
                  
                  
                  1,767
                  
                  
                  
                  0
                  
                  
                  
                  1,767Interest
      expense
                  
                  
                  (58,075
                  )
                  
                  
                  (16,179
                  )
                  
                  
                  (74,254
                  )Income
      (loss) before taxes (benefit)
                  
                  
                  20,488
                  
                  
                  
                  (201,786
                  )
                  
                  
                  (181,289
                  )Net
      income (loss)
                  
                  
                  20,488
                  
                  
                  
                  (201,786
                  )
                  
                  
                  (181,289
                  )Total
      assets
                  
                  $
                  5,912,120
                  
                  
                  $
                  6,610,790
                  
                  
                  $
                  12,522,910
 
 For
the nine months ended March 31, 2009:
  Food
      Service
                      Management
                  
                  
                  Training
      and Conference Center
                  
                  
                  TotalFood
      service revenue
                  
                  $
                  15,158,682
                  
                  
                  $
                  191,534
                  
                  
                  $
                  15,350,216Depreciation
      and amortization
                  
                  
                  15,464
                  
                  
                  
                  3,587
                  
                  
                  
                  19,051Income
      (loss) from operations
                  
                  
                  465,469
                  
                  
                  
                  (281,239
                  )
                  
                  
                  184,230Interest
      income
                  
                  
                  1,697
                  
                  
                  
                  —
                  
                  
                  
                  1,697Interest
      expense
                  
                  
                  (133,415
                  )
                  
                  
                  (47,172
                  )
                  
                  
                  (180,587
                  )Income
      (loss) before taxes (benefit)
                  
                  
                  333,458
                  
                  
                  
                  (341,939
                  )
                  
                  
                  (8,481
                  )Net
      income (loss)
                  
                  
                  333,458
                  
                  
                  
                  (341,939
                  )
                  
                  
                  (8,481
                  )Total
      assets
                  
                  $
                  6,231,437
                  
                  
                  $
                  6,469,262
                  
                  
                  $
                  12,700,699
 
 For
the nine months ended March 31, 2008:
  Food
      ServiceManagement
                  
                  
                  Training
      and Conference Center
                  
                  
                  TotalFood
      service revenue
                  
                  $
                  15,159,300
                  
                  
                  $
                  283,138
                  
                  
                  $
                  15,442,438Depreciation
      and amortization
                  
                  
                  22,381
                  
                  
                  
                  173,558
                  
                  
                  
                  195,939Income
      (loss) from operations
                  
                  
                  203,371
                  
                  
                  
                  (503,641
                  )
                  
                  
                  (300,271
                  )Interest
      income
                  
                  
                  12,196
                  
                  
                  
                  —
                  
                  
                  
                  12,196Interest
      expense
                  
                  
                  (203,833
                  )
                  
                  
                  (70,125
                  )
                  
                  
                  (273,958
                  )Income
      (loss) before taxes (benefit)
                  
                  
                  11,740
                  
                  
                  
                  (587,294
                  )
                  
                  
                  (575,554
                  )Net
      income (loss)
                  
                  
                  11,740
                  
                  
                  
                  (587,294
                  )
                  
                  
                  (575,554
                  )Total
      assets
                  
                  $
                  5,912,120
                  
                  
                  $
                  6,610,790
                  
                  
                  $
                  12,522,910
 
 6.
                  Revolving
      Credit Facility
 In
February 2001, the Company executed a loan agreement with a bank for a revolving
credit facility and two irrevocable letters of credit issued in conjunction with
the issuance of the Industrial Revenue Bonds, totaling $4,000,000 and
$3,065,000, respectively.  In October 2003, the Company entered into
an amended credit agreement whereby the $4,000,000 Revolving Credit Loan
Facility was reduced to $3,500,000 and $500,000 was placed in a cash collateral
account and pledged as additional collateral against the revolving credit
line.  As of March 31, 2009 and December 31, 2008 all of the cash
collateral account has been released and is available for
operations.
  At March
31, 2009 and June 30, 2008, the Company had approximately $3,500,000 outstanding
under the revolving credit.  Advances under the revolving credit are
used for working capital purposes.  These credit agreements contain
covenants that include the submission of specified financial information and the
maintenance of insurance coverage for the pledged assets during the term of the
loans.  The company and the bank reached an agreement in December 2008
which maintains the revolving credit line in place toDecember 31, 2009. The Company is
currently negotiating to replace or retire this debt with alternate
financing.
  9
 Table of Contents
  The
Company and Wilmington Trust bank have been working together in an attempt to
resolve a claim filed by Wilmington Trust Bank in the amount of $3,520,887 in
the Court of Common Pleas of Chester County, Pennsylvania.  However,
there can be no assurance as to the outcomes of these discussions and the
failure to resolve this matter or a resolution of this matter on terms which are
not beneficial to the Company will have a material adverse effect on the
business and financial operations of the Company.  To date, the
Company has made all principal, interest and bond payments which have been owed
to Wilmington Trust Bank.
  7.
                  Related
      Party Transactions
 As of
March 31, 2009, included in current liabilities–related parties is owed $358,888
to an officer and director of the company.  Amounts due to and from
officers are unsecured, interest bearing at 4% and due on demand.
  8.
                  Collegeville
      Inn Conference & Training
Center
 The
Company owns approximately twenty-two acres of land in Collegeville,
Pennsylvania.  In 1997, the Company completed its renovations of an
existing 40,000 square foot building to serve as a training facility and
conference center.  On October 8, 2008 the Company entered into an
agreement of sale for the tracts or parcels of land together with the building,
Collegeville Inn Conference & Training Center for the sum of
$5,500,000.  The agreement provided for an initial deposit of
$500,000, which has been received and held in escrow. At closing the Purchaser
shall pay the remaining balance of the purchase price.  The Purchaser
had a period of sixty (60) days after the Agreement Date for a due diligence
period, and that period has expired.  The agreement of sale provides
that settlement occur within forty five (45) days of purchaser’s receipt of all
permits and approvals.  Upon closing of the transaction, the Company
plans on using the proceeds to retire the outstanding debt associated with the
property. However, there can be no assurance that this transaction will be
completed in accordance with the terms of the agreement of sale.
  9.
                  Business
      Conditions
 The
Company’s primary sources of revenues are the management fees it receives from
contracts to provide food and housekeeping services to continuing care
facilities, hospitals, retirement communities and schools, as well as the
Collegeville Inn, which includes the Conference and Training Center, Catering
facilities and the Cook Chill operations. On October 8, 2008 the Company entered
into an agreement of sale for certain tracts or parcels of land together with
the building, Collegeville Inn Conference & Training Center for the sum of
$5,500,000.  Upon closing of the transaction, the Company plans on
using the proceeds to retire the outstanding debt associated with the
property.   However, there can be no assurance that this
transaction will be completed in accordance with the terms of the agreement of
sale.
  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, and reduction of operating expenses.
  The
Company had positive working capital at March 31, 2009 of approximately $2.1
million. Management believes that operating cash flow, proceeds from the sale or
lease of certain assets, available cash and available credit resources will be
adequate to make repayments of indebtedness, meet the working capital needs,
satisfy the needs of its operations, and to meet anticipated capital
expenditures during the next twelve months ending March 31, 2010.
  In view
of the matters described above, recoverability of a major portion of the
recorded asset amounts shown in the Company’s accompanying balance sheet is
dependent upon continued operations of an ongoing basis, to maintain present
financing, and to succeed in its future operations. The Company’s financial
statements do not include any adjustment relating to the recoverability and
classification of recorded asset amounts or amounts and classification of
liabilities that might be necessary should the Company be unable to continue in
existence.
  10
 Table of Contents
  Item2.
  Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
 The
following discussion and analysis should be read in conjunction with the
financial statements and notes thereto.
  Forward
Looking Statements
 This Form
10-Q contains forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933, as amended and Section 21E of the Securities
Exchange Act of 1934, as amended that are intended to be covered by the safe
harbors created thereby.  Investors are cautioned that all
forward-looking statements involve risks and uncertainty, including without
limitation, the adequacy of the Company’s cash from operations, existing
balances and available credit line.  Although the Company believes
that the assumptions underlying the forward-looking statements contained herein
are reasonable, any of the assumptions could be inaccurate, and therefore, there
can be no assurance that the forward-looking statements included in this Form
10-Q will prove to be accurate.  Factors that could cause actual
results to differ from the results discussed in the forward-looking statements
include, but are not limited to, results of operations and the outcome of the
Company’s litigation discussed in Note 4 - Litigation.  In light of
significant uncertainties inherent in the forward-looking statements included
herein, the inclusion of such information should not be regarded as a
representation by the Company or any other person that the objectives and plans
of the Company will be achieved.
  Results
of Operations for the Period Ended March 31, 2009
 Revenues
for the quarter ended March 31, 2009 were $4,748,742, a decrease of $369,829 or
7.2% compared to revenues of $5,118,571 in the corresponding quarter last
year.  This decrease is primarily due to the net impact of revenues
from new contracts offset by revenues from lost contracts.Revenues from ongoing
accounts were consistent with prior years.Revenues for the nine
month period ended March 31, 2009 were $15,350,216 compared to $15,442,438 for
the nine month period ended March 31, 2008, a decrease of $92,222 or
0.60%.  The decrease is primarily due to the net impact of revenues
from new contracts not offsetting revenues from lost contracts during the
quarter ended March 31, 2009.  Revenues for the nine month period from
Collegeville Inn operations decreased over the same period last year, primarily
due to a decrease in catering events and a decrease in cook chill
operations.
  Cost of
operations provided for the current quarter was $3,728,290 compared to
$4,185,599 for similar expenses in the same period last year, a decrease of
$457,309 or 10.9%.  This decrease is the result of revenues mentioned
above and the expenses associated with those revenues.  Cost of
operations for the nine month period ended March 31, 2009 were $12,226,722
compared to $12,521,798 for the nine month period ended March 31, 2008, a
decrease of $295,076 or 2.4%.  The decrease is primarily due to lower
revenues during the nine month period and the expenses associated with those
revenues over the same period.
  Gross
profit for the current quarter was $1,020,452 or 21.5% of gross revenue,
compared to $932,972, or 18.2% of gross revenue, for the same period last year,
an increase of $87,480 or 9.4%.  Gross profit for the nine month
period ended March 31, 2009 was $3,123,494 or 20.4% of gross revenue, compared
to $2,920,640, or 18.9%, for the nine month period ended March 31, 2008, an
increase of $202,854 or 7.0%.   The increase in gross profit is
due to the net impact of new contracts and lost contracts, partially offset by
the renegotiation of contract rates in the normal course of
business.
  General
and administrative expenses for the quarter were $922,064 or 19.4% of revenue,
compared  to $959,916 or 18.8% of revenue  for
the  same  quarter  last  year,  a  decrease  of  $37,852  or  3.9%
General and administrative expenses for the nine month period ended March 31,
2009 were $2,883,789 compared to $2,986,864 for the nine month period ended
March 31, 2008, a decrease of $103,075 or 3.5%.  This decrease is due
to lower payroll and related expenses in the period as well as a reduction in
travel and legal expenses.
  11
 Table of Contents
  Provision
for doubtful accounts for the quarter ended March 31, 2009 was $11,513 compared
to $12,773 for the corresponding quarter last year.   Provision
for doubtful accounts for the nine month period ended March 31, 2009 was $36,424
compared to $38,108 for the nine month period ended March 31, 2008.
  Interest
income for the quarter ended March 31, 2009 was $150 compared to $1,767 for the
same period last year.
  Interest
expense for the quarter ended March 31, 2009 was $57,808 compared to $74,254 for
the same period last year.  Interest expense for the nine-month period
ended March 31, 2009 was $180,587 compared to $273,958 for the nine-month period
ended December 31, 2008, a decrease of $93,371 or 34.1%. This decrease is
primarily due to long term debt repayment and a reduction of interest
rates.
  For the
reasons stated above, net profit before taxes for the quarter ended March 31,
2009 was $18,841compared to a net loss of $181,298 for the corresponding quarter
last year.   The net loss for the nine-month period ended March
31, 2009 was $8,481 compared to $575,554 for the nine-month period ended March
31, 2008.
  Net
profit per share for the current quarter was $0.01 compared to net loss per
share of $0.06 for the same quarter last year.  Net loss per share for
the nine-month period ended March 31, 2009 was $0.00 compared to $.20 for the
nine-month period ended March 31, 2008.
  Liquidity
and Capital Resources
 At March
31, 2009 the Company had positive working capital of $2,141,082 compared to
working capital of $2,241,861 for the same quarter last year.  This
change in working capital is primarily attributable to the cash provided in
financing activities for the nine months ended March 31, 2009 as well as the use
of cash in operating activities for the nine months ended March 30,
2008.
  Operating
Activities.  Cash used in operations for the nine months ended
March 31, 2009 was $458,549 compared to $684,573 used in operations for the nine
months ended March 31, 2008.  The current period’s activity is
primarily attributable to an increase in accounts payable, decrease in accounts
receivable and increase in prepaid expenses as well as operating income
sustained in the current period.
  Investing
Activities.  Investing activities provided $23,604 in cash in
the current nine months compared to $173,574 in cash provided in the same period
last year.  Investing activities include sale of property and
equipment in the amount of $5,329 in the current period as well as the repayment
of advances to employees of $ 18,275 and capital expenditures of $10,687 in the
same period last year as well as the repayments of advances to employees of
$184,261.
  Financing
Activities.  Current quarter financing activities provided
$149,776 in cash compared to $140,578 used in the same period last
year.  The current period’s activity was the result of proceeds from
the insurance notes payable, notes payable from related party, and repayment of
long-term debt.
  Capital
Resources.  The Company has certain credit facilities with its
bank including a revolving credit of $3,500,000.  At March 31, 2009
and June 30, 2008, the Company had approximately $3,500,000 outstanding under
its revolving credit.  The Company issued two series of Industrial
Bonds totaling $3,560,548 in December 1996.  The outstanding balance
on the bonds was $1,865,000 as of March 31, 2009.  In June 2008, the
Company entered into an agreement whereby the credit loan facility was extended
to March 31, 2009. The bonds were secured in part by two letters of credit
issued by Wilmington Trust. Due to  downgrades in the credit rating of
Wilmington Trust (which downgrade was not connected to any business Wilmington
Trust was doing with the Company), Janney, Montgomery Scott, the re-marketer of
the bonds, tendered the bonds which caused M&T Bank to draw down an
aggregate of $1,865,000 from the two letters of credit. As a result, the two
letters of credit have now been converted to direct loans to the Company and its
subsidiaries. The Company is currently negotiating to replace or retire this
debt with alternate financing.
  12
 Table of Contents
  The
Company and Wilmington Trust bank have been working together in an attempt to
resolve a claim filed by Wilmington Trust Bank in the amount of $3,520,887 in
the Court of Common Pleas of Chester County, Pennsylvania.  However,
there can be no assurance as to the outcomes of these discussions and the
failure to resolve this matter or a resolution of this matter on terms which are
not beneficial to the Company will have a material adverse effect on the
business and financial operations of the Company.  To date, the
Company has made all principal, interest and bond payments which have been owed
to Wilmington Trust Bank.
  Payment
      Due By PeriodContractual
      Obligations
                    
                    Total
                    
                    
                    Less
      than 1 year
                    
                    
                    2
      – 3 years
                    
                    
                    4
      – 5 years
                    
                    
                    After
      5 yearsDebt  *
                    
                    $
                    5,342,553
                    
                    
                    
                    3,657,553
                    
                    
                    
                    1,685,000
                    
                    
                    $
                    —
                    
                    
                    $
                    —Operating
      Leases
                    
                    
                    540
                    
                    
                    
                    540
                    
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    —Total
      Contractual Cash Obligations
                    
                    $
                    5,343,093
                    
                    
                    $
                    3,658,093
                    
                    
                    $
                    1,685,000
                    
                    
                    $
                    —
                    
                    
                    $
                    —
 ·
                    Long-Term
      Debt includes approximately $3,459,114 outstanding on the revolving credit
      facility.
 
 Amount
      of Commitment Expiration
                      Per
      PeriodOther
      Commercial Commitments
                    
                    Total
      Amounts Committed
                    
                    
                    Less
      than 1 year
                    
                    
                    1
      – 3 years
                    
                    
                    4
      – 5 years
                    
                    
                    Over
      5 yearsLines
      of Credit
                    
                    $
                    3,459,114
                    
                    
                    $
                    3,459,114
                    
                    
                    $
                    —
                    
                    
                    $
                    —
                    
                    
                    $
                    —Standby
      Letter of Credit
                    
                    
                    1,865,000
                    
                    
                    
                    180,000
                    
                    
                    
                    1,685,000
                    
                    
                    
                    —
                    
                    
                    
                    —Total
      Commercial Commitments
                    
                    $
                    5,324,114
                    
                    
                    $
                    3,639,114
                    
                    
                    $
                    1,685,000
                    
                    
                    $
                    —
                    
                    
                    $
                    —
  The
Company is exploring all reasonable alternatives to improve its operating
results, including but not limited to, increasing food service revenues with
targeted marketing efforts, and increasing revenues from the sale of the
Company’s Cook Chill products. In addition, on October 8, 2008 the Company
entered into an agreement of sale for the tracts or parcels of land together
with the building, Collegeville Inn Conference & Training Center for the sum
of $5,500,000.  The agreement provided for an initial deposit of
$500,000 which has been received and held in escrow.  At closing the
Purchaser shall pay the remaining balance of the purchase price.  The
Purchaser shall have a period of sixty (60) days after the Agreement Date for a
due diligence period, and that period has expired.  The agreement of
sale provides that settlement occur within forty five (45) days of purchaser’s
receipt of all permits and approvals.  Upon closing of the
transaction, the Company plans on using the proceeds to retire the outstanding
debt associated with the property.   However, there can be no
assurance that this transaction will be completed in accordance with the terms
of the agreement of sale.
  The
Company had positive working capital at March 31, 2009 of approximately $2.1
million. Management believes that operating cash flow, proceeds from the sale or
lease of certain assets, available cash and available credit resources will be
adequate to make repayments of indebtedness, meet the working capital needs,
satisfy the needs of its operations, and to meet anticipated capital
expenditures during the next twelve months ending March 31, 2010.
  13
 Table of Contents
  In view
of the matters described above, recoverability of a major portion of the
recorded asset amounts shown in the Company’s accompanying balance sheet is
dependent upon continued operations of an ongoing basis, to maintain present
financing, and to succeed in its future operations. The Company’s financial
statements do not include any adjustment relating to the recoverability and
classification of recorded asset amounts or amounts and classification of
liabilities that might be necessary should the Company be unable to continue in
existence.
  The
Company may seek to access the public equity market whenever conditions are
favorable. Any additional public funding may result in significant dilution for
existing shareholders and could involve the issuance of securities with rights,
which are senior to those of existing stockholders.  The Company may
also need additional funding earlier than anticipated, and its cash
requirements, in general, may vary materially from those now planned, for
reasons including, but not limited to, competitive advances and higher than
anticipated revenues from operations.
  Critical
Accounting Policies
 The
discussion and analysis of our financial condition and results of operations are
based upon the Company’s consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States of America. The preparation of these financial statements requires
the Company to make estimates and judgments that affect the reported amount of
assets and liabilities, revenues and expenses, and related disclosure of
contingent assets and liabilities at the date of the Company’s financial
statements. Actual results may differ from these estimates under different
assumptions or conditions.
  Critical
accounting policies are defined as those that are reflective of significant
judgments and uncertainties, and potentially result in materially different
results under different assumptions and conditions. The Company believes that
its critical accounting policies include those described below.
  Revenue
Recognition
 Revenue
is generated primarily from fees for food service management and facilities
management at continuing care and health care facilities, schools and the
Collegeville Inn Conference and Training Center.
  The
Company provides its services under several different financial arrangements
including a fee basis and guaranteed rate basis.  For Fee Contracts,
certain expenses are paid directly by the Customer and certain expenses are paid
by the Company and billed to the Customer.  The Company recognizes
Revenue in the amount of the expenses billed and the fees for providing
services.
  For
Guaranteed Rate Contracts, the Company charges Customers an established amount
for services provided (for example, per patient day) and is responsible for all
the expenses related to the delivery of those services.  The amount of
the billing is recorded as Revenue and the delivery costs are recorded as cost
of sales.
  Regardless
of the different financial arrangements, the Company recognizes revenue when
services have been rendered and the contract price is determinable, and
collectibility is reasonably assured.  Ongoing assessments of the
credit worthiness of customers provide the Company reasonable assurance of
collectibility upon performance of services.  The Company has no other
obligation with respect to its services once services are
performed.
  14
 Table of Contents
  Accounts
Receivable
 The
Company performs ongoing credit evaluations of its customers and adjusts credit
limits based on payment history and the customer’s current credit worthiness, as
determined by a review of their current credit information. The Company
continuously monitors collections and payments from its customers and maintains
a provision for estimated credit losses based on historical experience and any
specific customer collection issues that have been identified. While such credit
losses have historically been within the Company’s expectations and the
provisions established, the Company cannot guarantee that it will continue to
experience the same credit loss rates that it has in the past.
  Impairment
or Disposal of Long Lived Assets
 The
carrying value of property, plant, and equipment is evaluated based upon current
and anticipated undiscounted operating cash flows before debt service
charges.  An impairment is recognized when it is probable that such
estimated future cash flows will be less than the carrying value of the
assets.  Measurement of the amount of impairment, if any, is based
upon the difference between the net carrying value and the fair value, which is
estimated based upon anticipated undiscounted operating cash flows before debt
service charges.  Based upon a review of its long-lived assets, the
Company did not recognize an impairment loss for the quarter ended March 31,
2009 or fiscal year ended June 30, 2008; however, there can be no assurance that
the Company will not recognize an impairment loss on its long-lived assets in
future periods.
  Income
Tax Accounting
 The
Company determines its provision for income taxes using the asset and liability
method.  Under this method, deferred tax assets and liabilities are
recognized for the future tax effects of temporary differences of existing
assets and liabilities and their respective tax bases.  Future tax
benefits of tax loss and credit carry forwards also are recognized as deferred
tax assets.  When necessary, deferred tax assets are reduced by a
valuation allowance to the extent the Company concludes there is uncertainty as
to their ultimate realization.  Deferred tax assets and liabilities
are measured using enacted tax rates in effect for the year in which those
temporary differences are expected to be recovered or settled.  The
effect on deferred taxes of a change in tax rates is recognized in income in the
period that the change is enacted.
  As of
March 31, 2009 and June 30, 2008, the Company maintained a deferred tax asset of
$2,265,908 and $2,265,908, respectively. The Company has provided a valuation
allowance of $125,461 against its deferred tax assets after consideration of a
future gain on the disposal of certain land and assets relative to its
Collegeville facility and anticipated future profitable operating
results.  However, the amount realizable may be reduced if future
taxable income is reduced or is insufficient to utilize the entire deferred tax
asset.
  Capital
Expenditures
 The
Company has no other material commitments for capital expenditures and believes
that its existing cash and cash equivalents, cash from operations and available
revolving credit will be sufficient to satisfy the needs of its operations and
its capital commitments for the next twelve months.  However, if the
need arose, the Company would seek to obtain capital from such sources as
continuing debt financing or equity financing.
  Effects
of Inflation
 Substantially
all of the Company’s agreements with its customers allow the Company to pass
through to its customers its increases in the cost of labor, food and
supplies.  The Company believes that it will be able to recover
increased costs attributable to inflation by continuing to pass through cost
increases to its customers.
  15
 Table of Contents
  Medicare
and Medicaid Reimbursements
 A
substantial portion of the Company’s revenue is dependent upon the payment of
its fees by customer health care facilities, which, in turn, are dependent upon
third-party payers such as state governments, Medicare and
Medicaid.  Delays in payment by third party payers, particularly state
and local governments, may lead to delays in collection of accounts
receivable.
  ITEM3.
  Quantitative
and Qualitative Disclosure about Market Risk
  Not
applicable.
  ITEM4T.
  Controls
and Procedures
 As of the
end of the period covered by this report, the Company carried out an evaluation,
under the supervision and with the participation of the Company’s management,
including the Company’s Chief Executive Officer and President and Chief
Operating Officer (Principal Financial Manager), on the effectiveness of the
design and operation of the Company’s disclosure controls and procedures
pursuant to Exchange Act Rule 13a-15(e) and 15d-15(e).  Based upon
that evaluation, the Chief Executive Officer and President and Chief Operating
Officer (Principal Financial Manager) concluded that, as of March 31, 2009, such
controls and procedures were not effective.
  In making
this evaluation, management considered, among other matters, the material
weaknesses in the Company’s internal control over financial reporting that have
been identified.  See “Management’s report on Internal Control over
Financial Reporting” below.
  There
have been no significant changes in the Company’s internal controls over
financial reporting or in other factors that could significantly affect these
controls subsequent to the date of their evaluation.
  Management’s
Report on Internal Control Over Financial Reporting
 The
Company’s management is responsible for establishing and maintaining adequate
internal control over financial reporting, and for performing an assessment of
the effectiveness of internal control over financial reporting as of March 31,
2009. Internal control over financial reporting is a process designed to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. The Company’s system of internal
control over financial reporting includes those policies and procedures that
(i) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the Company’s
assets; (ii) provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance with
generally accepted accounting principles, and that receipts and expenditures are
being made only in accordance with authorizations of the Company’s management
and directors; and (iii) provide reasonable assurance regarding prevention
or timely detection of unauthorized acquisition, use, or disposition of the
Company’s assets that could have a material effect on its financial statements.
Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements.
  The
Company’s management performed an assessment of the effectiveness of the
Company’s internal control over financial reporting as of March 31, 2009, based
upon criteria in Internal Control—Integrated Framework issued by COSO. Based on
the Company’s assessment, management has concluded that its internal control
over financial reporting was not effective as of March 31, 2009 based on the
criteria in Internal Control—Integrated Framework issued by COSO.
  16
 Table of Contents
  The
Company’s management identified the following deficiencies that would be
considered a material weakness in our internal control over financial reporting
as of March 31, 2009. A material weakness is a deficiency, or combination of
deficiencies, that results in more than a reasonable possibility that a material
misstatement in the Company’s annual or interim financial statements will not be
prevented or detected on a timely basis:
  (i) The
Company did not maintain an effective control environment due to the lack of
documented, formal policies and procedures; and
 (ii) The
Company did not maintain effective internal controls over the financial closing
and reporting process.
  In light
of this conclusion, the Company has initiated documentation of its policies and
procedures and will institute compensating procedures and processes as necessary
to ensure the reliability of its financial reporting to include the development
of a standard closing checklist with specific assignment of duties,
responsibilities, and timetable for completions of assigned
tasks.  Management intends to remediate weaknesses in the control
environment and financial reporting through specific process improvements that
have been identified.  The Company will develop new processes in its
accounting department.  Each new process will be evaluated to ensure
it is supported by effectively designed level of controls and procedures to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles.  The Company plans to
devote additional resources to its internal controls, and is currently engaged
in discussions with third parties regarding improvements.  In
addition, further resources will be devoted to developing and communicating its
policies and procedures to its employees and management.  This shall
include development and enforcement of compliance programs.  The
compliance program shall also include communication to set and reinforce the
right tone from the top.
  These
remediation efforts, primarily associated with financial reporting, will require
significant ongoing effort and investment.  Management, with the
oversight of the audit committee, will continue to identify and take steps to
remedy known deficiencies as expeditiously as possible and enhance the overall
design and capability of the control environment.  The Company intends
to further expand its accounting policy and controls capabilities by providing
additional resources where deemed necessary and to enhance training of existing
staff in such matters.  Management believes that the foregoing actions
will continue to improve the Company’s internal control over financial
reporting, as well as its disclosure controls and procedures.
  This
quarterly report does not include an attestation report of the company’s
registered public accounting firm regarding internal control over financial
reporting.  Management’s report was not subject to attestation by the
company’s registered public accounting firm pursuant to temporary rules of the
Securities and Exchange Commission that permit the company to provide only
management’s report in this quarterly report.
  Subsequent
to March 31, 2009, however, the Company has commenced a review by its internal
staff, including its accounting staff, of new processes to provide an evaluation
of the level of controls and related procedures currently in place for each
process.
  17
 Table of Contents
  PARTII - OTHER INFORMATION
  Item
      1.
                  Legal
      Proceedings
                  NoneItem
      2.
                  Changes
      in Securities
                  NoneItem
      3.
                  Defaults
      Upon Senior Securities
                  NoneItem
      4.
                  Submission
      of Matters to a Vote of Security Holders
                  NoneItem
      5.
                  Other
      Information
                  NoneItem
      6.
                  Exhibits
      and Reports on Form 8K(a)
                  Exhibits31.1
                  Certification
      of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities
      and Exchange Act of 1934, as adopted pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002.31.2
                  Certification
      of President and Chief Operating Officer (Principal Financial Manager)
      pursuant to Rule 13a-14(a) under the Securities and Exchange Act of 1934,
      as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
      2002.32.1
                  Certification
      of Chief Executive Officer pursuant to 18 U.S. C. Section 1350, as adopted
      pursuant to Section 906 of the Sarbanes-Oxley Act of
  2002.32.2
                  Certification
      of President and Chief Operating Officer (Principal Financial Manager)
      pursuant to 18 U.S. C. Section 1350, as adopted pursuant to Section 906 of
      the Sarbanes-Oxley Act of 2002.
 
 18
 Table of Contents
  SIGNATURES
  Pursuant
to the requirements of the Securities Exchange Act of 1934, the Company has duly
caused this report to be signed on its behalf by the undersigned thereunto duly
authorized.
   Nutrition
      Management Services Company/s/ Joseph
      V. RobertsJoseph
      V. RobertsChairman
      and Chief Executive Officer
 /s/ Kathleen
      A. HillKathleen
      A. HillPresident
      and Chief Operating Officer(Principal
      Financial Manager)
 Date:  May
15, 2009
  19