U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                   Form 10-KSB

[X]          ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
             ACT OF 1934 (FEE REQUIRED)

For the fiscal year ended                   May 27, 2004
                          -----------------------------------------------------
                                       OR
[ ]  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE ACT
     OF 1934 (NO FEE REQUIRED)

For the transition period from                        to
                               ----------------------    ----------------------

Commission file number              0-1744
                       ------------------------------

Ambassador Food Services Corporation
------------------------------------------------------------------
(Name of small business issuer in its charter)

Delaware                                       44-0656199
--------------------------------------------------------------
(State or other jurisdiction of         (IRS Employer Identification No.)
 incorporation or organization)

5-30 54th Avenue Long Island City, New York      11101
-------------------------------------------------------
(Address of principal executive offices)      (Zip Code)

Issuer's telephone number:   718-361-2512
                           ---------------------
Securities registered pursuant to Section 12(b) of the Act:  None

Securities registered pursuant to Section 12(g) of the Act:  None

                           Common Stock (Par Value $1)
                           ---------------------------
                                (Title of Class)

Check  whether the Issuer (1) filed all reports  required to be filed by Section
13 or 15 (d) of the

Exchange  Act  during the past 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
            ------        -----

Check if there is no disclosure of delinquent  filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure  will be contained,  to
the  best  of  Registrant's   knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part III of this Form  10-KSB or any
amendment to this Form 10-KSB. [X]

Issuer's revenues for its most recent fiscal year are $5,336,442

At May 27, 2004,  there were  734,636  shares of the  Registrant's  common stock
outstanding.  Based on the average of the highest  bid and lowest  asked  prices
reported on the national  over-the-counter  market  (NASDAQ  Symbol  AMBF),  the
aggregate  market value of the shares held by  non-affiliates  of the Registrant
was $198,351.


Transitional Small Business Disclosure Format: YES                NO   X
                                                  -----             -------
                                       1
<PAGE>


                                Table of Contents


Part I

Item 1.   Description of Business
Item 2.   Description of Properties
Item 3.   Legal Proceedings
Item 4.   Submission of Matters to a Vote of Security Holders


Part II

Item 5.   Market for Registrant's Common Equity and Related Stockholder Matters
Item 6.   Management's Discussion and Analysis of Financial Condition and
          Results of Operations
Item 7.   Financial Statements
Item 8.   Changes in and Disagreements with Accountants on Accounting and
          Financial Disclosure
Item 8A.  Controls and Procedures
Item 8B.  Other Information


Part III

Item 9.   Directors and Executive Officers of the Registrant and Compliance with
          Section 16(a) of the Securities Exchange Act
Item 10.  Executive Compensation

Item 11.  Security Ownership of Certain Beneficial Owners and Management and
          Related Stockholder Matters
Item 12.  Certain Relationships and Related Transactions
Item 13.  Exhibits
Item 14.  Principal Accountant Fees and Services


                                       2
<PAGE>


                                     PART I

Item 1.   Description of Business

    (a)   Business Development

          The Registrant  (hereinafter  "Company" or "Ambassador") is a Delaware
          corporation,  incorporated in 1963. It is engaged through divisions in
          providing  contract food service and janitorial  services in New York.
          On  August  1,  1989,  the  name  of  the  Company  was  changed  from
          Automatique,  Incorporated to Ambassador Food Services Corporation.

          The principal business activity of the Company is the servicing of its
          customer  accounts,  which are primarily  governmental  social service
          agencies,  and  not-for  profit  organizations,  through  the  use  of
          cafeterias and prepared meals  delivered from the Company  commissary.
          The  Company  also  operates  a  janitorial  business  in New York and
          provides  routine  janitorial  services  for its current  food service
          customers.  The Company does not solicit  janitorial  services outside
          its food service customer base.

          Going Private Transaction
          -------------------------
          The Board of  Directors  is  proposing a 1 for 30 reverse  stock split
          followed by a 30 for 1 forward  stock split as a means to decrease the
          number of  outstanding  shareholders  to below 500 so that the Company
          may suspend its  obligation to file reports under the SEC Act of 1934.
          Management believes that substantial savings would accrue.  Subsequent
          thereto,  management  has  received  comments  to this  proxy from the
          Securities and Exchange Commission (SEC) to which it has responded and
          is awaiting their final approval before  scheduling the meeting of the
          stockholders to vote on the proposal. The Company has approximated its
          total cost for this transaction to by $25,000.

    (b)  Business of Issuer

         (1) Description of Business Done by the Registrant in its Food Segment

         (i and ii) The Company's food service  operation is confined to the New
                    York City  area and  consists  of  providing  contract  food
                    services for local  government  social service  agencies and
                    not-for-profit   agencies.   Business  is  obtained  through
                    competitive  bidding and is serviced by producing meals in a
                    central commissary and delivering them to various designated
                    points for consumption.

         (iii)      This segment has developed no new products.  The Company, in
                    general, markets products developed by its suppliers.

         (iv)       The  practice in the  industry is to operate  under  written
                    agreements  with the  locations  served.  In the market area
                    where  the  Company  is  located,  it  has  national,   (iv)
                    regional,   and  local  competition,   some  of  which  have
                    substantially greater total sales and assets. Competition in
                    the  food  service  industry  normally  comes in the form of
                    pricing and in quality of service and product.

         (v)        Raw   materials,   consisting   of  packaged   products  and
                    commodities,  are purchased from manufacturers and purveyors
                    and are  warehoused or processed by the

                                       3
<PAGE>

                    Company in the local market.  There is an adequate supply of
                    raw materials from normal sources.

         (vi)       During  the year ended May 27,  2004,  the  Company  had one
                    customer whose sales were equal to 10 percent or more of the
                    Company's consolidated revenues. This segment is not subject
                    to material  fluctuations  in sales  volume  resulting  from
                    seasonality.

         (vii)      The  distinctive  logo  associated with the Company has been
                    registered  under  the  laws  of  the  (vii)  United  States
                    relating to trade names and trademarks.  The Company regards
                    such logo as valuable and will maintain the  registration in
                    effect for continuing  use in connection  with the Company's
                    business.  In  addition,  the  segment is a party to a labor
                    agreement  with the United Service  Employees  Union #377 in
                    New York that expires December 31, 2004. As of May 27, 2004,
                    eight employees were members of the union.

         (viii)     The Company does not have a material portion of its business
                    subject to  renegotiation  or termination at the election of
                    the Government.

         (ix)       The  Company  does not  believe  that  existing  or probable
                    government   regulations  have  a  material  effect  on  its
                    operation.

     (b) (2)   Description of Business Done by the Registrant in its Janitorial
               Segment

         (i and ii) The  janitorial  and  maintenance  service  division  of the
                    Company's business is confined to the New York City area and
                    consists  primarily  of providing  various  types of routine
                    cleaning  services  as an added  service for  existing  food
                    service customers.

         (iii)      This segment has introduced no new products.

         (iv)       The janitorial  segment is limited to New York  metropolitan
                    areas.  Competition  for janitorial  contracts  comes in the
                    form of pricing  and  quality  of  service.  Competition  in
                    general is from regional and local companies.

         (v)        The  sources  and  availability  of raw  materials  for this
                    segment are adequate

         (vi)       During fiscal year 2004, this segment had no single customer
                    whose  sales  were  equal  to 10  percent  or  more  of  the
                    Company's consolidated revenues. This segment is not subject
                    to material  fluctuations  in sales  volume  resulting  from
                    seasonality.

         (vii)      This segment is operating without  registered  trademarks or
                    patents.  The segment is a party to a labor  agreement  with
                    the  United  Service  Employees  Union #377 in New York that
                    (vii) expires  December 31, 2004. As of May 27, 2004,  three
                    employees were members of the union.

         (viii)     The Company does not have a material portion of its business
                    subject to  renegotiation  or termination at the election of
                    the Government.

         (xi)       The  Company  does not  believe  that  existing  or probable
                    government   regulations  have  a  material  effect  on  its
                    operations.

                                       4
<PAGE>

   (b)  (1 and 2)

        (x) Through (xii) with Respect to the Registrant's Business in General

        (iv)        The Company has not  incurred  any expense for  research and
                    development activities during any of its last two (2) fiscal
                    years.

        (v)         Compliance   with  Federal,   state,   and  local  laws  and
                    regulations involving the protection of the environment will
                    not have a material effect.

        (vi)        As of May 27, 2004, the Company  employed  approximately  74
                    persons.

Code of Business Conduct and Ethics

The  Company  has not  adopted a code of ethics  that  applies to its  principal
executive  officer,  principal  financial officer,  principal  accounting office
(controller) and persons performing similar functions.

In light of the fact that the  Company's  Chief  Executive  Officer  acts as the
Company's  principal  executive,   accounting  and  financial  officer  and  the
relatively small number of persons employed by the Company,  the Company did not
previously  adopt a formal  written  Code of Business  Conduct  and  Ethics.  As
previously  stated in Item I, the  Company  has filed  with the SEC,  a proxy to
complete a going private transaction. As such, the Company does not foresee that
it will adopt a formal written Code of Business Conduct and Ethics.

Item 2.   Description of Properties

          The  Company  leases  all  real  estate  for  office,  warehouse,  and
          commissary facilities.  Annual rentals are approximately $239,000. The
          suitability of the leased properties is adequate;  such properties are
          described below:
<TABLE>
<CAPTION>
                                                                        Size      Expiration
     Location                                     Type of Property   (Sq. Ft.)       Date

     <S>                                          <C>                   <C>          <C>
     5-30 54th Ave., Long Island City, NY         Office/Whse           8,000        3/06
     41-43 24th St., Long Island City, NY         Commissary/Whse       2,500        6/05
     24-1 Bridge Plaza, Long Island City, NY      Whse                  2,000        11/06
     730 Kelly St., Bronx, NY                     Shelter               2,300        6/05
     175-15 Rockaway Blvd., Jamaica, NY           Shelter               4,000        6/05
</TABLE>


          The above physical  properties are used for office,  food  preparation
          and warehousing of food product items and equipment.  The Company owns
          all of the  equipment  used.  The Company  operates  approximately  11
          vehicles in the conduct of its business.

Item 3.   Legal Proceedings

          None.

                                       5
<PAGE>

Item 4.   Submission of Matters to a Vote of Security Holders

          No matters  were  submitted to a vote of security  holders  during the
          fourth quarter of the fiscal year of the Company.

          The Board of  Directors  is  proposing a 1 for 30 reverse  stock split
          followed by a 30 for 1 forward  stock split as a means to decrease the
          number of  outstanding  shareholders  to below 500 so that the Company
          may suspend its  obligation to file reports under the SEC Act of 1934.
          Management  understands  that substantial  savings would accrue.  As a
          result,  this  transaction  will  be  put  to a  vote  of  the  common
          stockholders  of the Company once  approval of the proxy  statement is
          obtained  by the  SEC.  This  transaction  will  be put to  vote  once
          approval of the proxy is obtained from the SEC.


                                     PART II

Item 5.   Market for  Registrants Common Equity and Related Stockholder Matters

    (a)   Price Range of Common Stock

          The  principal  market in which the  common  stock of the  Company  is
          traded  is  the  national   over-the-counter   market  (NASDAQ  symbol
          AMBF.PK).  The bid quotations for the Company's  common stock for each
          quarter  during  fiscal years ended May 27, 2004 and May 29, 2003,  is
          shown below:



                                      2004                     2003

                                 Bid Quotation            Bid Quotation
                                High         Low         High        Low
                                ----         ----        ----        ----
   First Quarter                $.27         $.27        $.25        $.25
   Second Quarter               $.27         $.27        $.27        $.27
   Third Quarter                $.27         $.27        $.30        $.30
   Fourth Quarter               $.29         $.27        $.27        $.27


          The quotations above reflect inter-dealer prices without retail
          mark-up, mark-down, or commission and may not represent actual
          transactions.

   (b)    Number of Equity Security Holders

          As of May 27,  2004,  there were 524 record  holders of the  Company's
          common stock.

   (c)    Dividends

          The Company has never paid cash dividends on its common stock. Payment
          of dividends will be within the  discretion of the Company's  Board of
          Directors  and will depend,  among other  factors,  on earnings,  debt
          agreements,  capital  requirements,  and the  operating  and financial
          condition of the Company.

                                       6
<PAGE>

Item 6.  Management's Discussion and Analysis of Financial Condition and Results
         of Operations

          This  discussion  should  be read in  conjunction  with the  Company's
          historical  consolidated  financial  statements  and the  accompanying
          notes included elsewhere in this Form 10-KSB.

          Disclosure Regarding Forward-Looking Statements
          -----------------------------------------------

          This Form  10-KSB,  including,  but not  limited to the  "Management's
          Discussion  and  Analysis  of  Financial   Condition  and  Results  of
          Operations"  and  "Business"   sections,   contains   "forward-looking
          statements"  within the meaning of the Private  Securities  Litigation
          Reform  Act  of  1995,   which  can  be   identified  by  the  use  of
          forward-looking   terminology,   such  as  "may,"  "intend,"   "will,"
          "expect," "anticipate," "should," "plans to," "estimate" or "continue"
          or the  negative  thereof or other  variations  thereon or  comparable
          terminology.  In  particular,  any  statement,   express  or  implied,
          concerning  future  operating  results  or  the  ability  to  generate
          revenues,  income  or cash  flow to  service  the  Company's  debt are
          forward-looking  statements.  Although the Company  believes  that the
          expectations  will  prove to have been  correct,  all  forward-looking
          statements are expressly qualified by such cautionary statements,  and
          the Company  undertakes no  obligation to update such  forward-looking
          statements.

          Critical Accounting Policies
          ----------------------------

          The Company's  consolidated  financial  statements  and related public
          financial  information  are  based on the  application  of  accounting
          principles   generally  accepted  in  the  United  States  of  America
          ("GAAP"). GAAP requires the use of estimates;  assumptions,  judgments
          and subjective  interpretations of accounting  principles that have an
          impact  on  the  assets,  liabilities,  revenue  and  expense  amounts
          reported.  These  estimates can also affect  supplemental  information
          contained  in  the  external  disclosures  of  the  Company  including
          information regarding contingencies, risk and financial condition. The
          Company  believes  its  use of  estimates  and  underlying  accounting
          assumptions  adhere to GAAP and are  consistently  and  conservatively
          applied. Valuations based on estimates are reviewed for reasonableness
          and conservatism on a consistent basis throughout the Company. Primary
          areas where financial information of the Company is subject to the use
          of estimates,  assumptions  and the  application  of judgment  include
          receivables, inventories, accruals and valuation of long-lived assets.
          We base our  estimates on historical  experience  and on various other
          assumptions that we believe to be reasonable under the  circumstances.
          Actual  results  may  differ  materially  from these  estimates  under
          different assumptions or conditions.

          The Company's critical accounting policies are as follows:

          Revenue Recognition
          -------------------

          Revenue from food and janitorial  customer  contracts is recognized at
          the time  services  are provided to the  customer in  accordance  with
          those contracts.

          Inventory
          ---------

          Inventory consists of food and supplies and are stated at the lower of
          cost  (first-in,   first-out)  or  market.  The  Company  reviews  its
          inventory  valuation  and  writes  down  the  inventory  for  unusable
          inventory. There were no such charges taken for the fiscal year 2004.

          Receivable Valuation
          --------------------

          All of the Company's accounts receivable are with customers located in
          the New York  City  area.  Accounts  receivable  are  uncollateralized
          customer obligations due under trade terms generally requiring payment
          within 30 and 60 days from the invoice  date.  Interest is not charged
          for delinquent accounts. The Company has not experienced a significant
          uncollected amount in several years. All customer accounts  receivable
          collateralize the Company's  outstanding  borrowings under its line of
          credit.  Accounts  receivable  are stated at the amount  billed to the
          customer.  Customer  account balances with invoices dated over 90 days
          old are considered delinquent.

                                       7
<PAGE>

          Payments on accounts receivable are allocated to the specific invoices
          identified on the customer's remittance advice or, if unspecified, are
          applied to the earliest unpaid invoices.

          The carrying  amount of accounts  receivable is reduced by a valuation
          allowance that reflects management's best estimate of the amounts that
          will not be collected.  Management  individually  reviews all accounts
          receivable balances that exceed 30 days from invoice date and based on
          an assessment of current  creditworthiness,  estimates the portion, if
          any, of the balance that will not be collected.

          Effects of Recent Accounting Pronouncements
          -------------------------------------------

          In   December   2003,   the  FASB   revised  FIN  No.  46  (FIN  46R),
          "Consolidation of Variable  Interest  Entities." FIN No. 46R clarifies
          the  application  of Accounting  Research  Bulletin No. 51 for certain
          entities for which equity investors do not have the characteristics of
          a controlling  financial  interest or do not have sufficient equity at
          risk for the  entity to  finance  its  activities  without  additional
          subordinated  financial support from other parties.  The Company would
          currently  be required to adopt FIN No. 46 for any  variable  interest
          entities  it  had  and  would  be  required  to  meet  the  disclosure
          requirements  of  this   pronouncement.   However,   the  Company  has
          determined  that it  does  not  have a  significant  interest  in such
          entities based on its analysis and assessment.

          Overview
          --------

          Ambassador Food Services  Corporation  provides contract food services
          for   government    social-service    agencies   and    not-for-profit
          organizations  in the New York City area.  This service is provided in
          the form of managing on-site cafeterias and delivery of meals prepared
          in the Company's central  commissary.  The Company also provides basic
          janitorial  services  for several of its food service  customers.  The
          Company does not provide janitorial  services outside its food service
          customer  base.  Although  the  majority  of the  business is obtained
          through  public bids, the Company has provided food service to most of
          its clients in excess of five years.

          Results of Operation
          --------------------

          Total sales for fiscal year 2004 of $5,336,442  were  $526,402  (9.0%)
          less than fiscal year 2003.

          For discussion and comparison purposes, the operating results for 2004
          and 2003, by line of business and in total, are presented in the table
          below:

<TABLE>
<CAPTION>
         2004                  Food                    Janitorial            Total
<S>                            <C>           <C>       <C>        <C>        <C>          <C>
Sales                          $4,858,856    100.0%    $477,586   100.0%     $5,336,442   100.0%
Cost of Product Sold            2,103,889     43.3%           -     0.0%     $2,103,889    39.4%
Operating Expense               1,676,037     34.5%     460,307    96.4%     $2,136,344    40.0%
Depreciation Expense               51,347      1.1%           -     0.0%       $ 51,347     0.9%
Administrative Expense          1,204,247     24.8%           -     0.0%     $1,204,247    22.6%

Operating Income (Loss)          (176,664)    -3.5%      17,279     3.6%     $ (159,385)   -2.9%


                                        8
<PAGE>

         2003                  Food                    Janitorial            Total
Sales                          $5,319,260    100.0%    $543,584   100.0%     $5,862,844   100.0%
Cost of Product Sold            2,292,769     43.1%           -     0.0%     $2,292,769    39.1%
Operating Expense               1,838,272     34.5%     525,146    96.6%     $2,363,418    40.3%
Depreciation Expense               80,414      1.5%           -     0.0%       $ 80,414     1.4%
Administrative Expense          1,253,625     23.6%           -     0.0%     $1,253,625    21.4%

Operating Income (Loss)          (145,820)    -2.7%      18,438     3.4%     $ (127,382)   -2.2%
</TABLE>

          Sales for the food service  segment of $4,858,856 were $460,404 (8.7%)
          less than  fiscal  year  2003.  Sales for the  janitorial  segment  of
          $477,586 were $65,998 (12.1%) less than fiscal year 2003. The decrease
          in sales was a result of a decrease in customer base and a decrease in
          business with  customers  whose programs are funded by the City of New
          York.

          Cost of food  products  sold for  fiscal  year 2004 was 43.3% of sales
          compared  to  43.1%  for  fiscal  year  2003.  The  overall  cost as a
          percentage  of sales  has been  consistent  throughout  the  reporting
          periods.

          Operating  expenses for the food service  segment for fiscal year 2004
          were 34.5% of sales  compared  to 34.5% of sales for fiscal year 2003.
          Operating  expenses  for the  janitorial  segment  were 96.4% of sales
          compared to 96.6% of sales for fiscal year 2003. The overall cost as a
          percentage  of sales  has been  consistent  throughout  the  reporting
          periods for both segments.

          Administrative expense for fiscal year 2004 decreased $49,378 compared
          to fiscal  year 2003.  The  decrease  is  attributed  to cost  cutting
          measures  enforced by  management,  a reduction  in  officers'  annual
          entitlement,  partially  offset by an increase  in business  insurance
          costs.

          Depreciation  expense for fiscal year 2004 decreased  $29,067 compared
          to fiscal year 2003.  The decrease is attributed  to older  equipment,
          still in use, becoming fully depreciated during fiscal year 2004.

          Other income  (expense),  net for fiscal year 2004 decreased  $888,648
          compared  to fiscal  year  2003.  Fiscal  year 2003  included  a final
          payment  of  $100,000  related  to the sale of  assets of the Iowa and
          Oklahoma vending and food service operations. Also, during fiscal year
          2003,  the holder of an 8% note agreed to accept  $125,000 as full and
          complete  settlement and  satisfaction of all debts and amounts due on
          the  note   payable.   This   transaction   resulted   in  a  gain  on
          extinguishment of debt of $790,992.

          2003 Results
          ------------

          Sales for the food service  segment of  $5,319,260  were $413,427 less
          than  fiscal year 2002  (7.2%).  Sales for the  janitorial  segment of
          $543,584 were $99,416 less than fiscal year 2002 (15.5%). The decrease
          in sales for both segments was a result of a decrease in customer base
          and a decrease in business with customers whose programs are funded by
          the city of New York.

          Cost of food  products  sold for  fiscal  year 2003 was 43.1% of sales
          compared to 45.2% for fiscal year 2002.  This slight increase in gross
          profit resulted from  competitive  pricing on purchases and changes in
          the menu mix sold to customers.

          Operating  expenses for the food service  segment for fiscal year 2003
          were 34.5% of sales  compared  to 34.3% of sales for fiscal year 2002.
          Operating  expenses for the janitorial  segment  increased to 96.6% of
          sales  compared  to 91.6% for fiscal year 2002.  Janitorial  sales for
          fiscal years 2003 and 2002 consist  primarily of auxiliary  janitorial
          services  for  current  food  service  customers  and  carry a smaller
          margin.

                                       9
<PAGE>

          Administrative expense for fiscal year 2003 increased $13,038 compared
          to fiscal year 2002. This slight increase resulted from costs incurred
          in moving accounting and administrative  functions from Kansas City to
          the Long Island City corporate office.

          Gain on Sale of Assets:  In  connection  with the sale of the Iowa and
          Oklahoma  vending machine and cafeteria  operations in 2001,  $200,000
          was held  from the  purchase  price by the buyer  contingent  upon the
          buyer retaining certain  customers.  This $200,000 was not recorded by
          the  Company in the year the  transaction  occurred as it was deemed a
          gain contingency.  The Asset Purchase Agreement called for the Company
          to receive the $200,000 in various  intervals  through 2004.  $100,000
          was  collected  and recorded  during 2002.  On February 15, 2003,  the
          Company  reached an  agreement to receive the final  $100,000  payment
          relating to the sale.  This  $100,000 was not due until  January 2004.
          The entire amount of $100,000 was collected on April 1, 2003.

          On April 1, 2003,  the holder of an 8% note agreed to accept  $125,000
          as full and  complete  settlement  and  satisfaction  of all debts and
          amounts due on the note payable.  This transaction  resulted in a gain
          on extinguishment of debt of $790,992.

          Liquidity and Capital Resources
          -------------------------------

          2004 Results
          ------------

          The Company's working capital on May 27, 2004,  decreased to a deficit
          of  $172,887  compared to a surplus of $30,765 on May 29,  2003.  Cash
          decreased from $68,551 on May 29, 2003, to $9,881 on May 27, 2004.

          Net cash used in operating activities for the year ended May 27, 2004,
          was $16,929  compared to $98,261 for the prior year.  Accounts payable
          and accrued  expenses  increased a net of $171,334.  This increase was
          mainly attributed to favorable renegotiated payment terms with various
          vendors.

          Net cash used in investing activities for the year ended May 27, 2004,
          was $23,211  compared to $107,402  for the prior year.  The prior year
          included a deposit  of  $100,000  into a  restricted  savings  account
          required by the lender of the credit line.

          Net cash used in financing activities for the year ended May 27, 2004,
          was $18,530  compared to net cash provided by financing  activities of
          $39,691 for the prior year.  Proceeds from the line of credit  payable
          increased  $13,394  for the year ended May 27,  2004,  compared  to an
          increase of $71,008 for the prior year.

          The following  table  summarizes the Company's  obligations at May 27,
          2004.

                                                     Less Than     In Excess of
Contractual Obligations                  Total        1 Year          1 Year
Long Term Debt
(Including Related
Parties)                             $   156,651     $  61,892      $  94,759
Net Operating Leases                 $   403,242     $ 240,781      $ 162,461
                                     ------------------------------------------
                           Total     $   559,893     $ 302,673      $ 257,220

          Based on the  Company's  results for the year ended May 27, 2004,  the
          Company was not in compliance with its tangible net worth covenant, as
          defined by the lender.

                                       10
<PAGE>

          On August 19, 2004, the lender agreed to waive the covenant  violation
          and extend the line of credit  payable  through  February 28, 2005. In
          addition,   certain  terms  of  the  agreement   have  been  modified,
          including:
          o  increasing  the interest rate charged to prime plus 7%
          o  requiring the Chief Executive Officer to guarantee up to  $100,000,
             and further limiting the maximum borrowing.
          o  reducing the minimum tangible net worth from  $200,000 to $60,000
          o  further limiting the maximum borrowings to the lesser of 85 percent
             of eligible  accounts receivable or 60 percent of eligible accounts
             receivable less restricted cash

          The Company continues to have operating losses.  Management  continues
          its cost  reduction  efforts  and its plan to  attract  new  business.
          However,  at present,  there is no  assurance  that its  efforts  will
          return the  Company to  profitability.  Therefore,  if the  Company is
          unsuccessful in its efforts to achieve  profitability,  or attract new
          finance, no assurance can be given that the Company will continue as a
          going  concern.  As  a  result  of  these  conditions,  the  Company's
          independent  auditors  have  issued  a going  concern  opinion  on the
          Company's consolidated financial statements as of May 27, 2004.

          2003 Results
          ------------

          The Company's working capital on May 29, 2003,  decreased to a surplus
          of $30,765  compared to a surplus of $107,811  on May 30,  2002.  Cash
          decreased  from  $234,523 on May 30, 2002, to $68,551 on May 29, 2003.
          The Company used  $100,000 for a  collateral  deposit  required by the
          credit line lender.

          Net cash used in operating activities for the year ended May 29, 2003,
          was  $98,261  compared to  $227,107  for the prior  year.  Receivables
          decreased  $69,729 because of decreased sales in both the food service
          and  janitorial   services.   Accounts  payable  decreased   $149,688,
          inventories decreased $20,553, and prepaid expenses increased $19,481.

          Net cash used in investing activities for the year ended May 29, 2003,
          was $107,402 compared to net cash provided by investment activities of
          $335,403  for the prior  year.  The fiscal  year  ended May 30,  2002,
          included  the  proceeds  from the sale of the  assets  of the  vending
          machine and  cafeteria  operations  in Iowa,  Missouri and Oklahoma of
          $507,899.

          Net cash provided by financing  activities  for the year ended May 29,
          2003,  was $39,691  compared to $122,487 for the prior year.  Proceeds
          from the line of credit payable  decreased  $183,636,  and payments on
          long term debt decreased $100,843 net from fiscal year 2002.

          Off Balance Sheet Arrangements
          ------------------------------
          The Company does not have any off-balance sheet arrangements that have
          or are  reasonably  likely to have a current  or future  effect on the
          Company's financial condition, changes in financial condition, revenue
          or expenses, results of operations, liquidity, capital expenditures or
          capital resources that is material to investors.

Item 7.   Financial Statements

          Report of Independent Registered Public Accounting Firm       F-1

          Consolidated Balance Sheets May 27, 2004 and May 29, 2003     F-2

          Consolidated Statements of Operations 52 Weeks Ended
          May 27, 2004 and May 29, 2003                                 F-3

          Consolidated Statements of Changes in Stockholders' Equity
          (Deficit) 52 Weeks Ended May 27, 2004 and May 29, 2003        F-4

          Consolidated Statements of Cash Flows 52 Weeks Ended
          May 27, 2004 and May 29, 2003                                 F-5

          Notes to Consolidated Financial Statements                 F-6 - F-14

                                       11
<PAGE>

Item 8.   Changes in and disagreements with accountants on accounting and
          financial disclosure.

          None

Item 8A.  Controls  and Procedures

          As of the end of the period covered by this report,  an evaluation was
          carried out under the  supervision and with the  participation  of the
          Company's  management,  including the chief executive  officer and the
          principal  financial  officer,  of the effectiveness of the design and
          operation of the Company's  disclosure controls and procedures.  There
          are  inherent  limitations  to  the  effectiveness  of any  system  of
          disclosure controls and procedures, including the possibility of human
          error  and  the  circumvention  or  overriding  of  the  controls  and
          procedures.   Accordingly,  even  effective  disclosure  controls  and
          procedures can only provide  reasonable  assurance of achieving  their
          control  objectives.  Based upon and as of the date of the evaluation,
          the  chief  executive  officer  and the  principal  financial  officer
          concluded that the design and operation of these  disclosure  controls
          and  procedures  were  effective in all  material  respects to provide
          reasonable  assurance that information required to be disclosed in the
          reports of the Company  files and submits  under the  Exchange  Act is
          recorded,  processed,  summarized  and reported as and when  required.
          There were no changes in the Company's internal control over financial
          reporting  that occurred  during the twelve months ended May 27, 2004,
          that  materially  affected,  or are  reasonably  likely to  materially
          affect, the Company's internal control over financial reporting.

Item 8B.  Other Information

          None


                                    PART III

Item 9.   Directors and Executive Officers of the Registrant; Compliance with 16
          (a) of the  Exchange  Act and  Compliance  with  Section  16(a) of the
          Securities Exchange Act.

   (a), (b) The Executive Officers and Directors of the Company are as follows:

<TABLE>
<CAPTION>
                                                                                   Director
      Name                          Age   Principal Occupation                       Since

      <S>                           <C>   <C>                                         <C>
      Robert A. Laudicina (1)       63    President, Treasurer, Director (2)          1986
      Arthur D. Stevens (1)         79    Chairman of the Board (3)                   1963
      Ann W. Stevens                62    Real Estate Broker, Director                1996
      John A. Makula                55    Vice President, Secretary, Director (4)     2000
</TABLE>

      (1) Member of Executive Committee of Board of Directors

      (2) Mr. Laudicina was elected President in March 1998 and Treasurer in May
          1998. He served as Executive Vice President beginning in February 1989
          and Vice President prior to that time beginning in January 1982.

      (3) Mr.  Stevens has been Chairman of the Board of Directors of Ambassador
          since February 15, 1963. He was also the first President and Treasurer
          of  Ambassador  beginning  on  April  19,  1963,  relinquishing  those
          positions  in April  1978 and  October  1969,  respectively.  He again
          assumed the position of President on January 1, 1987,  serving in that
          capacity through March 1998. He was Chief Executive Officer from April
          11, 1963 through May 1998 and Treasurer  from January 26, 1972 through
          May 1998.

      (4) Mr.  Makula was elected  Assistant  Secretary on April 12,  2000,  and
          elected Vice President, Secretary, Director in May 2000.

                                       12
<PAGE>

   (c)    Arthur D. Stevens, Chairman, and Ann W. Stevens, Director, are husband
          and wife.  No other  family  relationship  exists  between  any of the
          executive officers and directors listed above.

          Each  Officer  holds  his  office  at the  pleasure  of the  Board  of
          Directors until the next annual meeting of the Directors and until his
          successor is duly elected and qualified.

          The Executive Officers and Directors listed above were not involved in
          or part of any legal proceedings, as is described in Item 401(d).

          Compliance with Section 16(a) of the Securities Exchange Act
          ------------------------------------------------------------

          Section  16(a) of the  Securities  Exchange  Act of 1934  requires the
          Company's  officers  and  directors,  and persons who own more than 10
          percent of a registered class of the Company's equity  securities,  to
          file reports of ownership and changes in ownership with the Securities
          and Exchange Commission (SEC). Officers,  directors,  and greater than
          10 percent  stockholders are required by SEC regulation to furnish the
          Company with copies of all Section16 (a) forms they file.

          To the Company's knowledge,  based solely on a review of the copies of
          such reports furnished to the Company, all reports under Section 16(a)
          required  to be filed by its  officers,  directors  and  greater  than
          ten-percent beneficial owners were timely filed.

Item 10.  Executive Compensation

 (a), (b) The  following  table sets forth  information  as to the  remuneration
          accrued by Ambassador  Food Services  Corporation  and its  subsidiary
          during  the fiscal  year ended May 29,  2003,  for each  Director  and
          Officer whose aggregate remuneration for the year exceeded $100,000.

                     Names of Individuals,
                  Number of Persons in Group
                and Capacities in which Served

                     Robert A. Laudicina,               Fiscal          Base
            President, CEO, Treasurer and Director       Year          Salary
                                                         2004         $103,366
                                                         2003         $127,302
                                                         2002         $148,936
                                                         2001         $176,706

   (d)    Stock Options

          None

Item 11.  Security Ownership of Certain Beneficial Owners and Management

   (a)    Security Ownership of Certain Beneficial Owners

          The following  table sets forth,  as of May 27, 2004, the  information
          with  respect to common  stock  ownership  of each person known by the
          Company  to  own  beneficially  more  than  5% of  the  shares  of the
          Company's common stock, and of all Officers and Directors as a group.

                                       13
<PAGE>

                                                    Amount            Percent of
                                                Beneficially         Outstanding
 Name and Address of Beneficial Owner(s)            Owned              Shares

 Arthur D. Stevens
 1901 W. 69th Street
 Mission Hills, KS  66205                        131,444  (1)           17.9%

 Thomas G. Berlin
 800 Superior Avenue, Suite 2100
 Cleveland, Ohio 44114                           236,119  (3)           32.2%

 George T. Terris
 104 S. Warbler
 Sarasota, FL 34236                               54,000  (2)            7.4%

 George F. Crawford
 10110 Fontana Lane
 Overland Park, KS  66207                         51,761                 7.0%

(1)  Does not include  91,400 shares  beneficially  owned by Mr.  Stevens' adult
     children, in which shares he disclaims any beneficial interest.

(2)  Does not include 4,000 shares owned by Mr.  Terris'  immediate  family,  in
     which shares he disclaims any beneficial interest.

(3)  Includes 12,800 shares owned by Mr. Berlin's wife.

   (b)   Security Ownership of Management

                                                       Shares of Stock
                                                      Beneficially Owned
                                                         May 27, 2004
                                                      ------------------
                                                   Number              Percent
          Name                                  of Shares             of Stock
          Arthur D. Stevens
          1901 W. 69th Street
          Mission Hills, KS  66205                131,444    (1)         17.9%

          Robert A. Laudicina
          310 Prospect Avenue
          Hackensack, NJ 07061                     26,265                 3.6%

          John Makula
          5 Pittsford Way
          Nanuet, NY 10954                          9,750                 1.3%

          Ann W. Stevens
          1901 W. 69th Street
          Mission Hills, KS 66205                   1,000                 0.1%

          All Directors and Officers              168,459                22.9%
             as a Group (4 persons)


(1)  Does not include  91,400 shares  beneficially  owned by Mr.  Stevens' adult
     children, in which shares he disclaims any beneficial interest.

                                       14
<PAGE>

   (c)    Changes in Control

          The  Company  knows of no  contractual  arrangements,  which may, at a
          subsequent date, result in a change in control of the Company.

Item 12.  Certain Relationships and Related Transactions

          The Company  entered into a consulting  agreement with the chairman of
          the Board of Directors,  who is also a stockholder and former officer.
          The agreement,  originally  requiring  payments of $100,482 per annum,
          was informally amended to a total per annum consulting fee of $81,000.
          The consulting  agreement terminates in May 2009. The expense relating
          to that  agreement for the years ended May 27, 2004, and May 29, 2003,
          was approximately $80,000 and $91,000,  respectively. In addition, the
          Company had advances due to this individual in the amount of $3,154 as
          of May 27, 2004 and May 29,  2003,  respectively.  These  advances are
          non-interest bearing and are due on demand.

          The  Company  had  advances  due to certain  officers in the amount of
          $12,301 and $10,204 as of May 27, 2004 and May 29, 2003, respectively.
          The advances are non-interest bearing and are due on demand.

          In 2003, in connection with the settlement of debt, the Company signed
          notes with stockholders and management of the Company in the aggregate
          amount of $95,000.  A portion of these  notes are payable  upon demand
          with the  balances  due after  April  2007.  Interest at 10 percent is
          payable in semiannual  installments.  These notes are all subordinated
          to the lender of the credit line.  Aggregate maturities of these notes
          due within the next three years are as follows:

                         Year           Amount
                         ----           ------
                         2004           30,000
                         2005               --
                         2006           65,000
                                       -------
                           Total       $95,000


Item 13.  Exhibits

        3.1     Articles of Incorporation of the Registrant      (1)

        3.2     Bylaws of the Registrant                         (1)

        21      Subsidiary of the Registrant                     (2)



                                       15
<PAGE>

        31.1    Certification Pursuant to 18 U.S.C. Section 1350
                as adopted Pursuant to Section 302 of the
                Sarbanes-Oxley Act of 2002                       (2)

        32.1    Certification pursuant to Section 906 of the
                Sarbanes-Oxley Act of 2002                       (2)

                (1) This  exhibit  was  filed  with the  Company's  10-K for the
                    fiscal year ended May 28, 1981. A copy of the Certificate of
                    Amendment of  Certification  of  Incorporation  changing the
                    Company's  name was filed as  supplement to said exhibit for
                    the fiscal year ended June 1, 1989.

                (2) Exhibit attached as part of filing.

Item 14.  Principal Accountant Fees and Services

          Independent Auditor Fees

          Fees for professional  services provided by the Company's  independent
          auditors, WithumSmith+Brown, P.C., for the 52 weeks ended May 27, 2004
          and May 29, 2003 are as follows:

                                    2004                2003
                                  -------             -------
            Audit Fees            $45,000             $34,500
            Audit-related fees        -0-                 -0-
            Tax fees                5,500               6,500
            All other fees            -0-                 -0-
                                  -------             -------
            Totals                $50,500             $41,000


          Audit Fees

          Audit fees  consist  of fees  related  to  the audit of the  Company's
          year-end  financial  statements and review of the Company's  quarterly
          reports on Form 10-QSB.

          Tax Fees

          Tax fees  consist of fees  related to  preparation  of  the  Company's
          consolidated  United States  federal and state tax returns in 2004 and
          2003.

          Board of Directors Pre-Approval Policy

          It is the policy of the  Company's  Board of  Directors to approve all
          engagements of the Company's  independent  auditors to render audit or
          non-audit services prior to the initiation of such services.

                                       16
<PAGE>



                                   SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.



                                AMBASSADOR FOOD SERVICES CORPORATION
                                ------------------------------------
                                (Registrant)



                                By  /s/  Robert A. Laudicina
                                    ---------------------------------------
Date: 8/25/04                       Robert A. Laudicina
                                    Chief Executive Officer and Principal
                                    Financial Officer





Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following  persons on behalf of the  Registrant and
in the capacities and on the dates indicated.



/s/  Arthur D. Stevens             Chairman of the Board               8/25/04
--------------------------------------------------------------------------------
Arthur D. Stevens                  Title                               Date


                                   President and Chief
                                   Executive Officer and
/s/  Robert A. Laudicina           Principal Financial Officer         8/25/04
--------------------------------------------------------------------------------
Robert A. Laudicina                Title                               Date



/s/   Ann W.  Stevens              Director                            8/25/04
--------------------------------------------------------------------------------
Ann W. Stevens                     Title                               Date


/s/   John Makula                  Director                            8/25/04
--------------------------------------------------------------------------------
John Makula                        Title                               Date


Note:  The  Company  will provide,  on the written  request of any  stockholder,
       a copy  of  any  exhibit to this Form 10-KSB at a rate of $.15 per  page.
       The  minimum fee is  $5.00.  Requests  should  be directed  to  Robert A.
       Laudicina,  President,   Ambassador   Food   Services  Corporation,  5-30
       54th Avenue, Long Island City, New York 11101.


                                       17
<PAGE>
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the Board of Directors and Stockholders,
Ambassador Food Services Corporation and Subsidiary:

We have audited the accompanying  consolidated balance sheets of Ambassador Food
Services Corporation and Subsidiary as of May 27, 2004 and May 29, 2003, and the
related  consolidated   statements  of  operations,   changes  in  stockholders'
(deficit)  equity and cash flows for the 52 weeks then  ended.  These  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all material  respects,  the consolidated  financial position of Ambassador Food
Services Corporation and Subsidiary as of May 27, 2004 and May 29, 2003, and the
consolidated  results of their  operations and their cash flows for the 52 weeks
then ended in conformity with accounting  principles  generally  accepted in the
United States of America.

The accompanying  consolidated  financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has limited cash available to fund operations,
has sustained operating losses, and its current liabilities exceeded its current
assets by $172,887 at May 27, 2004. Furthermore,  the Company is operating under
a debt  compliance  waiver  from it's  principal  lender  which  will  expire in
February 2005.  These  conditions  raise  substantial  doubt about the Company's
ability to continue as a going concern. Management's plans are also described in
Note 1. The  consolidated  financial  statements do not include any  adjustments
that might result from the outcome of this uncertainty.


WithumSmith+Brown, P.C.
New Brunswick, New Jersey
August 13, 2004, except for the second paragraph of
Note 4, as to which the date is August 19, 2004

                                      F-1
<PAGE>

<TABLE>
<CAPTION>
              AMBASSADOR FOOD SERVICES CORPORATION AND SUBSIDIARY
                          CONSOLIDATED BALANCE SHEETS
                         MAY 27, 2004 AND MAY 29, 2003
                                                                    2004           2003
                                                                    ----           ----
       ASSETS
<S>                                                             <C>             <C>

Current Assets:
   Cash                                                         $     9,881     $    68,551
   Accounts receivable, net of allowance
    for doubtful accounts of $7,189 in 2004 and 2003                769,067         764,688
   Inventory                                                         92,260          94,475
   Prepaid expenses and other assets                                 75,237          64,748
   Restricted cash                                                  219,744         210,913
                                                                -----------     -----------
Total Current Assets                                              1,166,189       1,203,375

Property and Equipment - Net                                        136,405         167,148

Deposits                                                             20,860          20,860
                                                                -----------     -----------
        Total Assets                                            $ 1,323,454     $ 1,391,383
                                                                ===========     ===========
        LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY

Current Liabilities:
   Line of credit payable                                       $   575,575     $   562,181
   Current maturities of long-term debt                              31,892          52,251
   Notes payable to related parties, current maturities              30,000          30,000
   Advances due to related parties                                   15,455          13,358
   Accounts payable                                                 583,337         357,995
   Accrued expenses                                                 102,817         156,825
                                                                -----------     -----------
       Total Current Liabilities                                  1,339,076       1,172,610

Long-Term Debt, Net of Current Maturities                            29,759          42,231

Other Liabilities                                                        --           1,700

Notes Payable to Related Parties, Net of Current Maturities
       Net of Current Portion                                        65,000          65,000

Stockholders' (Deficit) Equity:
   Common stock, $1.00 par value (2,000,000
    shares authorized, 1,009,230 shares issued)                   1,009,230       1,009,230
   Additional paid-in capital                                       718,291         718,291
   Accumulated deficit                                           (1,508,201)     (1,287,985)
                                                                -----------     -----------
                                                                    219,320         439,536
Less Treasury Stock, at Cost (274,594 and 274,574 shares
   in 2004 and 2003, respectively)                                 (329,701)       (329,694)
                                                                -----------     -----------
Total Stockholders' (Deficit) Equity                               (110,381)        109,842
                                                                -----------     -----------
       Total Liabilities and Stockholders' (Deficit) Equity     $ 1,323,454     $ 1,391,383
                                                                ===========     ===========
</TABLE>

  The Notes to Consolidated Financial Statements are an integral part of these
                                   statements

                                      F-2
<PAGE>
               AMBASSADOR FOOD SERVICES CORPORATION AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                  52 WEEKS ENDED MAY 27, 2004 AND MAY 29, 2003


                                                        2004            2003
                                                    -----------     -----------
Sales                                               $ 5,336,442     $ 5,862,844

Cost and Expenses:
   Cost of food products sold                         2,103,889       2,292,769
   Operating                                          2,136,344       2,363,418
   Administrative                                     1,204,247       1,253,625
   Depreciation and amortization                         51,347          80,414
                                                    -----------     -----------
       Total Cost and Expenses                        5,495,827       5,990,226
                                                    -----------     -----------
Operating Loss                                         (159,385)       (127,382)

Other Income (Expense):
   Loss on asset disposal of property and equipment      (1,693)           --
   Interest income                                        8,832           8,539
   Interest expense                                     (64,030)        (64,340)
   Gain on sale of assets                                  --           100,000
   Gain on settlement of debt                              --           790,992
   Other income (expense)                                  --            (3,434)
                                                    -----------     -----------
       Total Other Income (Expense), Net                (56,891)        831,757
                                                    -----------     -----------
(Loss) Income  Before Provision For Income Taxes       (216,276)        704,375

Provision For Income Taxes                                3,940           1,285
                                                    -----------     -----------
Net (Loss) Income                                   $  (220,216)    $   703,090
                                                    ===========     ===========
Basic and Diluted (Loss) Income  Per Common Share   $     (0.30)    $      0.96
                                                    ===========     ===========
Weighted Average of Common Shares Outstanding           734,650         734,684
                                                    ===========     ===========

  The Notes to Consolidated Financial Statements are an integral part of these
                                   statements

                                      F-3
<PAGE>
               AMBASSADOR FOOD SERVICE CORPORATION AND SUBSIDIARY
      CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' (DEFICIT) EQUITY
                FOR THE YEARS ENDED MAY 27, 2004 AND MAY 29, 2003
<TABLE>
<CAPTION>

                                                 Common Stock
                           -----------------------------------------------------------
                                                Issued                 Treasury          Additional                      Total
                            Authorized   ----------------------   --------------------    Paid-in     Accumulated    Stockholders'
                              Shares       Shares       Amount      Shares      Amount    Capital       Deficit     Equity (Deficit)
                             ---------   ---------    ---------   ---------   ---------   --------   ------------   ----------------
<S>                          <C>         <C>         <C>          <C>        <C>          <C>        <C>             <C>
Balance, May 30, 2002        2,000,000   1,009,230   $1,009,230   (274,274)  $(329,601)   $718,291   $(1,991,075)    $(593,155)

Net Income                       --          --           --         --          --          --          703,090       703,090

Purchase of Treasury Stock       --          --           --          (300)        (93)      --             --             (93)
                             ---------   ---------    ---------   ---------   ---------   --------   ------------    ----------

Balance May 29, 2003         2,000,000   1,009,230    1,009,230   (274,574)   (329,694)    718,291    (1,287,985)      109,842

Net Loss                         --          --           --         --          --          --         (220,216)     (220,216)

Purchase of Treasury Stock       --          --           --           (20)         (7)      --             --              (7)
                             ---------   ---------   ----------   ---------   ---------   --------   ------------    ----------

Balance May 27, 2004         2,000,000   1,009,230   $1,009,230   (274,594)  $(329,701)   $718,291   $(1,508,201)    $(110,381)
                             =========   =========   ==========   =========  ==========   ========   ============    ==========

</TABLE>

The Notes to  Consolidated  Financial  Statements  are an integral part of these
statements

                                      F-4
<PAGE>
<TABLE>
<CAPTION>

               AMBASSADOR FOOD SERVICES CORPORATION AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                FOR THE YEARS ENDED MAY 27, 2004 AND MAY 29, 2003

                                                                2004         2003
                                                                ----         ----
<S>                                                           <C>         <C>

Cash Flows from Operating Activities:
   Net (loss) income                                          $(220,216)  $ 703,090
   Adjustments to reconcile net (loss) income to net cash
    used in operating activities:
    Gain on settlement of debt                                       --    (790,992)
    Depreciation and amortization                                51,347      80,414
    Loss on fixed asset disposal                                  1,693          --
    Interest income on restricted cash                           (8,831)     (7,382)
    Changes in:
     Accounts receivable                                         (4,379)     69,729
     Inventory                                                    2,215      20,553
     Prepaid expenses and other assets                          (10,489)    (19,481)
     Advances due to related parties                              2,097          --
     Accounts payable                                           225,342    (149,688)
     Accrued expenses                                           (54,008)     12,646
     Other liabilities                                           (1,700)    (17,150)
                                                              ----------  ----------
      Net Cash  Used In Operating Activities                    (16,929)    (98,261)

Cash Flows from Investing Activities:
   Purchase of property and equipment                           (23,211)    (16,372)
   Change in deposits                                                --       8,970
   Change in restricted cash                                         --    (100,000)
                                                              ----------  ----------
      Net Cash  Used In Investing Activities                    (23,211)   (107,402)

Cash Flows from Financing Activities:
   Principal payments on long-term debt                         (31,917)    (41,224)
   Increase in borrowings of long term debt                          --     135,000
   Payment to settle debt                                            --    (125,000)
   Purchase of treasury stock                                        (7)        (93)
   Net proceeds under line of credit payable                     13,394      71,008
                                                              ----------  ----------
      Net Cash (Used in) Provided by Financing Activities       (18,530)     39,691
                                                              ----------  ----------
Net Decrease in Cash                                            (58,670)   (165,972)

Cash at Beginning of Period                                      68,551     234,523
                                                              ----------  ----------
Cash at End of Period                                         $   9,881   $  68,551
                                                              ==========  ==========

Supplemental Disclosure of Cash Flow Information:

   Cash paid during the period:
    Income taxes                                              $   3,940   $   1,258
    Interest                                                  $  64,617   $  62,089

Non cash investing and financing activities:
   Purchase of vehicles through issuance of long term debt    $  15,493   $  65,007
   Debt settlement by insurance proceeds in connection
    with stolen vehicle                                       $  16,407   $      --

</TABLE>

The Notes to  Consolidated  Financial  Statements  are an integral part of these
statements

                                      F-5
<PAGE>


               AMBASSADOR FOOD SERVICES CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 -  Summary of Significant Accounting Policies:
----------------------------------------------------
          Significant  accounting  policies followed by Ambassador Food Services
          Corporation  and  Subsidiary  (hereinafter  collectively  known as the
          Company) in the preparation of the accompanying consolidated financial
          statements are summarized below:

          Nature of Business and Recent Developments
          The Company conducts operations in New York in two operating segments:
          food (meal  preparation  and  delivery,  cafeteria  and  catering) and
          janitorial  services.  These  segments  primarily  service  government
          agencies and non-profit organizations.

          In March 2004,  the Company has filed a  preliminary  Proxy  Statement
          Pursuant to Section 14(a) of the  Securities  and Exchange Act of 1934
          wherein the Board of Directors proposed a 1 for 30 reverse stock split
          followed by a 30 for 1 forward  stock split as a means to decrease the
          number of  outstanding  shareholders  to below 500 so that the Company
          may terminate its  registration  under the Securities and Exchange Act
          of 1934. Subsequent thereto,  management has received comments to this
          proxy from the  Securities and Exchange  Commission  (SEC) to which it
          has responded and is awaiting their final approval  before  scheduling
          the meeting of the  stockholders to vote on the proposal.  The Company
          has approximated its total cost for this transaction to by $25,000.

          Basis of Presentation
          The accompanying  consolidated financial statements have been prepared
          on a going concern basis, which contemplates the realization of assets
          and the  satisfaction  of  liabilities  and  commitments in the normal
          course of business.

          The  Company's  current  liabilities  exceed  its  current  assets  by
          $172,887,  it has  sustained  operating  losses,  and has limited cash
          available to fund operations.  In addition, the Company is also having
          difficulties  in  generating  positive  cash  flows  from  operations.
          Furthermore,  the Company is operating under a debt compliance  waiver
          from it's  primary  lender which will expire in February  2005.  These
          conditions  raise  substantial  doubt about the  Company's  ability to
          continue as a going concern. Management's plans include continuing its
          cost reduction efforts and its plan to attract new business.  However,
          at present,  there is no  assurance  that its efforts  will return the
          Company to profitability. However, there can be no assurances that the
          Company  will  be  successful  in  their  efforts  to  cut  costs  and
          renegotiate   their  line  of  credit  beyond   February   2005.   The
          accompanying  financial statements do not include any adjustments that
          might result from the outcome of this uncertainty.

          Principles of Consolidation
          The  consolidated   financial   statements  include  the  accounts  of
          Ambassador  Food  Services  Corporation  (AFSC)  and its  wholly-owned
          subsidiary,  Ambassador  Fast Services,  Inc.  (AFS) All  intercompany
          balances and transactions have been eliminated in consolidation.

          Reporting Periods
          The Company has a fiscal year (52 or 53 weeks)  ending on the Thursday
          nearest May 31. Fiscal years 2004 and 2003 contained 52 weeks.

          Use of Estimates
          The preparation of financial  statements in conformity with accounting
          principles generally accepted in the United States of America requires
          management to make estimates and assumptions  that affect the reported
          amounts of assets and liabilities and disclosure of contingent  assets
          and  liabilities  at the  date  of the  financial  statements  and the
          reported  amounts of revenue and expenses during the reported  period.
          Actual results could differ from those estimates.


                                      F-6
<PAGE>

               AMBASSADOR FOOD SERVICES CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


          Note 1 - Summary of Significant Accounting Policies (Continued):
          ---------------------------------------------------------------
          Inventory
          Inventory,  consisting of food and supplies, is stated at the lower of
          cost (first-in, first-out) or market.

          Income Taxes
          Deferred  income tax assets and  liabilities  are  recognized  for the
          differences between financial and income tax reporting basis of assets
          and  liabilities  based on enacted  tax rates and laws.  The  deferred
          income tax provision or benefit  generally  reflects the net change in
          deferred  income  tax  assets  and  liabilities  during  the  year.  A
          valuation  allowance is recorded  when the expected  recognition  of a
          deferred tax asset is considered to be unlikely.

          FINANCIAL INSTRUMENTS
          Short-Term  Financial  Instruments
          ----------------------------------
          The carrying  amount of short-term  financial  instruments,  including
          cash and cash equivalents, trade accounts receivables and payables and
          certain  accrued  liabilities,  approximates  their  fair value in the
          financial   statements   because  of  the  short   maturity   of  such
          instruments.

          Notes Payable and Long-Term Debt
          --------------------------------
          The carrying amount of the line of credit  approximates its fair value
          because the currently  effective  rates reflect market rates available
          to the Company.  The carrying  amount of fixed rate notes  payable and
          fixed rate related party advances approximates its fair value based on
          the Company's estimated current incremental borrowing rate for similar
          obligations with similar terms.

          CONCENTRATION OF RISK
          Financial   instruments  which  potentially   expose  the  Company  to
          concentrations   of  risk,   consist   primarily  of  cash,   accounts
          receivable, and labor:

          Cash
          ----
          The  Company  places  operating  cash  with  high  quality   financial
          institutions.  At times,  these  amounts  exceed the  Federal  Deposit
          Insurance Corporation limits of $100,000. However, management monitors
          the soundness of these  institutions  and considers the Company's risk
          negligible.

          Accounts Receivable and Credit Policies
          ---------------------------------------
          Accounts  receivable are  unsecured,  non-interest  bearing,  customer
          obligations due under normal trade terms  requiring  payment within 30
          to 60 days from the invoice  date,  depending on the terms the Company
          has with the customer.  If a customer fails to remit payment within 90
          days of the invoice date,  management  calls the customer to determine
          when  collection  can be  expected.  Customer  account  balances  with
          invoices  dated  over 90 days are  considered  delinquent.  Payment of
          accounts   receivable  are  allocated  to  the  specific  invoices  as
          identified on the customer's remittance advice. The carrying amount of
          accounts  receivable is reduced by a valuation allowance that reflects
          management's best estimate of the amounts that will not be collected.

          All of the Company's accounts  receivable  balances are with customers
          located in New York.  The Company  grants credit to customers  such as
          governmental    social   service   agencies   and   other   non-profit
          organizations.

                                      F-7
<PAGE>
               AMBASSADOR FOOD SERVICES CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

          Note 1 - Summary of Significant Accounting Policies (Continued):
          ---------------------------------------------------------------
          As of May 27, 2004, 40 percent  (e.g.  17, 12 and 11 percent) of total
          accounts receivable was from three customers. As of May 29, 2003, four
          customers represented approximately 51 percent (e.g. 16, 13, 11 and 11
          percent) of total  accounts  receivable.  One of these  customers also
          represented   approximately   31  percent  and  34  percent  of  total
          consolidated  net sales for the 52 weeks ended May 27,  2004,  and May
          29, 2003, respectively.

          Labor
          -----
          Some  of  the  Company's   non-management  employees  are  covered  by
          collective  bargaining  agreements.  The  agreement  with  the  United
          Service  Employees  Union # 377 is scheduled to expire within the next
          year.  If the Company  and the United  Service  Employees  Union # 377
          representing  such  workers  (aggregating  approximately  11%  of  all
          non-management  employees) are unable to agree on a new contract prior
          to expiration of the current contract,  a work stoppage may occur that
          could adversely affect results of operations.

          EFFECTS OF RECENT ACCOUNTING PRONOUNCEMENTS
          In   December   2003,   the  FASB   revised  FIN  No.  46  (FIN  46R),
          "Consolidation of Variable  Interest  Entities." FIN No. 46R clarifies
          the  application  of Accounting  Research  Bulletin No. 51 for certain
          entities for which equity investors do not have the characteristics of
          a controlling  financial  interest or do not have sufficient equity at
          risk for the  entity to  finance  its  activities  without  additional
          subordinated  financial support from other parties.  The Company would
          currently  be required to adopt FIN No. 46 for any  variable  interest
          entities  it  had  and  would  be  required  to  meet  the  disclosure
          requirements  of  this   pronouncement.   However,   the  Company  has
          determined  that it  does  not  have a  significant  interest  in such
          entities based on its analysis and assessment.

          RECLASSIFICATION
          Certain   amounts  from  the  2003  financial   statements  have  been
          reclassified to conform to the 2004 presentation.

          REVENUE RECOGNITION
          Revenue from food and janitorial  customer  contracts is recognized at
          the time  services  are provided to the  customer in  accordance  with
          those contracts.

          PROPERTY AND EQUIPMENT
          Property and equipment are stated at cost. Depreciation is provided in
          amounts  sufficient  to  relate  the  cost of  depreciable  assets  to
          operations  over their  estimated  useful  lives on the  straight-line
          method.  The estimated lives used in determining  depreciation  are as
          follows:

                         Description                                Years

                  Cafeteria and Commissary Equipment                 3-7
                  Leasehold Improvements                              *
                  Vehicles                                           3-5
                  Office Equipment                                   3-7
                  Warehouse Equipment                                3-7

                  *  Lesser of estimated life or term of lease

          Expenditures  for  maintenance  and  repairs are charged to expense as
          incurred.

                                      F-8
<PAGE>

               AMBASSADOR FOOD SERVICES CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


          Note 1 - Summary of Significant Accounting Policies (Continued):
          ---------------------------------------------------------------

          VALUATION OF LONG-LIVED ASSETS
          In accordance  with SFAS No. 144,  "Accounting  for the  Impairment or
          Disposal of Long-Lived  Assets,"  long-lived assets used in operations
          are reviewed for impairment when events and circumstances warrant such
          a review.  Based on these evaluations,  there were no adjustments made
          in the carrying value of the long-lived assets in 2004 and 2003.

          INCOME (LOSS) PER COMMON SHARE
          Income (loss) per common share is computed using the weighted  average
          of common shares outstanding during the period.

Note 2 -  Restricted Cash:
-------------------------
          In  connection  with the  Company's  line of  credit,  the  Company is
          required to maintain a  collateral  deposit of  $200,000.  The deposit
          earns  interest at the prime rate (4.00  percent at May 27, 2004,  and
          4.25 percent at May 29, 2003).  Interest earned for the year ended May
          27,  2004,   and  May  29,  2003,   amounted  to  $8,831  and  $7,382,
          respectively.  The collateral is required to be maintained  during the
          term of the loan.

Note 3 -  Property and Equipment:
--------------------------------
          Property and  equipment  consists of the following at May 27, 2004 and
          May 29, 2003:

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

     Cafeteria and Commissary Equipment      $     467,343       $    456,349
     Leasehold Improvements                         31,923             22,657
     Vehicles                                      156,493            162,182
     Office Equipment                               60,213             60,213
     Warehouse Equipment                            22,189             22,189
                                             -------------       ------------
                                                   738,161            723,590
     Less Accumulated Depreciation                 601,756            556,442
                                             -------------       ------------
     Property and Equipment, Net             $     136,405       $    167,148
                                             =============       ============

          Depreciation  expense  amounted  to $51,347 and $80,414 for the fiscal
          years ended May 27, 2004, and May 29, 2003, respectively.

Note 4 -  Line of Credit Payable:
--------------------------------
          The  Company  has a line of  credit  agreement  with a  lender,  which
          provides for maximum  borrowings of $1,000,000,  limited to 85 percent
          of eligible accounts receivable as defined by the lender.  Interest is
          payable  monthly at prime (4.00  percent  and 4.25  percent at May 27,
          2004 and May 29,  2003,  respectively)  plus five  percent.  The loan,
          which was  originally  due in December  2002, is  collateralized  by a
          first  priority  perfected  security  interest  in all  the  Company's
          assets, excluding certain equipment, for which the lender has a second
          priority  perfected  security  interest.   The  agreement  contains  a
          tangible  net worth  covenant,  as  defined  by the  lender,  which is
          measured on a semi-annual  basis.  As of May 27, 2004, the Company was
          in default on the tangible net worth covenant.

                                      F-9
<PAGE>

               AMBASSADOR FOOD SERVICES CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

          Note 4 - Line of Credit Payable (continued):
          -------------------------------------------
          On August 19, 2004, the lender agreed to waive the covenant  violation
          and  extended the due date  through  February  28, 2005.  In addition,
          certain terms of the agreement have been modified, including:
          o  increasing the interest rate charged to prime plus 7%
          o  requiring  the Chief Executive Officer to guarantee up to $100,000,
             and further  limiting the maximum borrowing.
          o  reducing the  minimum  tangible  net worth from $200,000 to $60,000
          o  further limiting the maximum borrowings to the lesser of 85 percent
             of eligible accounts receivable or 60 percent of  eligible accounts
             receivable less restricted cash

          In connection with the line of credit payable, $95,000 of loans due to
          certain related parties (see Note 6) are subordinated to the lender.

          The balance of the credit line was $575,575 and $562,181 as of May 27,
          2004, and May 29, 2003, respectively.

Note 5 - Long-Term Debt:
-----------------------
         Long-term debt consists of the following at May 27, 2004 and May 29,
         2003:

<TABLE>
<CAPTION>
                                                              2004              2003
                                                           ---------         ---------

           <S>                                             <C>                <C>
           Notes  payable -  vehicles,  payable
           in monthly  installments,
           non-interest bearing, due August 2007           $  14,803         $  38,546

           Note  payable -  vehicle,  payable
           in  monthly  installments, bearing interest
           at 8.99 percent, due May 2007                      12,754            15,936

           Note  payable -  vehicle,  payable
           in  monthly  installments, bearing interest
           at 7.99 percent, due November 2007                 14,094                --

           Notes  payable  to  individuals,  payable
           upon  demand  after October   2003.  Interest
           at 10  percent is payable in
           semi-annual installments                           20,000            40,000
                                                           ---------         ---------

           Total Long-Term Debt                               61,651            94,482

           Less Current Maturities                            31,892            52,251
                                                           ---------         ---------

           Long-Term Debt, Less Current Maturities        $   29,759         $  42,231
                                                          ==========         =========
</TABLE>

          Aggregate  maturities  of  long-term  debt due  within  the four years
          subsequent to May 27, 2004, are as follows:

                   Year                  Amount

                   2005               $   31,892
                   2006                   12,541
                   2007                   13,248
                   2008                    3,970
                                      ----------

                    Total             $   61,651
                                      ==========

                                      F-10
<PAGE>

               AMBASSADOR FOOD SERVICES CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 6 -  Related Party Transactions:
-----------------------------------
          The Company  entered into a consulting  agreement with the chairman of
          the Board of Directors,  who is also a stockholder and former officer.
          The agreement originally requiring payments of $100,482 per annum, was
          informally amended to a total per annum consulting fee of $81,000. The
          consulting  agreement  terminates in May 2009. The expense relating to
          that  agreement for the 52 week period ended May 27, 2004, and May 29,
          2003,  was  approximately  $80,000  and  $91,000,   respectively.   In
          addition,  the  Company had  advances  due to this  individual  in the
          amount of $3,154 as of May 27, 2004.  These advances are  non-interest
          bearing and are due on demand.

          The  Company  had  advances  due to certain  officers in the amount of
          $12,301 and $10,204 as of May 27, 2004 and May 29, 2003, respectively.
          These advances are non-interest bearing and are due on demand.

          In 2003, in connection  with the  settlement of debt (See Note 8), the
          Company signed notes with  stockholders  and management of the Company
          in the  aggregate  amount of  $95,000.  A portion  of these  notes are
          payable upon demand with the  balances due after April 2007.  Interest
          at 10 percent is payable in semiannual installments.  Interest expense
          relating  to this debt is  approximately  $10,000  and $-0- for the 52
          weeks ended May 27, 2004 and May 29, 2003,  respectively.  These notes
          are all  subordinated  to the  lender of the  credit  line.  Aggregate
          maturities  of these  notes due  within  the next  three  years are as
          follows:

                                    Year             Amount
                                    ----             -------

                                    2005             $30,000
                                    2006                  --
                                    2007              65,000
                                                    --------
                                         Total      $ 95,000
                                                    ========

Note 7 -  Gain on Sale of  Assets:
---------------------------------
          In connection  with the sale of the Iowa and Oklahoma  vending machine
          and cafeteria  operations in 2001, $200,000 was held from the purchase
          price  by the  buyer  contingent  upon  the  buyer  retaining  certain
          customers.  This  $200,000 was not recorded by the Company in the year
          the  transaction  occurred  as it was deemed a gain  contingency.  The
          Asset  Purchase  Agreement  called  for the  Company  to  receive  the
          $200,000 in various intervals through 2004. $100,000 was collected and
          recorded  during 2002.  On February 15, 2003,  the Company  reached an
          agreement to receive the final $100,000  payment relating to the sale.
          This  $100,000 was not due until  January  2004.  The entire amount of
          $100,000 was paid early on April 1, 2003.

Note 8 -  Gain on Settlement of Debt:
------------------------------------
          On March 10, 2003, a note payable to an individual with an outstanding
          balance of $915,992 and due June 2008,  was settled for $125,000.  The
          settlement  resulted in a gain of $790,992  for the year ended May 29,
          2003.

                                      F-11
<PAGE>
               AMBASSADOR FOOD SERVICES CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 9 -  Commitments:
--------------------
          The  Company  leases  all  real  estate  for  office,  warehouse,  and
          commissary  facilities  expiring  through November 2006. All equipment
          that is leased is for office use. The Company must pay utilities under
          the terms of the  leases.  Future  minimum  lease  payments  under all
          non-cancelable operating leases, as of May 27, 2004, are as follows:

             Fiscal Year       Real
              Ending           Estate        Equipment         Total
            -----------    --------------   -----------     ------------

              2005         $     239,421     $  1,360       $    240,781
              2006               140,511           --            140,511
              2007                23,310       23,310
                           -------------    -----------     ------------
                           $     403,242     $  1,360       $    404,602
                           =============    ===========     ============

          The  preceding  data  reflects  existing  leases and does not  include
          anticipated future replacements upon expiration.

          Rental expense charged to operations was $239,263 in 2004 and $236,833
          in 2003.

Note 10 - Income Taxes:
-----------------------
          Deferred income taxes consisted of the following at May 27 and May 29:

                                                        2004            2003
                                                        ----            ----

           Deferred Tax Asset                      $  681,377      $  554,411
           Less Valuation Allowance                  (681,377)       (512,618)
                                                   ----------      ----------
           Net Deferred Tax Asset                       --             41,793

           Deferred Tax Liability                       --            (41,793)
                                                   ----------      ----------
           Net Deferred Income Taxes               $    --         $    --
                                                   ==========      ==========

          The approximate tax effect of each temporary difference giving rise to
          the deferred tax asset and liability was as follows: 2004 2003

                                                        2004            2003
                                                        ----            ----

           Vacation Accrual                        $   10,360      $   11,398
           Allowance for Bad Debts                      2,876           2,876
           Depreciation                                11,918            --
           Contribution Carryforward                      476          14,772
           Net Operating Loss Carryforwards           655,747         525,365
                                                   ----------      ----------
           Deferred Tax Asset                      $  681,377      $  554,411
                                                   ==========      ==========

           Accelerated Depreciation                $    --         $  (41,793)
           Deferred Tax Liability                  $    --         $  (41,793)
                                                   ==========      ==========

          The  valuation  allowance was  established  to reduce the deferred tax
          asset to zero. The reduction is necessary  because of prior  operating
          losses and  uncertainty  about the  Company's  ability to utilize  net
          operating  loss  carryforwards   before  they  expire.  The  valuation
          allowance  increased by $168,759  and  decreased by $264,180 in fiscal
          years 2004 and 2003, respectively.

                                      F-12
<PAGE>

               AMBASSADOR FOOD SERVICES CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

          Note 10 - Income Taxes(continued):
          --------------------------------
          The income tax benefit  reflected in the  consolidated  statements  of
          operations  differs  from the amounts  computed  at Federal  statutory
          income tax rates.  The principal  differences are as follows at May 27
          and 29: 2004 2003

                                                        2004            2003
                                                        ----            ----
           Federal Income Tax Expense (Benefit)
             Computed at Statutory Rate            $  (73,533)     $  239,487
           State Income Tax Expense                     3,940           1,285
           Non-Utilization of Net Operating Loss
             Carryforwards                             73,533             --
           Utilization of Net Operating Loss
             Carryforwards                                --         (239,487)
                                                   ----------      ----------
           Income Tax Expense (Benefit)            $    3,940      $    1,285
                                                   ==========      ==========

          The Company has Federal net operating loss carryforwards  available at
          May 27,  2004 which  amounted  to  $1,639,368  and  expires at various
          intervals from 2008 through 2024.

          In addition,  for state  purposes,  AFS and AFSC has State of New York
          net  operating  loss  carryforwards  available at May 27, 2004,  which
          amounted  to  $2,125,604  and  expire at various  intervals  from 2008
          through 2024.

Note 11 - Segment Information:
-----------------------------
          The Company follows Financial  Accounting Standards Board SFAS No. 131
          Disclosures  about Segments of an Enterprise and Related  Information.
          SFAS No. 131 requires  companies to report  financial and  descriptive
          information about its reportable operating segments, including segment
          profit or loss, certain specific revenue and expense items and segment
          assets,  as well as  information  about the revenues  derived from the
          Company's  products and  services,  the countries in which the Company
          earns revenues and holds assets,  and major  customers.  The Company's
          businesses  are organized and managed as two operating  segments based
          on the  differences in products and services.  These segments are Food
          and  Janitorial.  Operating  segments are defined as  components of an
          enterprise  about which  separate  financial  information is available
          that is evaluated  regularly by the chief operating  decision-maker in
          deciding how to allocate resources and in assessing  performance.  The
          Company's  chief  executive  officer  and  vice  president  have  been
          identified as the chief operating decision-makers. The Company's chief
          operating  decision  makers  direct the  allocation  of  resources  to
          operating  segments based on the  profitability and cash flows of each
          respective segment.

          The Company evaluates  performance based on several factors,  of which
          the primary financial measure is business segment income before taxes.
          The accounting policies of the business segments are the same as those
          described in "Note 1 - Summary of  Significant  Accounting  Policies."
          The following  tables show the operations of the Company's  reportable
          segments:

                       2004                   Food       Janitorial     Total
           -----------------------------  ------------  ----------  -----------

           Sales                          $ 4,858,856   $ 477,586   $ 5,336,442
           Operating Income (Loss)        $  (176,664)  $  17,279   $  (159,385)
           Assets                         $ 1,323,454   $   --      $ 1,323,454
           Depreciation and Amortization  $    51,347   $   --      $    51,347
           Capital Expenditures           $    54,197   $   --      $    54,197

                                      F-13
<PAGE>
               AMBASSADOR FOOD SERVICES CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 11 - Segment Information (continued):
-----------------------------------------

                       2004                   Food      Janitorial     Total
           -----------------------------  ------------  ----------  -----------

           Sales                          $ 5,319,260   $ 543,584   $ 5,862,844
           Operating Income (Loss)        $  (145,820)  $  18,438   $  (127,382)
           Assets                         $ 1,386,974   $   4,409   $ 1,391,383
           Depreciation and Amortization  $    80,414   $    --     $    80,414

           Capital Expenditures           $    81,379   $    --     $    81,379

          A reconciliation of the totals reported for the operating  segments to
          income (loss) before the provision for income taxes are as follows for
          the 52 weeks ended May 27, 2004 and May 29, 2003: 2004 2003

                                                          2004            2003
                                                          ----            ----

           Total Reportable Segment Operating Loss   $ (159,385)     $ (127,382)

           Other Income (Expense):
                Loss on Asset Disposal                   (1,693)          --
                Interest Income                           8,832           8,539
                Interest Expense                        (64,030)        (64,340)
                Gain on Sale of Assets                     --           100,000
                Gain on Settlement of Debt                 --           790,992
                Other Expense                              --            (3,434)
                                                     ----------      ----------
                  Total Other Income (Expense), Net     (56,891)        831,757
                                                     ----------      ----------
           (Loss) Income Before Provision for
              Income Taxes                           $ (216,276)     $  704,375
                                                     ==========      ==========

                                      F-14