**Form 10-Q**

 

**UNITEDSTATES SECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

 

| **(Mark One)** |                                                                                                                                                                                                                                                          |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **x**          | **QUARTERLY REPORT PURSUANT TO  SECTION 13 or 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934**                                                                                                                                                                 |
|           |                                                                                                                                                                                                                                                          |
|           | **For the quarterly period ended September  22, 2007**                                                                                                                                                                                                        |
|           |                                                                                                                                                                                                                                                          |
|           | OR                                                                                                                                                                                                                                                            |
|           |                                                                                                                                                                                                                                                          |
| **o**          | **TRANSITION REPORT PURSUANT TO  SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934**                                                                                                                                                                |
|           |                                                                                                                                                                                                                                                          |
|           | **For the transition period  from                  to                  ** |
|                |                                                                                                                                                                                                                                                               |  |

 

**CommissionFile Number 1-32439**

 

**CUISINESOLUTIONS, INC.**

(Exact name ofregistrant as specified in its charter)

 

| **DELAWARE**                                                    | ** ** | **52-0948383**                        |
|-----------------------------------------------------------------|------------|---------------------------------------|
| (State of other  jurisdiction of incorporation or organization) |       | (IRS Employer  Identification Number) |

 

**85 S.Bragg Street, Suite 600, Alexandria, VA 22312**

(Address ofprincipal executive offices) (Zip Code)

 

(Registrant’stelephone number, including area code) ** (703) 270-2900**

 

Indicate by check markwhether the registrant (1) has filed all reports required to be filed bySection 13 or 15 (d) of the Securities Exchange Act of 1934, during thepreceding 12 months (or for such shorter period that the registrant wasrequired to file such reports), and (2) has been subject to such filingrequirements for the past 90 days.

 

**Yes** x**  No** o

 

Indicate by check markwhether the registrant is a large accelerated filer, an accelerated filer, or anon-accelerated filer. See definition of “accelerated filer and largeaccelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

 
| Large  accelerated filer o |   | Accelerated  filer o |   | Non-accelerated filer** **x |
|---------------------------------|--------|---------------------------|--------|----------------------------------|

 

Indicate by check mark whetherthe registrant is a shell company (as defined in Rule 12b-2 of the ExchangeAct).

 

**Yes** o**  No** x

 

Indicate the number ofshares outstanding of each of the issuer’s classes of common stock as of thelatest practicable date.

 

The number of shares ofoutstanding of each of the issuer’s classes of common stock, $0.01 par value,outstanding as of October 31, 2007 was 16,693,091.

 

 

----

 

TABLE OF CONTENTS

 
| PART I     |                                                                                                                           |   |
|------------|--------------------------------------------------------------------------------------------------------------------------------|--------|
| Item 1.    | Financial Statements  (unaudited)                                                                                              |   |
| Item 2.    | Management’s  Discussion and Analysis of Financial Condition and Results of Operations                                    |   |
| Item 3.    | Quantitative  and Qualitative Disclosures about Market Risk                                                                    |   |
| Item 4.    | Controls and  Procedures                                                                                                       |   |
|       |                                                                                                                           |   |
| PART II    |                                                                                                                           |   |
| Item 1.    | Legal Proceedings                                                                                                              |   |
| Item 1A.   | Risk Factors                                                                                                                   |   |
| Item 2.    | Unregistered  Sales of Equity Securities and Use of Proceeds                                                                   |   |
| Item 3.    | Defaults Upon  Senior Securities                                                                                               |   |
| Item 4.    | Submission of  Matters to a Vote of Security Holders                                                                           |   |
| Item 5.    | Other Information                                                                                                              |   |
| Item 6.    | Exhibits                                                                                                                       |   |
|       |                                                                                                                           |   |
| SIGNATURES |                                                                                                                           |
| EX-31.1:   | Certification of Chief  Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                            |   |
| EX-31.2:   | Certification of Chief  Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                            |   |
| EX-32.1:   | Certification of Chief Executive Officer and Chief Financial Officer  pursuant to Section 906 of theSarbanes-Oxley Act of 2002 |   |

 

2

----

 

**CUISINESOLUTIONS, INC.**

**PART I:   FINANCIAL INFORMATION**

 

### **Item 1. Financial Statements(unaudited)**

### ** **

**CUISINE SOLUTIONS, INC.**

**CONSOLIDATED CONDENSED BALANCE SHEETS**

**(Unaudited)**

** **
| ** **                                                                                                                                                          | ** ** | **September 22,** | ** **     | **June 30,** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------|----------------|-------------------|------------|
| ** **                                                                                                                                                          | ** ** | **2007**               | ** **     | **2007**          | ** ** |
| **ASSETS**                                                                                                                                                          |       |                   |           |              |       |
| Current assets                                                                                                                                                      |       |                   |           |              |       |
| Cash and cash equivalents                                                                                                                                           |       | $                      | 390,000        |              | $          | 546,000 |   |
| Trade accounts receivable, net                                                                                                                                      |       | 8,614,000              |           | 5,864,000         |       |
| Inventory, net                                                                                                                                                      |       | 14,774,000             |           | 15,081,000        |       |
| Prepaid expenses                                                                                                                                                    |       | 785,000                |           | 521,000           |       |
| Accounts receivable, related parties                                                                                                                                |       | 67,000                 |           | 57,000            |       |
| Deferred tax assets                                                                                                                                                 |       | 1,919,000              |           | —            |       |
| Other current assets                                                                                                                                                |       | 374,000                |           | 638,000           |       |
| TOTAL CURRENT ASSETS                                                                                                                                                | ** ** | **26,923,000**         | ** **     | **22,707,000**    | ** ** |
|                                                                                                                                                                |       |                   |           |              |       |
| Fixed assets, net                                                                                                                                                   |       | 13,266,000             |           | 12,520,000        |       |
| Deferred tax assets, net                                                                                                                                            |       | 5,185,000              |           | 7,069,000         |       |
| Investments, non-current                                                                                                                                            |       | 375,000                |           | 375,000           |       |
| Restricted cash                                                                                                                                                     |       | 81,000                 |           | 66,000            |       |
| Other assets                                                                                                                                                        |       | 77,000                 |           | 83,000            |       |
| TOTAL ASSETS                                                                                                                                                        | ** ** | **$**                  | **45,907,000** | ** **        | **$**      | **42,820,000** | ** ** |
|                                                                                                                                                                |       |                   |           |              |       |
| **LIABILITIES AND STOCKHOLDERS’ EQUITY**                                                                                                                       |       |                   |           |              |       |
| Current liabilities                                                                                                                                                 |       |                   |           |              |       |
| Accounts payable and accrued expenses                                                                                                                               |       | $                      | 8,401,000      |              | $          | 6,999,000 |   |
| Line-of-credit                                                                                                                                                      |       | 3,861,000              |           | 1,811,000         |       |
| Accrued payroll and related liabilities                                                                                                                             |       | 1,851,000              |           | 2,486,000         |       |
| Current portion of long-term debt                                                                                                                                   |       | 776,000                |           | 777,000           |       |
| CURRENT LIABILITIES                                                                                                                                                 | ** ** | **14,889,000**         | ** **     | **12,073,000**    | ** ** |
|                                                                                                                                                                |       |                   |           |              |       |
| Long-term debt, less current portion                                                                                                                                |       | 5,523,000              |           | 5,523,000         |       |
| Asset retirement obligation                                                                                                                                         |       | 499,000                |           | 499,000           |       |
| Deferred rent                                                                                                                                                       |       | 116,000                |           | 100,000           |       |
| TOTAL LIABILITIES                                                                                                                                                   | ** ** | **21,027,000**         | ** **     | **18,195,000**    | ** ** |
| ** **                                                                                                                                                          | ** ** | ** **             | ** **     | ** **        | ** ** |
| Commitments and contingencies                                                                                                                                       | ** ** | ** **             | ** **     | ** **        | ** ** |
| Stockholders’ equity                                                                                                                                           | ** ** | ** **             | ** **     | ** **        | ** ** |
| Common Stock                                                                                                                                                        |       |                   |           |              |       |
| Class A Stock - $.01 par value, 20,000,000 shares authorized,  16,693,091 and 16,623,191 shares and issued and outstanding at September 22,  2007 and June 30, 2007 |       | 167,000                |           | 166,000           |       |
| Class B Stock - $.01 par value, 175,000 shares authorized, none issued                                                                                              |       | —                 |           | —            |       |
| Additional paid-in capital                                                                                                                                          |       | 27,978,000             |           | 27,934,000        |       |
| Accumulated deficit                                                                                                                                                 |       | (4,576,000             | )              | (4,583,000        | )          |
| Accumulated other comprehensive income                                                                                                                              |       |                   |           |              |       |
| Cumulative translation adjustment                                                                                                                                   |       | 1,311,000              |           | 1,108,000         |       |
| TOTAL STOCKHOLDERS’ EQUITY                                                                                                                                     | ** ** | **24,880,000**         | ** **     | **24,625,000**    | ** ** |
|  TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY                                                                                                               | ** ** | **$**                  | **45,907,000** | ** **        | **$**      | **42,820,000** | ** ** |

 

Seeaccompanying notes to consolidated condensed financial statements.

 

3

----

 

**CUISINE SOLUTIONS, INC.**

**CONSOLIDATED CONDENSED STATEMENTS OF INCOME**

**(Unaudited)**

** **
| ** **                                                | ** ** | **Twelve Weeks Ended** | ** **     |
|-----------------------------------------------------------|------------|----------------------------------|----------------|
| ** **                                                | ** ** | **September 22,**           | ** **     | **September 16,** | ** ** |
| ** **                                                | ** ** | **2007**                         | ** **     | **2006** | ** ** |
| ** **                                                | ** ** | ** **                       | ** **     | ** ** | ** ** |
| **Net sales**                                             | ** ** | **$**                            | **17,480,000** | ** ** | **$** | **14,206,000** | ** ** |
| Cost of goods sold                                        |       | 13,933,000                       |           | 11,036,000 |   |
| **Gross margin**                                          | ** ** | **3,547,000**                    | ** **     | **3,170,000** | ** ** |
|                                                      |       |                             |           |   |   |
| Research and development                                  |       | 236,000                          |           | 173,000 |   |
| Selling and marketing                                     |       | 1,535,000                        |           | 1,284,000 |   |
| General and administrative                                |       | 1,700,000                        |           | 1,119,000 |   |
| **Income before non-operating expense and income  taxes** | ** ** | **76,000**                       | ** **     | **594,000** | ** ** |
|                                                      |       |                             |           |   |   |
| Non-operating income (expense)                            |       |                             |           |   |   |
| Interest expense                                          |       | (81,000                          | )              | (71,000 | ) |
| Other income, net                                         |       | 16,000                           |           | 8,000 |   |
| **Total non-operating expense**                           | ** ** | **(65,000**                      | **)**          | **(63,000** | **)** |
|                                                      |       |                             |           |   |   |
| **Income before income tax**                              |       | 11,000                           |           | 531,000 |   |
| Provision for income tax expense                          |       | (4,000                           | )              | (6,000 | ) |
|                                                      |       |                             |           |   |   |
| **NET INCOME**                                            | ** ** | **$**                            | **7,000**      | ** ** | **$** | **525,000** | ** ** |
|                                                      |       |                             |           |   |   |
| Per common share data                                     |       |                             |           |   |   |
| Basic earnings:                                           |       |                             |           |   |   |
| Net income                                                | ** ** | **$**                            | **0.00**       | ** ** | **$** | **0.03** | ** ** |
| ** **                                                | ** ** | ** **                       | ** **     | ** ** | ** ** |
| Diluted earnings:                                         | ** ** | ** **                       | ** **     | ** ** | ** ** |
| Net income                                                | ** ** | **$**                            | **0.00**       | ** ** | **$** | **0.03** | ** ** |
| ** **                                                | ** ** | ** **                       | ** **     | ** ** | ** ** |
| Weighted average shares outstanding-basic                 | ** ** | **16,663,780**                   | ** **     | **16,439,191** | ** ** |
| Common stock equivalents                                  | ** ** | **1,769,350**                    | ** **     | **1,763,703** | ** ** |
| Weighted average shares outstanding-diluted               | ** ** | **18,433,130**                   | ** **     | **18,202,894** | ** ** |

 

Seeaccompanying notes to consolidated condensed financial statements.

 

4

----

 

**CUISINE SOLUTIONS, INC.**

**CONSOLIDATED CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY**

**(Unaudited)**

** **
| ** **                           | ** ** | ** ** | ** **  | ** **     | ** ** | **Retained**     | ** ** | ** **      | ** **      | ** **             | ** ** |
|--------------------------------------|------------|------------|-------------|----------------|------------|------------------|------------|-----------------|-----------------|------------------------|------------|
| ** **                           | ** ** | ** ** | ** **  | **Additional** | ** ** | **Earnings**     | ** ** | **Cumulative**  | ** **      | **Total**              | ** ** |
| ** **                           | ** ** | **Common** | ** **  | **Paid-In**    | ** ** | **(Accumulated** | ** ** | **Translation** | ** **      | **Stockholders’** | ** ** |
| ** **                           | ** ** | **Stock**  | ** **  | **Capital**    | ** ** | **Deficit)**     | ** ** | **Adjustment**  | ** **      | **Equity**             | ** ** |
|                                 |       |       |        |           |       |             |       |            |            |                   |       |
| **Balance, June 24, 2006**           | ** ** | **$**      | **165,000** | ** **     | **$**      | **27,516,000**   | ** ** | **$**           | **(15,127,000** | **)**                  | **$**      | **701,000** | ** ** | **$** | **13,255,000** | ** ** |
|                                 |       |       |        |           |       |             |       |            |            |                   |       |
| **Exercise of common stock options** |       | —     |        | —         |       | —           |       | —          |            | —                 |       |
| **Stock-based compensation**         |       | —     |        | 71,000         |       | —           |       | —          |            | 71,000                 |       |
| **Twelve weeks 2007 net income**     |       | —     |        | —         |       | 525,000          |       | —          |            | 525,000                |       |
| **Other Comprehensive Income**       |       |       |        |           |       |             |       |            |            |                   |       |
| **Translation adjustment**           |       | —     |        | —         |       | —           |       | 56,000          |            | 56,000                 |       |
| **Total Comprehensive income**       | ** ** | ** ** | ** **  | ** **     | ** ** | ** **       | ** ** | ** **      | ** **      | **581,000**            | ** ** |
| **Balance, September 16, 2006**      | ** ** | **$**      | **165,000** | ** **     | **$**      | **27,587,000**   | ** ** | **$**           | **(14,602,000** | **)**                  | **$**      | **757,000** | ** ** | **$** | **13,907,000** | ** ** |

 
| ** **                           | ** ** | ** ** | ** **  | ** **     | ** ** | **Retained**     | ** ** | ** **      | ** **     | ** **             | ** ** |
|--------------------------------------|------------|------------|-------------|----------------|------------|------------------|------------|-----------------|----------------|------------------------|------------|
| ** **                           | ** ** | ** ** | ** **  | **Additional** | ** ** | **Earnings**     | ** ** | **Cumulative**  | ** **     | **Total**              | ** ** |
| ** **                           | ** ** | **Common** | ** **  | **Paid-In**    | ** ** | **(Accumulated** | ** ** | **Translation** | ** **     | **Stockholders’** | ** ** |
| ** **                           | ** ** | **Stock**  | ** **  | **Capital**    | ** ** | **Deficit)**     | ** ** | **Adjustment**  | ** **     | **Equity**             | ** ** |
|                                 |       |       |        |           |       |             |       |            |           |                   |       |
| **Balance, June 30, 2007**           | ** ** | **$**      | **166,000** | ** **     | **$**      | **27,934,000**   | ** ** | **$**           | **(4,583,000** | **)**                  | **$**      | **1,108,000** | ** ** | **$** | **24,625,000** | ** ** |
|                                 |       |       |        |           |       |             |       |            |           |                   |       |
| **Exercise of common stock options** |       | 1,000      |        | 13,000         |       | —           |       | —          |           | 14,000                 |       |
| **Stock-based compensation**         |       | —     |        | 31,000         |       | —           |       | —          |           | 31,000                 |       |
| **Twelve weeks 2008 net income**     |       | —     |        | —         |       | 7,000            |       | —          |           | 7,000                  |       |
| **Other Comprehensive Income**       |       |       |        |           |       |             |       |            |           |                   |       |
| **Translation adjustment**           |       | —     |        | —         |       | —           |       | 203,000         |           | 203,000                |       |
| **Total Comprehensive income**       | ** ** | ** ** | ** **  | ** **     | ** ** | ** **       | ** ** | ** **      | ** **     | **210,000**            | ** ** |
| **Balance, September 22, 2007**      | ** ** | **$**      | **167,000** | ** **     | **$**      | **27,978,000**   | ** ** | **$**           | **(4,576,000** | **)**                  | **$**      | **1,311,000** | ** ** | **$** | **24,880,000** | ** ** |

 

See accompanyingnotes to consolidated condensed financial statements.

 

5

----

 

**CUISINESOLUTIONS, INC.**

**CONSOLIDATEDCONDENSED STATEMENTS OF CASH FLOWS**

**(Unaudited)**

 
| ** **                                                                    | ** ** | **Year to date**       | ** **  |
|-------------------------------------------------------------------------------|------------|----------------------------------|-------------|
| ** **                                                                    | ** ** | **Twelve weeks ended** | ** **  |
| ** **                                                                    | ** ** | **September 22,**           | ** **  | **September 16,** | ** ** |
| ** **                                                                    | ** ** | **2007**                         | ** **  | **2006** | ** ** |
| **CASH  FLOWS FROM OPERATING ACTIVITIES**                                     |       |                             |        |   |   |
| Net income                                                                    |       | $                                | 7,000       |   | $ | 525,000 |   |
|                                                                          |       |                             |        |   |   |
| Adjustments to  reconcile net income to net cash used in operating activities |       |                             |        |   |   |
| Depreciation and  amortization                                                |       | 404,000                          |        | 255,000 |   |
| Allowance for  doubtful accounts                                              |       | 14,000                           |        | (26,000 | ) |
| Inventory  obsolescence reserve                                               |       | 130,000                          |        | 80,000 |   |
| Change in deferred  tax assets                                                |       | 3,000                            |        | — |   |
| Stock-based  compensation                                                     |       | 31,000                           |        | 71,000 |   |
| Changes in  assets and liabilities, net of effects of non-cash transactions:  |       |                             |        |   |   |
| Increase in  accounts receivable                                              |       | (2,634,000                       | )           | (488,000 | ) |
| Decrease  (increase) in inventory                                             |       | 384,000                          |        | (1,403,000 | ) |
| Increase in  prepaid expenses                                                 |       | (79,000                          | )           | (217,000 | ) |
| Increase in  accounts receivable, related parties                             |       | (10,000                          | )           | (17,000 | ) |
| Decrease in  other assets                                                     |       | 101,000                          |        | — |   |
| Increase in  accounts payable and accrued expenses                            |       | 923,000                          |        | 1,104,000 |   |
| Decrease in  accrued payroll and related liabilities                          |       | (393,000                         | )           | (861,000 | ) |
| Changes in  assets and liabilities of discontinued operations                 |       | —                           |        | (7,000 | ) |
| **Net  cash used in operating activities**                                    | ** ** | **(1,119,000**                   | **)**       | **(984,000** | **)** |
|                                                                          |       |                             |        |   |   |
| **CASH  FLOWS FROM INVESTING ACTIVITIES**                                     |       |                             |        |   |   |
| Increase in  restricted cash                                                  |       | (16,000                          | )           | (15,000 | ) |
| Capital  expenditures                                                         |       | (902,000                         | )           | (1,509,000 | ) |
| **Net  cash used in investing activities**                                    | ** ** | **(918,000**                     | **)**       | **(1,524,000** | **)** |
|                                                                          |       |                             |        |   |   |
| **CASH  FLOWS FROM FINANCING ACTIVITIES**                                     |       |                             |        |   |   |
| Payments on debt                                                              |       | (174,000                         | )           | (78,000 | ) |
| Proceeds from  debt                                                           |       | —                           |        | 567,000 |   |
| Net borrowing on  line-of-credit                                              |       | 2,038,000                        |        | 2,000,000 |   |
| Proceeds from  stock issuance                                                 |       | 14,000                           |        | — |   |
| **Net  cash provided by financing activities**                                | ** ** | **1,878,000**                    | ** **  | **2,489,000** | ** ** |
|                                                                          |       |                             |        |   |   |
| Net decrease in  cash and cash equivalents                                    |       | (159,000                         | )           | (19,000 | ) |
| Change in  cumulative translation adjustment                                  |       | 3,000                            |        | 16,000 |   |
| Cash and cash  equivalents, beginning of period                               |       | 546,000                          |        | 2,154,000 |   |
| **CASH  and CASH EQUIVALENTS, END OF PERIOD**                                 | ** ** | **$**                            | **390,000** | ** ** | **$** | **2,151,000** | ** ** |

 

See accompanyingnotes to consolidated condensed financial statements.

 

6

----

 

**Cuisine Solutions, Inc.**

 

NOTES TO UNAUDITEDCONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

September 22, 2007

 

**NOTE 1 - DESCRIPTION OF OPERATIONS**

 

The Company produces and markets premium, fullycooked, frozen and prepared foods to a variety of channels and geographicregions. The Company has manufacturing facilities in the U.S.A. and France andits products are sold primarily to the U.S.A. and European Union businesscustomers in the Foodservice, On Board Services, Retail, Military and NationalRestaurant Chains channels.

 

**NOTE 2 – CONDENSED CONSOLIDATEDFINANCIAL STATEMENTS**

 

The accompanyingunaudited condensed consolidated financial statements included herein have beenprepared by the Company in accordance with U.S. generally accepted accountingprinciples (“GAAP”) for interim financial information and pursuant to the rulesand regulations of the U.S. Securities and Exchange Commission (the “SEC”) forreporting on Form 10-Q. Accordingly, certain information and footnotedisclosures required for complete consolidated financial statements are notincluded herein. It is recommended that these unaudited condensed consolidatedfinancial statements be read in conjunction with the audited consolidatedfinancial statements and related notes as reported in the Company’s 2007 AnnualReport on Form 10-K as filed with the SEC on September 21, 2007.

 

In management’s opinion,all adjustments, consisting of normal recurring adjustments, considerednecessary for a fair presentation of the unaudited condensed financial position,results of operations, and cash flow at the dates and for the periods presentedhave been included. The condensed consolidated balance sheet presented at June30, 2007 has been derived from the financial statements that have been auditedby the Company’s independent registered public accounting firm. The results ofoperations for the twelve week period ended September 22, 2007 may not beindicative of the results that may be expected for the fiscal year ended June28, 2008, or any other period within the fiscal year 2008.

 

**NOTE 3 - RECENT ACCOUNTINGPRONOUNCEMENTS**

 

In June 2006, theFinancial Accounting Standard Board (“FASB”) issued FASB Interpretation (“FIN”)No. 48 *Accounting for Uncertainty in Income Taxes,**an interpretation of FASBStatement No. 109*. FIN 48 is effective for fiscal years beginning afterDecember 15, 2006. Differences between the amounts recognized in the statementsof financial position prior to the adoption of FIN 48 and the amountsrecognized after the adoption should be accounted for as a cumulative-effectadjustment recorded to the beginning balance of retained earnings. EffectiveJuly 1, 2007, the Company adopted the provisions of FIN 48 and the effect ofthe adoption was not material.

 

**NOTE 4 – TRADE ACCOUNTS RECEIVABLE, NET**

 

Trade accounts receivable consisted of:

 

| ** **                       | ** ** | **September 22, 2007** | ** ** | **June 30, 2007** | ** ** |
|----------------------------------|------------|----------------------------------|------------|-----------------------------|------------|
| Trade accounts  receivable       |       | $                                | 9,008,000  |                        | $          | 6,237,000 |   |
| Allowance for  doubtful accounts |       | (394,000                         | )          | (373,000                    | )          |
| Trade accounts  receivable, net  |       | $                                | 8,614,000  |                        | $          | 5,864,000 |   |

 

The Company provides allowances for estimated creditlosses, product returns, and adjustments at a level deemed appropriate toadequately provide for known and inherent risks related to such accounts. Theallowances are based on reviews of individual accounts by customer, theirfinancial conditions, and other factors that deserve recognition in estimatingpotential losses. While management uses the best information available inmaking its determination, the ultimate recovery of recorded accounts and otherreceivables is also dependent on future economic and other conditions that maybe beyond management’s control.

 

7

----

 

**NOTE 5 – INVENTORY, NET**

 

Inventory consisted of the following: 

 

| ** **                                 | ** ** | **September 22, 2007** | ** ** | **June 30, 2007** | ** ** |
|--------------------------------------------|------------|----------------------------------|------------|-----------------------------|------------|
| Raw material                               |       | $                                | 4,388,000  |                        | $          | 4,626,000 |   |
| Frozen product  & other finished goods |       | 9,629,000                        |       | 9,722,000                   |       |
| Packaging                                  |       | 1,076,000                        |       | 989,000                     |       |
|                                       |       | 15,093,000                       |       | 15,337,000                  |       |
| Less  obsolescence reserve                 |       | (319,000                         | )          | (256,000                    | )          |
|                                       |       | $                                | 14,774,000 |                        | $          | 15,081,000 |   |

 

# **NOTE 6 – DEBT**

# ** **

Debt, at September 22, and June 30, 2007 was asfollows:

 
| ** **      | ** ** | ** **                 | ** ** | **September 22, 2007  Principal** | ** **   | ** **            | ** ** | ** **                                  | ** ** | ** **                             | ** ** |
|-----------------|------------|----------------------------|------------|---------------------------------------------|--------------|-----------------------|------------|---------------------------------------------|------------|----------------------------------------|------------|
| ** **      | ** ** | ** **                 | ** ** | **Outstanding  In Foreign**            | ** **   | **Interest**          | ** ** | **September 22, 2007  Principal** | ** ** | **June 30, 2007  Principal** | ** ** |
| **Description** | ** ** | **Maturity**               | ** ** | **Currency**                                | ** **   | **Rates**             | ** ** | **Outstanding**                             | ** ** | **Outstanding**                        | ** ** |
| Term Loan       |       | October 22, 2012 |       | 112,000                                     |  € | 5.7                   | %          | $                                           | 157,000    |                                   | $          | 155,000 |   |
| Term Loan       |       | June 3, 2008               |       | 45,000                                      |  € | 3.3                   | %          | 63,000                                      |       | 81,000                                 |       |
| Term Loan       |       | June 15, 2008              |       | 11,000                                      |  € | 4.0                   | %          | 16,000                                      |       | 20,000                                 |       |
| Term Loan       |       | June 20, 2010              |       | 37,000                                      |  € | 3.8                   | %          | 52,000                                      |       | 54,000                                 |       |
| Term Loan       |       | November 28, 2012          |       | 219,000                                     |  € | 2.8                   | %          | 308,000                                     |       | 304,000                                |       |
| Term Loan       |       | June 12, 2019              |       | 1,900,000                                   |  € | 3.6                   | %          | 2,674,000                                   |       | 2,560,000                              |       |
| Term Loan       |       | October 23, 2013           |       | 556,000                                     |  € | 3.8                   | %          | 782,000                                     |       | 766,000                                |       |
| Line of Credit  |       | June 2008                  |       | 316,000                                     |  € | 5.2% - 5.5            | %          | 445,000                                     |       | —                                 |       |
| Term Loan       |       | June 5, 2012               |       |                                        |         | 7.0                   | %          | 1,648,000                                   |       | 1,718,000                              |       |
| Term Loan       |       | October 5, 2010            |       |                                        |         | 7.3                   | %          | 458,000                                     |       | 490,000                                |       |
| Term Loan       |       | March 15, 2010             |       |                                        |         | 6.8                   | %          | 109,000                                     |       | 118,000                                |       |
| Line of Credit  |       | June 15, 2009              |       |                                        |         | LIBOR+2.25            | %          | 3,416,000                                   |       | 1,811,000                              |       |
| Capital Lease   |       | September 18, 2008         |       |                                        |         | 19.4                  | %          | 5,000                                       |       | 6,000                                  |       |
| Capital Lease   |       | December 31, 2011          |       |                                        |         | 8.4                   | %          | 27,000                                      |       | 28,000                                 |       |
|            |       |                       |       |                                        |         | Total                 |       | $                                           | 10,160,000 |                                   | $          | 8,111,000 |   |
|            |       |                       |       |                                        |         | Less: current portion |       | 4,637,000                                   |       | 2,588,000                              |       |
|            |       |                       |       |                                        |         | Non-current portion   |       | $                                           | 5,523,000  |                                   | $          | 5,523,000 |   |

 

From time to time, the Company enters into separateterm loans to purchase new equipment and for improvement projects. As ofSeptember 22, 2007, the total principal balance of all these term loans was$6,267,000; among which $4,052,000 was denominated in Euros in the amount of2,880,000€. These loans bear interest rates ranging from 2.8% to 7.3%, withmaturity dates ranging from June 3, 2008 to June 12, 2019. The loans aretypically secured by the equipment.

 

As of September 22, 2007, the total loan balance undercapital leases was $32,000, bearing interest rates ranging from 8.4% to 19.4%with maturity dates ranging from September 18, 2008 to December 31, 2011.

 

**NOTE 7 - INCOME TAXES**

 

The Company’s effective tax rate of 36.4% for thethree months ended September 22, 2007, increased 35.3% from 1.1% for the threemonths ended September 16, 2006. The increase in the effective rate resultedfrom the reversal of our tax valuation reserve in the third quarter of fiscalyear 2007; however, the Company still retains its net operating loss carryforwardof $13,970,000 for U.S. Federal and state income tax purposes and does notexpect to pay any taxes in fiscal year 2008.  The Company has reclassed$1,919,000 of the Deferred Tax asset to current assets to more accuratelyreflect the distribution in accordance with GAAP.

 

8

----

 

**NOTE 8 – STOCKHOLDERS’ EQUITY**

 

Effective June 26,2005, the Company adopted the fair value recognition provisions of SFASNo. 123(R), *Share-Based Payment* (“SFAS 123(R)”),using the modified prospective-transition method. Under that transition method,compensation cost recognized in the fiscal year 2006 includes:(a) compensation cost for all share-based payments granted prior to, butnot yet vested as of June 25, 2005, based on the grant date fair valueestimated in accordance with the original provision of SFAS 123, and(b) compensation cost for all share-based payments granted subsequent toJune 25, 2005, based on the grant-date fair value estimated in accordancewith the provisions of SFAS 123(R). As a result, a non-cash charge of $31,000and $71,000 were charged to compensation expense during the twelve week periodended September 22, 2007 and September 16, 2006, respectively. The Companyallocated share-based compensation expense under SFAS 123(R) in the unauditedcondensed consolidated statements of income as follows:

 

| ** **                                          | ** ** | **Twelve weeks ended** | ** ** |
|-----------------------------------------------------|------------|----------------------------------|------------|
| ** **                                          | ** ** | **September 22, 2007** | ** ** | **September 16, 2006** | ** ** |
| Cost of goods  sold                                 |       | $                                | —     |   | $ | 9,000 |   |
| Selling and  marketing                              |       | —                           |       | 21,000 |   |
| General and  administrative                         |       | 31,000                           |       | 41,000 |   |
|                                                |       | 31,000                           |       | 71,000 |   |
| Income tax  benefit                                 |       | (12,000                          | )          | (27,000 | ) |
| Total share-base  compensation, net of tax benefits |       | $                                | 19,000     |   | $ | 44,000 |   |

 

The Company did not grantany stock options during the twelve week periods ended September 22, 2007 andSeptember 16, 2006. Options exercised during the first quarter of fiscal year2008 were 69,900 with an intrinsic value of $409,000 and no options wereexercised during the first quarter of fiscal year 2007.

 

As of September 22, 2007the total unrecognized estimated compensation cost related to non-vested stockoptions granted prior to that date was $141,000, which is expected to berecognized over a weighted average period of 1.38 years.

 

**NOTE 9 – EARNINGS PER SHARE**

 

Basic earnings per commonshare are computed using the weighted-average number of shares outstandingduring the period. Diluted earnings per common share are computed using theweighted-average number of shares outstanding during the period, plus theincremental shares outstanding assuming the exercise of diluted stock options.Anti-dilutive options of 15,000 were not included in the computation for thefirst quarter of fiscal year 2008 and there were no anti-dilutive shares oroptions during the first quarter of fiscal year 2007.

 

**NOTE 10 – TRANSACTIONS WITH RELATEDPARTIES**

 

The Company’s 10% equityinvestment in Cuisine Solutions Chile for $375,000 is accounted for under thecost method as the Company does not have the ability to exercise significantinfluence over the operating or financial policy of Cuisine Solutions Chile. Duringthe first quarter of fiscal year 2008 and 2007, the Company purchased$1,185,000 and $827,000, respectively, of products from Cuisine Solutions Chilefor resale in the U.S. and Europe. The balance owed by the Company to CuisineSolutions Chile as of first quarter of fiscal year 2008 and 2007 were $751,000and $804,000, respectively.

 

The Company’s line-of-creditwith Branch Banking and Trust with a maximum borrowing amount of $6.0 millionand a maturity date of June 15, 2010, is guaranteed by Food InvestorsCorporation (“FIC”), an affiliate of the Company, and secured by real estateowned by FIC. The Company has agreed to pay compensation for this guaranteefrom FIC of 1.5% on the maximum borrowing amount payable quarterly.

 

**NOTE 11 – SUBSEQUENT EVENTS**

 

During the Company’s AnnualMeeting on October 25, 2007, the Company’s stockholders approved an increase inthe number of authorized shares of capital stock from 20,000,000 to 40,000,000and the issuance of two classes of stock to be designated, respectively, commonstock and blank-check preferred stock of which 38,000,000 were designatedcommon stock and 20,000,000 were designated blank-check preferred stock. Inaddition, the Company’s stockholders also approved the adoption of the Company’s2007 Equity Incentive Plan.

 

9

----

 

**Item 2. Management’sDiscussion and Analysis of Financial Condition and Results of Operations**

 

Allstatements contained herein, other than historical facts, may constitute “forward-lookingstatements” within the meaning of Section 27A of the Securities Act of1933, as amended, and Section 21E of the Securities Exchange Act of 1934,as amended. These statements may relate to, among other things, future eventsor our future performance or financial condition. In some cases, you canidentify forward-looking statements by terminology such as “may,” “might,” “believe,”“will,” “provided,” “anticipate,” “future,” “could,” “growth,” “plan,” “intend,”“expect,” “should,” “would,” “if,” “seek,” “possible,” “potential,” “likely” orthe negative of such terms or comparable terminology. These forward-lookingstatements involve known and unknown risks, uncertainties and other factorsthat may cause our actual results, levels of activity, performance orachievements to be materially different from any future results, levels ofactivity, performance or achievements expressed or implied by suchforward-looking statements. Such factors include, among others: (1) a significantchange of the Company’s relationship with its customers in channels whereconcentration of sales to a certain number of customers exists; (2) theimpact on the Company’s profitability from the fluctuations in the availabilityand cost of raw materials; (3) the impact on the Company’s reportedearnings from fluctuations in currency exchange rates, particularly the Euro;and (4) those factors listed under the caption “risk factors” of the AnnualReport on Form 10-K as filed with the SEC on September 21, 2007. We cautionreaders not to place undue reliance on any such forward-looking statements,which are made pursuant to the Private Securities Litigation Reform Act of 1995and, as such, speak only as of the date made. We undertake no obligation topublicly update or revise any forward-looking statements, whether as a resultof new information, future events or otherwise, after the date of thisForm 10-Q.

 

The following analysis ofour financial condition and results of operations should be read in conjunctionwith our financial statements and the notes thereto contained elsewhere in thisreport.

 

**BUSINESS OVERVIEW**

 

We produce and market premium, fully cooked, frozenand prepared foods to a variety of channels and geographic regions. We believethat we are recognized in the market place as having the highest quality frozenfood product line in the world. Our motto is: exceptional food - ultimate convenience.

 

Cuisine Solutions currently distributes productsthrough the following sales channels:

•                  On Board Services:Airlines, railroad and cruise lines.

•                  Foodservice:Hotel banquets, convention centers, sport stadiums and other special eventssuch as the Olympics.

•                  Retail:Supermarket in-store deli and premium frozen packaged foods.

•                  Military: Navalcarriers, Army field feeding, and military dining halls and clubs.

•                  National Restaurant Chains: Casual diningmulti-unit restaurants.

 

**CRITICAL ACCOUNTING ESTIMATES ANDPOLICIES**

 

Our accounting policies,which are in compliance with U.S. GAAP, require us to apply methodologies,estimates and judgments that have a significant impact on the results we reportin our financial statements. In our 2007 Annual Report on Form 10-K, we havediscussed those material policies that we believe are critical and require theuse of complex judgment in their application. There have been no materialchanges to the policies during the fiscal quarter ended September 22, 2007.

 

**RESULTS OF OPERATIONS**

 

***Comparisonof the twelve weeks ended September 22, 2007 to the twelve weeks ended September16, 2006***

 

**NET SALES**

** **

| **By Geographic Region** | ** ** | **September 22, 2007** | ** ** | **September 16, 2006** | ** ** | **% change** | ** ** |
|------------------------------------|------------|----------------------------------|------------|----------------------------------|------------|-------------------|------------|
| USA Sales                          |       | $                                | 11,599,000 |                             | $          | 9,796,000         |       | 18.4 | % |
| Europe Sales                       |       | 5,833,000                        |       | 4,393,000                        |       | 32.8              | %          |
| Rest of World  Sales               |       | 48,000                           |       | 17,000                           |       | 182.4             | %          |
| Net Sales                          |       | $                                | 17,480,000 |                             | $          | 14,206,000        |       | 23.0 | % |

 

10

----

 

| ** **         | ** ** | **September 22, 2007** | ** ** | **September 16, 2006** | ** ** | **% change** | ** ** |
|--------------------|------------|----------------------------------|------------|----------------------------------|------------|-------------------|------------|
| Existing  products |       | 13,873,000                       |       | 12,082,000                       |       | 14.8              | %          |
| New products       |       | 3,607,000                        |       | 2,124,000                        |       | 69.8              | %          |
| Net Sales          |       | $                                | 17,480,000 |                             | $          | 14,206,000        |       | 23.0 | % |
|                    |            |                                  |            |                                  |            |                   |            |  |  |

** **

| **By Channel**        | ** ** | **September 22, 2007** | ** ** | **September 16, 2006** | ** ** | **% change** | ** ** |
|----------------------------|------------|----------------------------------|------------|----------------------------------|------------|-------------------|------------|
| On Board  Services         |       | $                                | 5,611,000  |                             | $          | 4,128,000         |       | 35.9 | % |
| Food Service               |       | 2,628,000                        |       | 2,413,000                        |       | 8.9               | %          |
| Retail                     |       | 3,843,000                        |       | 3,055,000                        |       | 25.8              | %          |
| Military                   |       | 3,932,000                        |       | 3,833,000                        |       | 2.6               | %          |
| National  Restaurant Chain |       | 1,466,000                        |       | 777,000                          |       | 88.7              | %          |
| Net Sales                  |       | $                                | 17,480,000 |                             | $          | 14,206,000        |       | 23.0 | % |

 

Net Sales of $17,480,000 for the first quarter offiscal year 2008 increased $3,274,000, or 23.0%, over the first quarter of fiscalyear 2007 sales of $14,206,000. We do not have any defined segments since allof our products are produced similarly despite the sales channel or area ofdistribution. Our new product sales increased significantly to $3,607,000 inthe first quarter of fiscal year 2008 from the first quarter of fiscal year2007 new product sales of $2,124,000, a 69.8% increase. These new product salesare defined as sales over the first year of introduction. For the first quarterfiscal year 2008 we had gains in all sales channels with National RestaurantChains increasing 88.7% to $1,466,000 over the first quarter fiscal 2007reflecting continued product acceptance in larger chain restaurants. On BoardServices increased 35.9% to $5,611,000 for first quarter fiscal year 2008 fromsales to additional new airlines and continued expansion in existing carriers.Retail increased 25.8% to $3,843,000 over first quarter fiscal year 2007 fromincreased consumer purchases. While we consider new products and channelinformation helpful to the reader we cannot forecast any particular trends forour sales as a result of such information. Our sales development cycle can runover one year in certain markets before recognizing a sale.

 

**GROSS MARGIN**

 

The gross margin decreased during the first quarter offiscal year 2008 to 20.3%, compared to 22.0% in the prior year. This marginreduction was primarily attributable to higher raw materials costs, increasedcosts in raw materials due solely to a weak U.S. dollar, fuel surcharges,continued increases in facility expansion and increased costs associated withnew product introductions. We have started to introduce price increases throughall the channels but due to the cyclical nature of some products we will notfully implement the price increase program until the third quarter of fiscalyear 2008.

 

**RESEARCH AND DEVELOPMENT EXPENSES**

 

Research and development expenses increased in thefirst quarter of fiscal year 2008 to $236,000 from the first quarter of fiscalyear 2007 of $173,000, a 36.4% increase. Most of the research and developmentcosts are incurred well before an actual sale and the cycle can last over oneyear in certain markets. The expense increase is primarily related to increasedsalaries from additional staff, offset partially by lower consulting fees.

 

**SELLING AND MARKETING EXPENSES**

 

Our sales and marketing teams are focused on customersprimarily in the USA and Europe. Expenses for the first quarter of fiscal year2008 increased $251,000 to $1,535,000, or 19.5%, over the first quarter offiscal year 2007 expense of $1,284,000 (selling and marketing expensesrepresented 8.8% and 9.0% of revenue for first quarters of fiscal years 2008and 2007, respectively). This increase was primarily related to increasedsalaries of $128,000 and costs associated with in-store demonstrations of$105,000.

 

**GENERAL AND ADMINISTRATIVE EXPENSES**

 

General and administrative expenses for the firstquarter of fiscal year 2008 increased $581,000 to $1,700,000, or 51.9%, overthe first quarter of prior fiscal year 2007 expenses of $1,119,000 (general andadministrative expenses represented 9.7% and 7.9% of revenue for the firstquarters of fiscal 2008 and 2007, respectively). This increase was due totravel and consulting fees of $135,000 and $119,000, respectively, as well asadditional staff and salary increases of $91,000, insurance increases of$56,000 and bad debt increase of $40,000.

 

11

----

 

**NON-OPERATINGINCOME AND EXPENSE**

 

Non-operating expenseincreased to $65,000 in the first quarter of fiscal year 2008 from $63,000 infirst quarter of fiscal year 2007, due primarily to the increase in interestexpense of $10,000 relating to the increased outstanding borrowings in the U.S.and France.

 

**INCOMEBEFORE INCOME TAXES**

 

Incomebefore income taxes in the first quarter of fiscal year 2008 of $11,000decreased substantially from the first quarter fiscal year 2007 of $531,000, or97.9%. This decrease was primarily related to lower gross margin percentagesprincipally from higher raw material costs resulting in approximately a$350,000 decrease in potential margins as well as higher selling and marketing,general administrative and research and development expenses.

 

**INCOME TAXES**

 

We recorded a provision for income taxes of $4,000 and$6,000 for the first quarter of fiscal years 2008 and 2007, respectively. Oureffective income tax rate for the first quarter of fiscal year 2008 wascomputed to be 36.4% as compared to 1.1% for the first quarter of fiscal year2007 which was based on minimum tax payments.

 

In June 2006, the FASB issued Interpretation No. 48, *Accounting for Uncertainty in Income Taxes, an interpretation of FASBStatement No. 109* (“FIN 48”).  This Statement addressesuncertainty in tax positions recognized in a company’s financial statements andstipulates a recognition threshold and measurement of a tax position taken orexpected to be taken in a tax return.  The Company adopted FIN 48 onJuly 1, 2007 and the effect of applying the provisions of this interpretationwas not material.

 

**NET INCOME**

 

Net income decreased $518,000 to $7,000 for the firstquarter fiscal year 2008 from $525,000 in first quarter of fiscal year 2007. Theprimary reason for the decrease was lower gross margin and increases in allresearch, selling and marketing, and general administrative expenses.

 

**LIQUIDITY AND CAPITAL RESOURCES**

 

Selected financial ratios at the end of the first quartersof fiscal years 2008 and 2007 were as follows:

 

| ** **                 | ** ** | **September  22,** | ** ** | **September  16,** | ** ** |
|----------------------------|------------|--------------------|------------|--------------------|------------|
| ** **                 | ** ** | **2007**           | ** ** | **2006**           | ** ** |
| Liquidity Ratios           |       |               |       |               |       |
| Current ratio              | ** ** | **1.7**            |       | 1.7                |       |
| Receivables  turnover      | ** ** | **2.4**            |       | 2.7                |       |
| Days sales in  receivables | ** ** | **41.3**           |       | 34.9               |       |
| Inventory  turnover        | ** ** | **1.1**            |       | 1.2                |       |
| Days sales in  inventory   | ** ** | **89.1**           |       | 81.9               |       |
| Leverage Ratio             |       |               |       |               |       |
| Long-term debt  to equity  | ** ** | **25.4**           | **%**      | 30.2               | %          |
| Operating Ratios           |       |               | ** ** |               |       |
| Return on  investment      | ** ** | **0**              | **%**      | 3.8                | %          |
| Return on assets           | ** ** | **0**              | **%**      | 1.7                | %          |

 

Cash, cash equivalents, and short-term marketable securitieswere $390,000 at the end of the first quarter fiscal year 2008 compared to$546,000 at the end of fiscal year 2007.

 

12

----

 

During the first quarter of fiscal year 2008, cash used byoperating activities was $1,119,000, compared to $984,000 in the first quarterof fiscal year 2007. The decrease in cash by operating activities was primarilydue to changes in working capital items: increases in accounts receivable of$2,634,000 were only slightly offset by increases in accounts payable andaccrued expenses of $530,000.

 

Cash used in investing activities was $918,000 in the firstquarter of fiscal year 2008, compared to $1,524,000 in the first quarter offiscal year 2007. The decrease was due primarily to final expansion activitiesat the USA facility. Projected capital expenditures for fiscal year 2008 areestimated to be between $5,000,000 and $7,000,000.

 

Cash provided by financing activities was $1,878,000 in thefirst quarter of fiscal year 2008, compared to $2,489,000 in the first quarterof fiscal year 2007. The Company’s new line of credit now sweeps automaticallyand debt proceeds are not individual transactions as in the past.

 

**CONTRACTUALOBLIGATIONS AND COMMERCIAL COMMITMENTS**

 

Our significantcontractual obligations as of September 22, 2007 were for debt, assetretirement obligation, and capital and operating leases. Debt by year ofmaturity and future rental payments under operating lease agreements as of June30, 2007, are presented below and there were no material changes during thefirst quarter of fiscal year 2008. We have not engaged in off-balance sheetfinancing, commodity contract trading or significant related partytransactions.

 

| ** **                       | ** ** | ** ** | ** ** | **Payments Due by Period** | ** ** |
|----------------------------------|------------|------------|------------|-------------------------------------------|------------|
| ** **                       | ** ** | ** ** | ** ** | **Less than**                        | ** ** | ** ** | ** ** | ** ** | ** ** | **More than** | ** ** |
| **Contractual Obligations** | ** ** | **Total**  | ** ** | **1 year**                           | ** ** | **1 - 3 years** | ** ** | **4**** - 5 years** | ** ** | **5 years** | ** ** |
| Debt payable –  current     |       | $          | 2,578,000  |                                      | $          | 2,578,000 |   | $ | — |   | $ | — |   | $ | — |   |
| Debt payable –  long term   |       | 5,499,000  |       | —                                    |       | 1,717,000 |   | 1,582,000 |   | 2,200,000 |   |
| Capital leases                   |       | 34,000     |       | 10,000                                    |       | 13,000 |   | 11,000 |   | — |   |
| Operating leases                 |       | 5,020,000  |       | 795,000                                   |       | 1,209,000 |   | 1,143,000 |   | 1,873,000 |   |
| Interest                         |       | 1,003,000  |       | 181,000                                   |       | 287,000 |   | 194,000 |   | 341,000 |   |
| Total                            |       | $          | 14,134,000 |                                      | $          | 3,564,000 |   | $ | 3,226,000 |   | $ | 2,930,000 |   | $ | 4,414,000 |   |

 

Assuming that there areno significant changes to our business plan, management also anticipatesgenerating positive cash flow from operations during fiscal year 2008. Managementbelieves that the combination of cash on hand, cash flows from operations andavailable credit facilities will provide sufficient liquidity to meet ourongoing cash requirements for the foreseeable future.

 

**Item 3. Quantitativeand Qualitative Disclosures About Market Risk**

 

*Derivative Financial Instruments.*  We do not hold or issuederivative financial instruments for trading purposes.

 

*Interest Rate Exposure.*  Based on our overall interestrate exposure during the first quarter of fiscal year 2008 and assuming similarinterest rate volatility in the future, a near-term (12 months) change ininterest rates would not materially affect our consolidated financial position,results of operation or cash flows.

 

*Foreign Currency Exchange Exposure.*  Our revenue, expense and capitalpurchasing activities are primarily transacted in U.S. dollars.  Wehave one foreign operation that exposes us to translation risk when the localcurrency financial statements are translated to U.S. dollars.  Sincechanges in translation risk are reported as adjustments to stockholders’equity, a 10% change in the foreign exchange rate would not have a materialeffect on our financial position, results of operation or cashflows.  For the first quarter of fiscal year 2008, a 10% change inthe foreign exchange rate would have increased or decreased our consolidatednet income by approximately $8,000.

 

**Item 4. Controls and Procedures**

 

Ourmanagement evaluated, with theparticipation of our principal executive officer and our principal financialofficer, the effectiveness of the disclosure controls and procedures as of the end of the period covered by thisquarterly report. Based on that evaluation, the principal executiveofficer and principal financial officer concluded that the Company’s disclosure

 

13

----

 

controls and procedures, as defined in Rule 13a-15(e) under theSecurities Exchange Act of 1934, are effective to ensure that information requiredto be disclosed in the reports that the Company files or submits under theSecurities Exchange Act of 1934 is recorded, processed, summarized andreported, within the time periods specified in the rules and forms of theSecurities and Exchange Commission.

 

There have been no changes in the Company’s internal control overfinancial reporting that occurred during the quarter ended September 22, 2007that have materially affected, or are reasonably likely to materially affect,the Company’s internal control over financial reporting.

 

Our management, includingour Chief Executive Officer and Chief Financial Officer, do not expect that ourdisclosure controls and procedures will prevent all errors and fraud.  Indesigning and evaluating the disclosure controls and procedures, managementrecognized that any controls and procedures, no matter how well designed andoperated, can provide only reasonable, not absolute, assurance of achieving thedesired control objectives.  Further, the design of a control system mustreflect the fact that there are resource constraints, and managementnecessarily was required to apply its judgment in evaluating the cost-benefitrelationship of possible controls and procedures.  Because of the inherentlimitations in all control systems, no evaluation of controls can provideabsolute assurance that all control issues and instances of fraud, if any,within the Company have been detected.  These inherent limitations includethe realities that judgments in decision-making can be faulty, and thatbreakdowns can occur because of simple error or mistake.  Additionally,controls can be circumvented by the individual acts of some persons, bycollusion of two or more people, or by management’s override of thecontrol.  The design of any system of controls also is based in part uponcertain assumptions about the likelihood of future events, and there can be noassurance that any design will succeed in achieving its stated goals under allpotential future conditions.  Over time, controls may become inadequatebecause of changes in conditions, or the degree of compliance with the policiesor procedures may deteriorate.  Because of the inherent limitations in acost-effective control system, misstatements due to error or fraud may occur andnot be detected.

 

14

----

 

**CUISINESOLUTIONS, INC.**

 

**PART II: OTHERINFORMATION**

 

**Item 1. LegalProceedings.**

 

None.

 

**Item 1A. RiskFactors.**

 

Therehave been no material changes from our risk factors as previously reported inour Annual Report to the SEC on Form 10-K for the year ended June 30, 2007 asfiled with the SEC on September 21, 2007.

 

**Item 2.Unregistered Sales of Equity Securities and Use of Proceeds**

 

Not applicable.

 

**Item 3.Defaults Upon Senior Securities**

 

Not applicable.

 

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

 

Not applicable.

 

**Item 5.Other Information**

 

Not applicable.

 

**Item 6.Exhibits**

 

**EXHIBIT INDEX**

 
| **Exhibit** | ** ** | ** **                                                                                                                         |
|-------------|------------|------------------------------------------------------------------------------------------------------------------------------------|
| **Number**  | ** ** | **Description**                                                                                                                    |
| 3.1         |       | Restated Certificate of  Incorporation, as amended. (1)                                                                            |
|        |       |                                                                                                                               |
| 3.2         |       | Certificate of  Amendment of Restated Certificate of Incorporation. (2)                                                            |
|        |       |                                                                                                                               |
| 3.3         |       | By-laws. (3)                                                                                                                       |
|        |       |                                                                                                                               |
| 31.1        |       | Certification of Chief  Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                               |
|        |       |                                                                                                                               |
| 31.2        |       | Certification of Chief  Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                               |
|        |       |                                                                                                                               |
| 32.1        |       | Certifications of Chief  Executive Officer and Chief Financial Officer pursuant to Section 906 of the  Sarbanes-Oxley Act of 2002. |

 

----

| (1)    | Incorporated by  reference to exhibit 3-A of the Registrant’s Form 10-K/A for the year  ended June 27, 1992, filed with the Commission on April 2, 1993. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                         |
| (2)    | Incorporated by  reference to exhibit 3.2 of the Registrant’s Registration Statement on  Form 8-A , filed with the Commission on February 22, 2005.                |
|   |                                                                                                                                                                         |
| (3)    | Incorporated by  reference to exhibit 3-B of the Registrant’s Form 10-K/A for the year  ended June 27, 1992, filed with the Commission on April 2, 1993. |

 

 

15

----

 

**SIGNATURES**

 

Pursuant to therequirements of the Securities Exchange Act of 1934, the Registrant has dulycaused this report to be signed on its behalf by the undersigned hereunto dulyauthorized.

 
|   | CUISINE SOLUTIONS, INC. |
|--------|-------------------------|
|   |                    |
| Date:  | November 2, 2007        |   | By: | /s/Stanislas Vilgrain |   |
|   |                    |   Stanislas  Vilgrain |
|   |                    |   Chief Executive  Officer |
|   |                    |   |
|   | By:                     | /s/Ronald Zilkowski |   |
|   |                    |   Ronald  Zilkowski |
|   |                    |   Chief  Financial Officer, Treasurer and |
|   |                    |   Corporate  Secretary |
|        |                         |  |  |  |  |  |

 

16

 

----