UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549



Form 10-Q



(Mark One)

þ

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



For the quarterly period ended: December 15, 2007



OR



 ̈

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



For the transition period from  to_____



| |                                                    | 
| | -------------------------------------------------- | 
| | CUISINE SOLUTIONS, INC.                            | 
| | (Exact name of registrant as specified in charter) | 



|                                               |  |                          |  |                                  
|---------------------------------------------- |  | ------------------------ |  | ---------------------------------
|DELAWARE                                       |  | 1-32439                  |  | 52-0948383                       
|(State or other jurisdiction
of incorporation) |  | (Commission File Number) |  | (IRS Employer
Identification No.)



| |                                                     | 
| | --------------------------------------------------- | 
| | 85 S. Bragg Street, Suite 600, Alexandria, VA 22312 | 
| | (Address of principal executive offices)            | 



| |                                                      | 
| | ---------------------------------------------------- | 
| | (703) 270-2900                                       | 
| | (Registrants Telephone Number, including Area Code) | 



Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934, during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.YesþNo ̈



Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check one):



|                          |                     |                        
|------------------------- | ------------------- | -----------------------
|Large accelerated filer  ̈ | Accelerated filer  ̈ | Non-accelerated filer þ



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



Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date.



Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.  The number of shares of the issuers Common Stock, $0.01 par value, outstanding as of January 23, 2008 was 16,693,091.



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TABLE OF CONTENTS



|                                                                                                 |          |  |        
|------------------------------------------------------------------------------------------------ | -------- |  | -------
|PART I                                                                                           |          |  |        
|Item 1.    Financial Statements (unaudited)                                                      | page   3
|Item 2.    Managements Discussion and Analysis of Financial Condition and Results of Operations | page 10 
|Item 3.    Quantitative and Qualitative Disclosures about Market Risk                            | page 16 
|Item 4.    Controls and Procedures                                                               | page 16 
|                                                                                                 |          |  |        
|PART II                                                                                          |          |  |        
|Item 1.    Legal Proceedings                                                                     | page 17 
|Item 1A. Risk Factors                                                                            | page 17 
|Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds                           | page 18 
|Item 3.    Defaults Upon Senior Securities                                                       | page 18 
|Item 4.    Submission of Matters to a Vote of Security Holders                                   | page 18 
|Item 5.    Other Information                                                                     | page 18 
|Item 6.    Exhibits                                                                              | page 18 
|                                                                                                 |          |  |        
|SIGNATURES                                                                                       |          |  | page 19
|EXHIBIT INDEX                                                                                    |          |  | page 20



---

PART I:   FINANCIAL INFORMATION



ITEM 1.

FINANCIAL STATEMENTS(unaudited)



CUISINE SOLUTIONS, INC.

CONSOLIDATED CONDENSED BALANCE SHEETS

(Unaudited)



|                                                                                              |  |              |             |          |   |            
|--------------------------------------------------------------------------------------------- |  | ------------ | ----------- | -------- | - | -----------
|                                                                                              |  | December 15, |             | June 30,
|                                                                                              |  | 2007         |             | 2007    
|ASSETS                                                                                        |  |              |             |          |   |            
|Current assets                                                                                |  |              |             |          |   |            
|Cash and cash equivalents                                                                     |  | $            | 593,000     |          | $ | 546,000    
|Trade accounts receivable, net                                                                |  |              | 9,444,000   |          |   | 5,864,000  
|Inventory, net                                                                                |  |              | 13,248,000  |          |   | 15,081,000 
|Prepaid expenses                                                                              |  |              | 641,000     |          |   | 521,000    
|Accounts receivable, related parties                                                          |  |              | 45,000      |          |   | 57,000     
|Deferred tax assets                                                                           |  |              | 1,806,000   |          |   |           
|Other current assets                                                                          |  |              | 601,000     |          |   | 638,000    
|TOTAL CURRENT ASSETS                                                                          |  |              | 26,378,000  |          |   | 22,707,000 
|Fixed assets, net                                                                             |  |              | 13,612,000  |          |   | 12,520,000 
|Deferred tax assets, net                                                                      |  |              | 5,152,000   |          |   | 7,069,000  
|Investments, non-current                                                                      |  |              | 375,000     |          |   | 375,000    
|Restricted cash                                                                               |  |              | 97,000      |          |   | 66,000     
|Other assets                                                                                  |  |              | 71,000      |          |   | 83,000     
|TOTAL ASSETS                                                                                  |  | $            | 45,685,000  |          | $ | 42,820,000 
|LIABILITIES AND STOCKHOLDERS' EQUITY                                                          |  |              |             |          |   |            
|Current liabilities                                                                           |  |              |             |          |   |            
|Accounts payable and accrued expenses                                                         |  | $            | 9,587,000   |          | $ | 6,999,000  
|Line-of-credit                                                                                |  |              | 2,058,000   |          |   | 1,811,000  
|Accrued payroll and related liabilities                                                       |  |              | 1,748,000   |          |   | 2,486,000  
|Current portion of long-term debt                                                             |  |              | 926,000     |          |   | 777,000    
|TOTAL CURRENT LIABILITIES                                                                     |  |              | 14,319,000  |          |   | 12,073,000 
|Long-term debt, less current portion                                                          |  |              | 5,425,000   |          |   | 5,523,000  
|Asset retirement obligation                                                                   |  |              | 499,000     |          |   | 499,000    
|Deferred rent                                                                                 |  |              | 132,000     |          |   | 100,000    
|TOTAL LIABILITIES                                                                             |  |              | 20,375,000  |          |   | 18,195,000 
|Commitments and contingencies                                                                 |  |              |             |          |   |            
|Stockholders' equity                                                                          |  |              |             |          |   |            
|Preferred Stock - $.01 par value, 2,000,000 shares authorized, none issued                    |  |              | __          |          |   | __         
|Common Stock - $.01 par value, 38,000,000 shares authorized, 16,693,091 and 16,623,191 shares |  |              |             |          |   |            
|issued and outstanding at December 15, 2007 and June 30, 2007                                 |  |              | 167,000     |          |   | 166,000    
|Additional paid-in capital                                                                    |  |              | 27,992,000  |          |   | 27,934,000 
|Accumulated deficit                                                                           |  |              | (4,351,000) |          |   | (4,583,000)
|Accumulated other comprehensive income                                                        |  |              |             |          |   |            
|Cumulative translation adjustment                                                             |  |              | 1,502,000   |          |   | 1,108,000  
|TOTAL STOCKHOLDERS' EQUITY                                                                    |  |              | 25,310,000  |          |   | 24,625,000 
|TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                                    |  | $            | 45,685,000  |          | $ | 42,820,000 



See accompanying notes to consolidated condensed financial statements.



3



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CUISINE SOLUTIONS, INC.

CONSOLIDATED CONDENSED STATEMENTS OF INCOME

(Unaudited)



|                                                     |                    |            |                         |   |                   |  |                  |            |  |   |           
|---------------------------------------------------- | ------------------ | ---------- | ----------------------- | - | ----------------- |  | ---------------- | ---------- |  | - | ----------
|                                                     | Twelve Weeks Ended |            | Twenty-four Weeks Ended
|                                                     | December 15,
2007  |            | December 9,
2006        |   | December 15,
2007 |  | December 9,
2006
|                                                     |                    |            |                        
|Net sales                                            | $                  | 23,738,000 |                         | $ | 23,248,000        |  | $                | 41,218,000 |  | $ | 37,454,000
|Cost of goods sold                                   |                    | 18,934,000 |                         |   | 17,466,000        |  |                  | 32,867,000 |  |   | 28,502,000
|Gross margin                                         |                    | 4,804,000  |                         |   | 5,782,000         |  |                  | 8,351,000  |  |   | 8,952,000 
|Research and development                             |                    | 263,000    |                         |   | 184,000           |  |                  | 499,000    |  |   | 357,000   
|Selling and marketing                                |                    | 2,314,000  |                         |   | 2,405,000         |  |                  | 3,849,000  |  |   | 3,689,000 
|General and administrative                           |                    | 1,775,000  |                         |   | 1,501,000         |  |                  | 3,475,000  |  |   | 2,620,000 
|Income before non-operating expense and income taxes |                    | 452,000    |                         |   | 1,692,000         |  |                  | 528,000    |  |   | 2,286,000 
|Non-operating income (expense)                       |                    |            |                         |   |                   |  |                  |            |  |   |           
|Interest expense                                     |                    | (101,000)  |                         |   | (68,000)          |  |                  | (182,000)  |  |   | (139,000) 
|Other income, net                                    |                    | 27,000     |                         |   | 8,000             |  |                  | 43,000     |  |   | 16,000    
|Total non-operating expense                          |                    | (74,000)   |                         |   | (60,000)          |  |                  | (139,000)  |  |   | (123,000) 
|Income before income tax                             |                    | 378,000    |                         |   | 1,632,000         |  |                  | 389,000    |  |   | 2,163,000 
|Provision for income tax expense                     |                    | (153,000)  |                         |   | (4,000)           |  |                  | (157,000)  |  |   | (10,000)  
|NET INCOME                                           | $                  | 225,000    |                         | $ | 1,628,000         |  | $                | 232,000    |  | $ | 2,153,000 
|Per common share data                                |                    |            |                         |   |                   |  |                  |            |  |   |           
|Basic earnings:                                      |                    |            |                         |   |                   |  |                  |            |  |   |           
|Net income                                           | $                  | 0.01       |                         | $ | 0.10              |  | $                | 0.01       |  | $ | 0.13      
|Diluted earnings:                                    |                    |            |                         |   |                   |  |                  |            |  |   |           
|Net income                                           | $                  | 0.01       |                         | $ | 0.09              |  | $                | 0.01       |  | $ | 0.12      
|Weighted average shares outstanding-basic            |                    | 16,693,091 |                         |   | 16,439,191        |  |                  | 16,678,523 |  |   | 16,439,191
|Common stock equivalents                             |                    | 1,719,076  |                         |   | 1,664,453         |  |                  | 1,747,497  |  |   | 1,647,271 
|Weighted average shares outstanding-diluted          |                    | 18,412,167 |                         |   | 18,103,644        |  |                  | 18,426,020 |  |   | 18,086,462



See accompanying notes to consolidated condensed financial statements.





4



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CUISINE SOLUTIONS, INC.

CONSOLIDATED CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

(Unaudited)



|                                  |              |         |                            |   |                                         |  |                                   |              |                            |   |           |  |   |           
|--------------------------------- | ------------ | ------- | -------------------------- | - | --------------------------------------- |  | --------------------------------- | ------------ | -------------------------- | - | --------- |  | - | ----------
|                                  | Common Stock |         | Additional
Paid-In
Capital |   | Retained
Earnings
(Accumulated
Deficit) |  | Cumulative
Translation
Adjustment |              | Total
Stockholders
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          |              |        |                            |   | 141,000                                 |  |                                   |             |                            |   |          |  |   | 141,000   
|Twenty-four weeks 2007 net income |              |        |                            |   |                                        |  |                                   | 2,153,000    |                            |   |          |  |   | 2,153,000 
|Other Comprehensive Income        |              |         |                            |   |                                         |  |                                   |              |                            |   |           |  |   |           
|Translation adjustment            |              |        |                            |   |                                        |  |                                   |             |                            |   | 265,000   |  |   | 265,000   
|Total Comprehensive income        |              |         |                            |   |                                         |  |                                   |              |                            |   |           |  |   | 2,418,000 
|Balance, December 9, 2006         | $            | 165,000 |                            | $ | 27,657,000                              |  | $                                 | (12,974,000) |                            | $ | 966,000   |  | $ | 15,814,000
|                                  |              |         |                            |   |                                         |  |                                   |              |                            |   |           |  |   |           
|                                  |              |         |                            |   |                                         |  |                                   |              |                            |   |           |  |   |           
|                                  |              |         |                            |   |                                         |  |                                   |              |                            |   |           |  |   |           
|                                  | Common Stock |         | Additional
Paid-In
Capital |   | Retained
Earnings
(Accumulated
Deficit) |  | Cumulative
Translation
Adjustment |              | Total
Stockholders'
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          |              |        |                            |   | 45,000                                  |  |                                   |             |                            |   |          |  |   | 45,000    
|Twenty-four weeks 2008 net income |              |        |                            |   |                                        |  |                                   | 232,000      |                            |   |          |  |   | 232,000   
|Other Comprehensive Income        |              |         |                            |   |                                         |  |                                   |              |                            |   |           |  |   |           
|Translation adjustment            |              |        |                            |   |                                        |  |                                   |             |                            |   | 394,000   |  |   | 394,000   
|Total Comprehensive income        |              |         |                            |   |                                         |  |                                   |              |                            |   |           |  |   | 626,000   
|Balance, December 15, 2007        | $            | 167,000 |                            | $ | 27,992,000                              |  | $                                 | (4,351,000)  |                            | $ | 1,502,000 |  | $ | 25,310,000



See accompanying notes to consolidated condensed financial statements.



5



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CUISINE SOLUTIONS, INC.

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)



|                                                                                 |                                      |             |                  |   |            
|-------------------------------------------------------------------------------- | ------------------------------------ | ----------- | ---------------- | - | -----------
|                                                                                 | Year to date
Twenty-four weeks ended
|                                                                                 | December 15,
2007                    |             | December 9,
2006
|CASH FLOWS FROM OPERATING ACTIVITIES                                             |                                      |             |                  |   |            
|Net income                                                                       | $                                    | 232,000     |                  | $ | 2,153,000  
|Adjustments to reconcile net income to net cash provided by operating activities |                                      |             |                  |   |            
|Depreciation and amortization                                                    |                                      | 889,000     |                  |   | 608,000    
|Allowance for doubtful accounts                                                  |                                      | 18,000      |                  |   | (92,000)   
|Inventory obsolescence reserve                                                   |                                      | 13,000      |                  |   | 142,000    
|Change in deferred tax assets                                                    |                                      | 113,000     |                  |   |           
|Stock-based compensation                                                         |                                      | 45,000      |                  |   | 141,000    
|Changes in assets and liabilities, net of effects of non-cash transactions:      |                                      |             |                 
|Increase in accounts receivable                                                  |                                      | (3,338,000) |                  |   | (2,026,000)
|Decrease (increase) in inventory                                                 |                                      | 2,194,000   |                  |   | (684,000)  
|Increase in prepaid expenses                                                     |                                      | (110,000)   |                  |   | (308,000)  
|Decrease (increase) in accounts receivable, related parties                      |                                      | 12,000      |                  |   | (12,000)   
|Decrease in other assets                                                         |                                      | 88,000      |                  |   | 230,000    
|Increase in accounts payable and accrued expenses                                |                                      | 2,263,000   |                  |   | 3,589,000  
|Decrease in accrued payroll and related liabilities                              |                                      | (831,000)   |                  |   | (574,000)  
|Changes in assets and liabilities of discontinued operations                     |                                      |            |                  |   | (3,000)    
|Net cash provided by operating activities                                        |                                      | 1,588,000   |                  |   | 3,164,000  
|CASH FLOWS FROM INVESTING ACTIVITIES                                             |                                      |             |                  |   |            
|Increase in restricted cash                                                      |                                      | (32,000)    |                  |   | (30,000)   
|Capital expenditures                                                             |                                      | (1,530,000) |                  |   | (2,236,000)
|Net cash used in investing activities                                            |                                      | (1,562,000) |                  |   | (2,266,000)
|CASH FLOWS FROM FINANCING ACTIVITIES                                             |                                      |             |                  |   |            
|Payments on debt                                                                 |                                      | (406,000)   |                  |   | (159,000)  
|Proceeds from debt                                                               |                                      | 141,000     |                  |   | 992,000    
|Net borrowing (repayment) on line-of-credit                                      |                                      | 214,000     |                  |   | (840,000)  
|Proceeds from stock issuance                                                     |                                      | 14,000      |                  |   |           
|Net cash used in financing activities                                            |                                      | (37,000)    |                  |   | (7,000)    
|Net (decrease) increase in cash and cash equivalents                             |                                      | (11,000)    |                  |   | 891,000    
|Change in cumulative translation adjustment                                      |                                      | 58,000      |                  |   | 22,000     
|Cash and cash equivalents, beginning of period                                   |                                      | 546,000     |                  |   | 2,154,000  
|CASH and CASH EQUIVALENTS, END OF PERIOD                                         | $                                    | 593,000     |                  | $ | 3,067,000  



See accompanying notes to consolidated condensed financial statements.





6



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CUISINE SOLUTIONS, INC.



NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



December 15, 2007



NOTE 1 - DESCRIPTION OF OPERATIONS



The Company produces and markets premium, fully cooked, frozen and prepared foods to a variety of channels and geographic regions.  The Company has manufacturing facilities in the U.S.A. and France and its products are sold primarily to the U.S.A. and European Union business customers in the Foodservice, On Board Services, Retail, Military and National Restaurant Chains channels.



NOTE 2 - CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



The accompanying unaudited condensed consolidated financial statements included herein have been prepared by the Company in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the SEC) for reporting on Form 10-Q. Accordingly, certain information and footnote disclosures required for complete consolidated financial statements are not included herein. It is recommended that these unaudited condensed consolidated financial statements be read in conjunction with the audited consolidated financial statements and related notes as reported in the Companys 2007 Annual Report on Form 10-K as filed with the SEC on September 21, 2007.



In managements opinion, all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation of the unaudited condensed financial position, results of operations, and cash flow at the dates and for the periods presented have been included. The condensed consolidated balance sheet presented at June 30, 2007 has been derived from the financial statements that have been audited by the Companys independent registered public accounting firm. The results of operations for the twenty-four week period ended December 15, 2007 may not be indicative of the results that may be expected for the fiscal year ended June 28, 2008, or any other period within the fiscal year 2008.



NOTE 3 - RECENT ACCOUNTING PRONOUNCEMENTS



In June 2006, the Financial Accounting Standard Board (FASB) issued FASB Interpretation (FIN) No. 48 Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109. FIN 48 is effective for fiscal years beginning after December 15, 2006. Differences between the amounts recognized in the statements of financial position prior to the adoption of FIN 48 and the amounts recognized after the adoption should be accounted for as a cumulative-effect adjustment recorded to the beginning balance of retained earnings. Effective July 1, 2007, the Company adopted the provisions of FIN 48 and the effect of the adoption was not material.



NOTE 4 - TRADE ACCOUNTS RECEIVABLE, NET



Trade accounts receivable consisted of:



|                                |                   |           |               |   |          
|------------------------------- | ----------------- | --------- | ------------- | - | ---------
|                                | December 15, 2007 |           | June 30, 2007
|Trade accounts receivable       | $                 | 9,848,000 |               | $ | 6,237,000
|Allowance for doubtful accounts |                   | (404,000) |               |   | (373,000)
|Trade accounts receivable, net  | $                 | 9,444,000 |               | $ | 5,864,000



The Company provides allowances for estimated credit losses, product returns, and adjustments at a level deemed appropriate to adequately provide for known and inherent risks related to such accounts. The allowances are based on reviews of individual accounts by customer, their financial conditions, and other factors that deserve recognition in estimating potential losses. While management uses the best information available in making its determination, the ultimate recovery of recorded accounts and other receivables is also dependent on future economic and other conditions that may be beyond managements control.



7



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NOTE 5 - INVENTORY, NET



Inventory consisted of the following:



|                                      |                   |            |               |   |           
|------------------------------------- | ----------------- | ---------- | ------------- | - | ----------
|                                      | December 15, 2007 |            | June 30, 2007
|Raw material                          | $                 | 4,339,000  |               | $ | 4,626,000 
|Frozen product & other finished goods |                   | 8,048,000  |               |   | 9,722,000 
|Packaging                             |                   | 1,133,000  |               |   | 989,000   
|                                      |                   | 13,520,000 |               |   | 15,337,000
|Less obsolescence reserve             |                   | (272,000)  |               |   | (256,000) 
|                                      | $                 | 13,248,000 |               | $ | 15,081,000



NOTE 6-DEBT



Debt, at December 15, and June 30, 2007 was as follows:



|               |  |           |  |                                                             |  |                |           |                                         |           |                                     |   |          
|-------------- |  | --------- |  | ----------------------------------------------------------- |  | -------------- | --------- | --------------------------------------- | --------- | ----------------------------------- | - | ---------
|Description    |  | Maturity  |  | December 15,
2007
Principal
Outstanding
In Foreign
Currency |  | Interest
Rates |           | December 15,
2007
Principal
Outstanding |           | June 30,
2007
Principal
Outstanding
|Term Loan      |  | 22-Oct-12 |  | 107000€                                                     |  | 5.70%          |           | $                                       | 156,000   |                                     | $ | 155,000  
|Term Loan      |  | 3-Jun-08  |  | 30000€                                                      |  | 3.30%          |           |                                         | 44,000    |                                     |   | 81,000   
|Term Loan      |  | 15-Jun-08 |  | 9000€                                                       |  | 4.00%          |           |                                         | 13,000    |                                     |   | 20,000   
|Term Loan      |  | 20-Jun-10 |  | 34000€                                                      |  | 3.80%          |           |                                         | 50,000    |                                     |   | 54,000   
|Term Loan      |  | 28-Nov-12 |  | 209000€                                                     |  | 2.80%          |           |                                         | 304,000   |                                     |   | 304,000  
|Term Loan      |  | 12-Jun-19 |  | 1872000€                                                    |  | 3.60%          |           |                                         | 2,725,000 |                                     |   | 2,560,000
|Term Loan      |  | 23-Oct-13 |  | 537000€                                                     |  | 3.80%          |           |                                         | 782,000   |                                     |   | 766,000  
|Term Loan      |  | Mar-15    |  | 100000€                                                     |  | 4.30%          |           |                                         | 146,000   |                                     |   | —        
|Line of Credit |  | Jun-08    |  | 665000€                                                     |  | 5.2% - 5.5%    |           |                                         | 968,000   |                                     |   | —        
|Term Loan      |  | 5-Jun-12  |  |                                                             |  | 7.00%          |           |                                         | 1,574,000 |                                     |   | 1,718,000
|Term Loan      |  | 5-Oct-10  |  |                                                             |  | 7.30%          |           |                                         | 426,000   |                                     |   | 490,000  
|Term Loan      |  | 15-Mar-10 |  |                                                             |  | 6.80%          |           |                                         | 102,000   |                                     |   | 118,000  
|Line of Credit |  | 15-Jun-09 |  |                                                             |  | LIBOR+2.25%    |           |                                         | 1,090,000 |                                     |   | 1,811,000
|Capital Lease  |  | 18-Sep-08 |  |                                                             |  | 19.40%         |           |                                         | 4,000     |                                     |   | 6,000    
|Capital Lease  |  | 31-Dec-11 |  |                                                             |  | 8.40%          |           |                                         | 25,000    |                                     |   | 28,000   
|               |  |           |  |                                                             |  | Total          |           | $                                       | 8,409,000 |                                     | $ | 8,111,000
|               |  |           |  | Less: current portion                                       |  |                | 2,984,000 |                                         |           | 2,588,000                          
|               |  |           |  | Non-current portion                                         |  | $              | 5,425,000 |                                         | $         | 5,523,000                          



From time to time, the Company enters into separate term loans to purchase new equipment and for improvement projects.  As of December 15, 2007, the total principal balance of all these term loans was $6,322,000; of which $4,220,000 was denominated in Euros in the amount of 2,898,000€. These loans bear interest rates ranging from 2.8% to 7.3%, with maturity dates ranging from June 3, 2008 to June 12, 2019.  The loans are typically secured by the equipment.



As of December 15, 2007, the total loan balance under capital leases was $29,000; bearing interest rates ranging from 8.4% to 19.4% with maturity dates ranging from September 18, 2008 to December 31, 2011.





8



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NOTE 7 - INCOME TAXES



The Companys effective tax rate of 40.2% for the twenty-four weeks ended December 15, 2007 increased 39.7% from 0.5% for the twenty-four weeks ended December 9, 2006. The increase in the effective rate resulted from the reversal of our tax valuation reserve in the third quarter of fiscal year 2007; however, the Company still retains its net operating loss carryforward of $13,970,000 at June 30, 2007 for U.S. Federal and state income tax purposes and does not expect to pay any taxes in fiscal year 2008.



NOTE 8 - STOCKHOLDERS EQUITY



Effective June 26, 2005, the Company adopted the fair value recognition provisions of SFAS No. 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, but not yet vested as of June 25, 2005, based on the grant date fair value estimated in accordance with the original provision of SFAS 123, and (b) compensation cost for all share-based payments granted subsequent to June 25, 2005, based on the grant-date fair value estimated in accordance with the provisions of SFAS 123(R). As a result, a non-cash charge of $45,000 and $141,000 were charged to compensation expense during the twenty-four week period ended December 15, 2007 and December 9, 2006, respectively. The Company allocated share-based compensation expense under SFAS 123(R) in the unaudited condensed consolidated statements of income as follows:



|                                                   |                         |          |                  |   |         
|-------------------------------------------------- | ----------------------- | -------- | ---------------- | - | --------
|                                                   | Twenty-four weeks ended
|                                                   | December 15, 2007       |          | December 9, 2006
|Cost of goods sold                                 | $                       |         |                  | $ | 17,000  
|Selling and marketing                              |                         |         |                  |   | 41,000  
|General and administrative                         |                         | 45,000   |                  |   | 83,000  
|                                                   |                         | 45,000   |                  |   | 141,000 
|Income tax benefit                                 |                         | (17,000) |                  |   | (53,000)
|Total share-base compensation, net of tax benefits | $                       | 28,000   |                  | $ | 88,000  



During the twenty-four week periods ended December 15, 2007 and December 9, 2006, the Company granted zero and 12,401 stock options, respectively.  Options exercised during the first two quarters of fiscal year 2008 were 69,900, with an intrinsic value of $409,000 and no options were exercised during the first two quarters of fiscal year 2007.



As of December 15, 2007, the total unrecognized estimated compensation cost related to non-vested stock options granted prior to that date was $126,000, which is expected to be recognized over a weighted average period of 1.25 years.



NOTE 9 - EARNINGS PER SHARE



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



NOTE 10 - TRANSACTIONS WITH RELATED PARTIES



The Companys 10% equity investment in Cuisine Solutions Chile for $375,000 is accounted for under the cost method as the Company does not have the ability to exercise significant influence over the operating or financial policy of Cuisine Solutions Chile.  During the first two quarters of fiscal year 2008 and 2007, the Company purchased $2,016,000 and $2,186,000, respectively, of products from Cuisine Solutions Chile for resale in the U.S. and Europe. The balance owed by the Company to Cuisine Solutions Chile as of the second quarter of fiscal year 2008 and 2007 were $364,000 and $489,000, respectively, and recorded to accounts payable.





9



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The Companys line-of-credit with Branch Banking and Trust Company (BB&T), with a maximum borrowing amount of $6.0 million and a maturity date of June 15, 2010, is guaranteed by Food Investors Corporation (FIC), an affiliate of the Company, and secured by real estate owned by FIC. The Company has agreed to pay compensation for this guarantee from FIC of 1.5%, or $90,000, per year payable quarterly.



ITEM 2.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS



All statements contained herein, other than historical facts, may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the Securities Act) and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act). These statements may relate to, among other things, future events or our future performance or financial condition. In some cases, you can identify 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 or the negative of such terms or comparable terminology. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others: (1) a significant change of the Companys relationship with its customers in channels where concentration of sales to a certain number of customers exists; (2) the impact on the Companys profitability from the fluctuations in the availability and cost of raw materials; (3) the impact on the Companys reported earnings from fluctuations in currency exchange rates, particularly the Euro; and (4) those factors listed under the caption risk factors of this Report and the Annual Report on Form 10-K as filed with the SEC on September 21, 2007. We caution readers not to place undue reliance on any such forward-looking statements, which are made pursuant to the Private Securities Litigation Reform Act of 1995 and, as such, speak only as of the date made. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, after the date of this Form 10-Q.



The following analysis of our financial condition and results of operations should be read in conjunction with our financial statements and the notes thereto contained elsewhere in this report.



BUSINESS OVERVIEW



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



Cuisine Solutions currently distributes products through the following sales channels:



·

On Board Services: Airlines, railroad and cruise lines.

·

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

·

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

·

Military: Naval carriers, Army field feeding, and military dining halls and clubs.

·

National Restaurant Chains: Casual dining multi-unit restaurants.



We utilize the sous vide technology and methods, which means that the products are vacuum sealed and then slowly cooked in water at very low temperatures. The sous vide technology involves knowing the precise time and temperature that food changes molecular structure during cooking. This enables us to cook the food for optimum taste, color, and texture while also pasteurizing.  Since the products are immediately flash-frozen, there is no need for preservatives in the product and most of our products have a guaranteed 18 month shelf life.





10



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CRITICAL ACCOUNTING ESTIMATES AND POLICIES



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 report in our financial statements. In our 2007 Annual Report on Form 10-K, we have discussed those material policies that we believe are critical and require the use of complex judgment in their application.  There have been no material changes to the policies during the fiscal quarter ended December 15, 2007.



RESULTS OF OPERATIONS



Comparison of the twelve weeks ended December 15, 2007 to the twelve weeks ended December 9, 2006



NET SALES



|                     |                   |            |                  |   |            |  |       
|-------------------- | ----------------- | ---------- | ---------------- | - | ---------- |  | ------
|By Geographic Region | December 15, 2007 |            | December 9, 2006 |   | % change  
|U.S. Sales           | $                 | 15,692,000 |                  | $ | 16,510,000 |  | -5.0% 
|Europe Sales         |                   | 7,766,000  |                  |   | 6,701,000  |  | 15.9% 
|Rest of World Sales  |                   | 280,000    |                  |   | 37,000     |  | 656.8%
|Net Sales            | $                 | 23,738,000 |                  | $ | 23,248,000 |  | 2.1%  



|                  |                   |            |                  |   |            |  |       
|----------------- | ----------------- | ---------- | ---------------- | - | ---------- |  | ------
|                  | December 15, 2007 |            | December 9, 2006 |   | % change  
|Existing products | $                 | 19,732,000 |                  | $ | 18,668,000 |  | 5.7%  
|New products      |                   | 4,006,000  |                  |   | 4,580,000  |  | -12.5%
|Net Sales         | $                 | 23,738,000 |                  | $ | 23,248,000 |  | 2.1%  



|                          |                   |            |                  |   |            |  |        
|------------------------- | ----------------- | ---------- | ---------------- | - | ---------- |  | -------
|By Channel                | December 15, 2007 |            | December 9, 2006 |   | % change  
|On Board Services         | $                 | 6,358,000  |                  | $ | 4,634,000  |  | 37.2%  
|Food Service              |                   | 3,999,000  |                  |   | 3,681,000  |  | 8.6%   
|Retail                    |                   | 8,069,000  |                  |   | 9,434,000  |  | (14.5%)
|Military                  |                   | 3,087,000  |                  |   | 4,666,000  |  | (33.8%)
|National Restaurant Chain |                   | 2,225,000  |                  |   | 833,000    |  | 167.1% 
|Net Sales                 | $                 | 23,738,000 |                  | $ | 23,248,000 |  | 2.1%   



Net Sales of $23,738,000 for the second quarter of fiscal year 2008 increased $490,000, or 2.1%, over the second quarter of fiscal year 2007 sales of $23,248,000.  We do not have any defined segments since all of our products are produced similarly despite the sales channel or area of distribution.  Our new product sales were $4,006,000 in the second quarter of fiscal year 2008, a $574,000, or 12.5%, decrease from the second quarter of fiscal year 2007 new product sales of $4,580,000.  These new product sales are defined as sales during the first year of introduction.  For the second quarter of fiscal year 2008 we had gains in three of our five sales channels with National Restaurant Chains sales increasing 167.1% to $2,225,000 over the second quarter of fiscal 2007, reflecting continued product acceptance in larger chain restaurants.  On Board Services sales increased 37.2% to $6,358,000 for the second quarter of fiscal year 2008 from sales to additional new airlines and continued expansion in existing carriers. Food Service sales increased 8.6%, to $3,999,000, over the second quarter of fiscal year 2007 from increased hotel banqueting.  Military sales decreased by 33.8%, to $3,087,000, due primarily to the restructuring of the CONOPS menu in Iraq, which resulted in a decrease in the frequency in which our approved items were served.  A further reason for the decrease has been political pressure to cut costs associated with the war, which has resulted in a decreased basic daily food allowance (BDFA), and resulting decreased sales by the prime contractors to whom we sell our products.  At this time we are unable to determine if sales in the military channel will return to normal growth in the near future, if at all, or if sales will continue to decline.  Retail sales decreased 14.5% to $8,069,000, primarily due to reduced promotions for our products in Costco.  While we consider new products and channel information helpful to the reader we cannot forecast any particular trends for our sales as a result of such information.  Our sales development cycle can run over one year in certain markets before recognizing a sale.



11



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GROSS MARGIN

The gross margin decreased during the second quarter of fiscal year 2008 to 20.2%, compared to 24.9% in the prior year. This margin reduction was primarily attributable to higher raw materials costs, fuel surcharges, continued increases in facility expansion and increased costs associated with new product introductions. We have started to introduce price increases through all the sales channels but due to the cyclical nature of some products the price increase program will not be fully implemented until the end of the third quarter of fiscal year 2008. In addition, our France plant incurred some operational expense increases as compared to the prior year period. We are working closely with local management to find improvements.



RESEARCH AND DEVELOPMENT EXPENSES

Research and development expenses increased in the second quarter of fiscal year 2008 to $263,000 from the second quarter of fiscal year 2007 of $184,000, a 42.9% increase.  Most of the research and development costs are incurred well before an actual sale and the cycle can last over one year in certain markets.  The expense increase is primarily related to increased salaries for additional staff.



SELLING AND MARKETING EXPENSES

Our selling and marketing teams are focused on customers primarily in the U.S. and Europe.  Expenses for the second quarter of fiscal year 2008 decreased $91,000 to $2,314,000, or 3.8%, from the second quarter of fiscal year 2007 expenses of $2,405,000 (selling and marketing expenses represented 9.7% and 10.3% of revenue for the second quarters of fiscal years 2008 and 2007, respectively).  This decrease was primarily related to decreased in store demonstration costs of $210,000, reclassification of certain costs to general and administrative expenses of $68,000 and decreased salaries of $52,000, partially offset by increased broker fees of $124,000 and promotional expenses related to the rugby world cup of $156,000.



GENERAL AND ADMINISTRATIVE EXPENSES

General and administrative expenses for the second quarter of fiscal year 2008 increased $274,000 to $1,775,000, or 18.3%, over the second quarter of the prior fiscal year 2007 expenses of $1,501,000 (general and administrative expenses represented 7.5% and 6.5% of revenue for the second quarters of fiscal 2008 and 2007, respectively).  This increase was primarily due to additional staff and salary increases of $62,000, insurance increases of $54,000 and reclassification of certain costs from selling and marketing expenses of $68,000.



NON-OPERATING INCOME AND EXPENSE

Non-operating expenses increased to $74,000 in the second quarter of fiscal year 2008 from $60,000 in the second quarter of fiscal year 2007, due primarily to the increase in interest expense of $33,000 relating to the increased outstanding borrowings in the U.S. and France.



INCOME BEFORE INCOME TAXES

Income before income taxes in the second quarter of fiscal year 2008 of $378,000 decreased substantially from the second quarter fiscal year 2007 of $1,632,000, or 76.8%.  This decrease was primarily related to lower gross margin percentages, principally from higher raw material costs resulting in approximately a $1,116,000 decrease in margins as well as higher general and administrative and research and development expenses.



INCOME TAXES

We recorded a provision for income taxes of $153,000 and $4,000 for the second quarter of fiscal years 2008 and 2007, respectively. Our effective income tax rate for the second quarter of fiscal year 2008 was computed to be 40.5% as compared to .25% for the second quarter of fiscal year 2007, which was based on minimum tax payments and a full valuation allowance on our net deferred tax assets.



NET INCOME

Net income decreased $1,403,000 to $225,000 for the second quarter of fiscal year 2008 from $1,628,000 in the second quarter of fiscal year 2007.  The primary reason for the decrease was lower gross margin and higher general and administrative, research and development expenses, and provision for income taxes.





12



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Comparison of the twenty-four weeks ended December 15, 2007 to the twenty-four weeks ended December 9, 2006



NET SALES



|                     |                   |            |                  |   |            |  |       
|-------------------- | ----------------- | ---------- | ---------------- | - | ---------- |  | ------
|By Geographic Region | December 15, 2007 |            | December 9, 2006 |   | % change  
|U.S. Sales           | $                 | 27,291,000 |                  | $ | 26,306,000 |  | 3.7%  
|Europe Sales         |                   | 13,599,000 |                  |   | 11,094,000 |  | 22.6% 
|Rest of World Sales  |                   | 328,000    |                  |   | 54,000     |  | 507.4%
|Net Sales            | $                 | 41,218,000 |                  | $ | 37,454,000 |  | 10.0% 



|                  |                   |            |                  |   |            |  |      
|----------------- | ----------------- | ---------- | ---------------- | - | ---------- |  | -----
|                  | December 15, 2007 |            | December 9, 2006 |   | % change  
|Existing products | $                 | 33,605,000 |                  | $ | 30,750,000 |  | 9.3% 
|New products      |                   | 7,613,000  |                  |   | 6,704,000  |  | 13.6%
|Net Sales         | $                 | 41,218,000 |                  | $ | 37,454,000 |  | 10.0%



|                          |                   |            |                  |   |            |  |        
|------------------------- | ----------------- | ---------- | ---------------- | - | ---------- |  | -------
|By Channel                | December 15, 2007 |            | December 9, 2006 |   | % change  
|On Board Services         | $                 | 11,969,000 |                  | $ | 8,762,000  |  | 36.6%  
|Food Service              |                   | 6,627,000  |                  |   | 6,094,000  |  | 8.7%   
|Retail                    |                   | 11,912,000 |                  |   | 12,489,000 |  | (4.6%) 
|Military                  |                   | 7,019,000  |                  |   | 8,499,000  |  | (17.4%)
|National Restaurant Chain |                   | 3,691,000  |                  |   | 1,610,000  |  | 129.3% 
|Net Sales                 | $                 | 41,218,000 |                  | $ | 37,454,000 |  | 10.0%  



Net Sales of $41,218,000 for the first two quarters of fiscal year 2008 increased $3,764,000, or 10.0%, over the first two quarters of fiscal year 2007 sales of $37,454,000.  We do not have any defined segments since all of our products are produced similarly despite the sales channel or area of distribution.  Our new product sales increased to $7,613,000 in the first two quarters of fiscal year 2008 from the first two quarters of fiscal year 2007 new product sales of $6,704,000, a 13.6% increase.  These new product sales are defined as sales during the first year of introduction.  For the first two quarters of fiscal year 2008 we had gains in three channels.  National Restaurant Chains sales increased 129.3% to $3,691,000 over the first two quarters of fiscal 2007, reflecting continued product acceptance in larger chain restaurants.  On Board Services sales increased 36.6% to $11,969,000 for the first two quarters of fiscal year 2008 from sales to additional new airlines and continued expansion in existing carriers.  Food Service sales increased 8.7% to $6,627,000 over the first two quarters of fiscal year 2007 from increased hotel banqueting purchases. Military sales decreased 17.4% to $7,019,000, due primarily to the restructuring of the CONOPS menu in Iraq, which resulted in a decrease in the frequency in which our approved items were served.  A further reason for the decrease has been political pressure to cut costs associated with the war, which has resulted in a decreased BDFA and resulting decreased sales by the prime contractors to whom we sell our products.  At this time we are unable to determine if sales in the military channel will return to normal growth in the near future, if at all, or if sales will continue to decline.  Retail sales decreased 4.6% to $11,912,000, primarily due to reduced promotions for our products in Costco.  While we consider new products and channel information helpful to the reader we cannot forecast any particular trends for our sales as a result of such information.  Our sales development cycle can run over one year in certain markets before recognizing a sale.



GROSS MARGIN

The gross margin decreased during the first two quarters of fiscal year 2008 to 20.3%, compared to 23.9% in the prior year. This margin reduction was primarily attributable to higher raw materials costs, fuel surcharges, continued increases in facility expansion and increased costs associated with new product introductions. We have started to introduce price increases through all the sales channels but due to the cyclical nature of some products the price increase program will not be fully implemented until the end of the third quarter of fiscal year 2008. In addition, our France plant incurred some operational expense increases as compared to the prior year period. We are working closely with local management to find improvements.



13



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RESEARCH AND DEVELOPMENT EXPENSES

Research and development expenses increased in the first two quarters of fiscal year 2008 to $499,000 from the first two quarters of fiscal year 2007 expenses of $357,000, a 39.8% increase.  Most of the research and development costs are incurred well before an actual sale and the cycle can last over one year in certain markets.  The expense increase is primarily related to increased salaries for additional staff.



SELLING AND MARKETING EXPENSES

Our selling and marketing teams are focused on customers primarily in the U.S. and Europe.  Expenses for the first two quarters of fiscal year 2008 increased $160,000 to $3,849,000, or 4.3%, over the first two quarters of fiscal year 2007 expenses of $3,689,000 (selling and marketing expenses represented 9.3% and 9.8% of revenue for the first two quarters of fiscal years 2008 and 2007, respectively).  This increase was primarily related to increased promotional expenses related to the rugby world cup of $201,000, salaries of $88,000, consulting expenses of $69,000, reclassification of certain costs to general and administrative expenses of $68,000 and travel expenses of $52,000, partially offset by a reduction in costs associated with in-store demonstrations of $126,000.



GENERAL AND ADMINISTRATIVE EXPENSES

General and administrative expenses for the first two quarters of fiscal year 2008 increased $855,000 to $3,475,000, or 24.6%, over the first two quarters of prior fiscal year 2007 expenses of $2,620,000 (general and administrative expenses represented 8.4% and 7.0% of revenue for the first two quarters of fiscal 2008 and 2007, respectively).  This increase was primarily due to salaries and benefits from additional staff and salary expenses of $286,000, public company expenses of $83,000, reclassification of certain costs to selling and marketing expenses of $68,000, financing charges of $65,000, supplies expenses of $65,000, travel and entertainment expenses of $62,000, rent expenses of $52,000 and broker fees $48,000.



NON-OPERATING INCOME AND EXPENSE

Non-operating expense increased to $139,000 in the first two quarters of fiscal year 2008 from $123,000 in the first two quarters of fiscal year 2007, due primarily to the increase in interest expense of $43,000 relating to the increased outstanding borrowings in the U.S. and France.



INCOME BEFORE INCOME TAXES

Income before income taxes in the first two quarters of fiscal year 2008 of $389,000 decreased substantially from the first two quarters of fiscal year 2007 of $2,163,000, or 82.0%.  This decrease was primarily related to lower gross margin percentages, principally from higher raw material costs resulting in approximately a $1,525,000 decrease in margins as well as higher general and administrative, selling and marketing and research and development expenses.



INCOME TAXES

We recorded a provision for income taxes of $157,000 and $10,000 for the first two quarters of fiscal years 2008 and 2007, respectively. Our effective income tax rate for the first two quarters of fiscal year 2008 was computed to be 40.4% as compared to 0.5% for the first two quarters of fiscal year 2007, which was based on minimum tax payments and a full valuation allowance on our deferred tax assets.



In June 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109 (FIN 48).  This Statement addresses uncertainty in tax positions recognized in a companys financial statements and stipulates a recognition threshold and measurement of a tax position taken or expected to be taken in a tax return.  The Company adopted FIN 48 on July 1, 2007 and the effect of applying the provisions of this interpretation was not material.



NET INCOME

Net income decreased $1,921,000 to $232,000 for the first two quarters fiscal year 2008 from $2,153,000 in the first two quarters of fiscal year 2007.  The primary reason for the decrease was lower gross margin and increases in research and development, sales and marketing, general and administrative expenses and income taxes.





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LIQUIDITY AND CAPITAL RESOURCES



Selected financial ratios for the twenty-four weeks ended December 15, 2007 and December 9, 2006 were as follows:



|                          |  |              |  |            
|------------------------- |  | ------------ |  | -----------
|                          |  | December 15, |  | December 9,
|                          |  | 2007         |  | 2006       
|Liquidity Ratios          |  |              |  |            
|Current ratio             |  | 1.73         |  | 1.48       
|Receivables turnover      |  | 9.6          |  | 11.1       
|Days sales in receivables |  | 38.5         |  | 34.6       
|Inventory turnover        |  | 5.6          |  | 6.6        
|Days sales in inventory   |  | 67.7         |  | 60.1       
|Leverage Ratio            |  |              |  |            
|Long-term debt to equity  |  | 25.1%        |  | 30.9%      
|Operating Ratios          |  |              |  |            
|Return on investment      |  | 2.1%         |  | 14.5%      
|Return on assets          |  | 1.2%         |  | 7.0%       



Cash, cash equivalents, and short-term marketable securities were $593,000 at the end of the second quarter of fiscal year 2008 compared to $546,000 at the end of fiscal year 2007.



During the first two quarters of fiscal year 2008, cash generated by operating activities was $1,588,000, compared to $3,164,000 in the first two quarters of fiscal year 2007. The increase in cash generated by operating activities was primarily due to changes in working capital: decreases in inventory of $2,194,000 and increases in accounts payable and accrued expenses of $2,263,000 were partially offset by increases in accounts receivable of $3,338,000.



Cash used in investing activities was $1,562,000 in the first two quarters of fiscal year 2008, compared to $2,266,000 in the first two quarters of fiscal year 2007. The decrease was due primarily to the completion of expansion activities at the U.S. facility. Projected capital expenditures for fiscal year 2008 are estimated to be between $3,000,000 and $5,000,000.



Cash used in financing activities was $37,000 in the first two quarters of fiscal year 2008, compared to $7,000 in the first two quarters of fiscal year 2007.  Our line of credit now sweeps automatically and debt proceeds are not individual transactions as in the past.



CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS



Our significant contractual obligations as of December 15, 2007 were for debt, asset retirement obligations, and capital and operating leases. Debt by year of maturity and future rental payments under operating lease agreements as of December 15, 2007 are presented below and there were no material changes during the first two quarters of fiscal year 2008.  We have not engaged in off-balance sheet financing, commodity contract trading or significant related party transactions.



|                         |       |            |                  |                        |             |  |             |           |                   |   |           |  |   |          
|------------------------ | ----- | ---------- | ---------------- | ---------------------- | ----------- |  | ----------- | --------- | ----------------- | - | --------- |  | - | ---------
|                         |       |            |                  | Payments Due by Period
|Contractual Obligations  | Total |            | Less than
1 year |                        | 1 - 3 years |  | 4 - 5 years |           | More than
5 years
|Debt payable  current   | $     | 2,975,000  |                  | $                      | 2,975,000   |  | $           |          |                   | $ |          |  | $ |         
|Debt payable  long term |       | 5,405,000  |                  |                        |            |  |             | 1,993,000 |                   |   | 1,421,000 |  |   | 1,991,000
|Capital leases           |       | 29,000     |                  |                        | 9,000       |  |             | 12,000    |                   |   | 8,000     |  |   |         
|Operating leases         |       | 4,538,000  |                  |                        | 809,000     |  |             | 1,301,000 |                   |   | 1,166,000 |  |   | 1,262,000
|Interest                 |       | 887,000    |                  |                        | 228,000     |  |             | 326,000   |                   |   | 157,000   |  |   | 176,000  
|Total                    | $     | 13,834,000 |                  | $                      | 4,021,000   |  | $           | 3,632,000 |                   | $ | 2,752,000 |  | $ | 3,429,000



15



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| |  |  |  |  |  |  |  |  |  |  |  |  |  | 
| |  |  |  |  |  |  |  |  |  |  |  |  |  | 



Assuming that there are no significant changes to our business plan, management also anticipates generating positive cash flow from operations during fiscal year 2008.  Management believes that the combination of cash on hand, cash flows from operations and available credit facilities will provide sufficient liquidity to meet our ongoing cash requirements for the foreseeable future.



ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK



Derivative Financial Instruments.  We do not hold or issue derivative financial instruments for trading purposes.



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



Foreign Currency Exchange Exposure.  Our revenue, expense and capital purchasing activities are primarily transacted in U.S. dollars.  We have one foreign operation that exposes us to translation risk when the local currency financial statements are translated to U.S. dollars.  Since changes in translation risk are reported as adjustments to stockholders' equity, a 10% change in the foreign exchange rate would not have a material effect on our financial position, results of operation or cash flows.  For the first two quarters of fiscal year 2008, a 10% change in the foreign exchange rate would have increased or decreased our consolidated net income by approximately $9,000.



ITEM 4.

CONTROLS AND PROCEDURES



Our management evaluated, with the participation of our principal executive officer and our principal financial officer, the effectiveness of the disclosure controls and procedures as of the end of the period covered by this quarterly report.  Based on that evaluation, the principal executive officer and principal financial officer concluded that the Companys disclosure controls and procedures, as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, are effective to ensure that information required to be disclosed in the reports that the Company files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the rules and forms of the Securities and Exchange Commission.



There have been no changes in the Company's internal control over financial reporting that occurred during the quarter ended December 15, 2007 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.



Our management, including our Chief Executive Officer and Chief Financial Officer, do not expect that our disclosure controls and procedures will prevent all errors and fraud.  In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving the desired control objectives.  Further, the design of a control system must reflect the fact that there are resource constraints, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.  Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.  These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake.  Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by managements override of the control.  The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.  Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.  Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.



16



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CUISINE SOLUTIONS, INC.



PART II: OTHER INFORMATION



ITEM 1.

LEGAL PROCEEDINGS.



Neither we, nor our subsidiary are currently subject to any material legal proceeding, nor, to our knowledge, is any material legal proceeding threatened against us or our subsidiary.



ITEM 1A.

RISK FACTORS.



Our business is subject to certain risks and events that, if they occur, could adversely affect our financial condition and results of operations and the trading price of our stock. For a discussion of these risks, please refer to the Risk Factors section of our Annual Report on Form 10-K for the fiscal year ended June 30, 2007 filed by us with the Securities and Exchange Commission (the SEC) on September 21, 2007. In connection with our preparation of this quarterly report, management has reviewed and considered these risk factors and has determined that the following risk factors should be read in connection with the existing risk factors disclosed in our Annual Report on Form 10-K for the fiscal year ended June 30, 2007.



We do not enter into long term contracts with our customers, and the loss of one or more significant customers could have a material adverse impact on our business, results of operations and financial condition.

A large portion of our revenue has traditionally come from the supply of our products to travel-related customers. In fiscal year 2002 and 2003, our sales declined tremendously as the travel-related industries experienced a major set back in the wake of the September 11, 2001 terrorist attacks. Since fiscal 2004, we have made a concerted effort to diversify our sales into other sales channels. Growth in those areas continues to reduce our dependency on the travel industry. However, the success in implementing this diversification strategy might not limit or eliminate the risk of concentration of sales to certain number of customers. In fiscal 2007 and 2006, one Military distributor and one Retail customer became our two largest customers. Generally, we do not enter into long term supply contracts with our customers and, as a result, these customers may generally discontinue purchasing our products at any time. For example, we cannot guarantee that the Army will continue to purchase items from us.

Moreover, because we sell to the government indirectly through a number of prime contractors, if governmental investigations or audits uncover improper or illegal activities by a prime contractor to whom we sell our products, or if the Military sales to a prime contractor are discontinued or decreased, then our revenue and results of operations may be negatively impacted.   We are aware that one prime contractor through which we sell our products is the subject of a governmental investigation.  To date, we have not been adversely impacted as a result of the investigation; however, this or other similar investigations or audits may have a material adverse effect on our revenues and results of operations in the future.



Force majeure events, such as terrorist attacks, other acts of violence or war, political instability and health epidemics may adversely affect us.



Terrorist attacks, war, and political instability, along with health epidemics, may disrupt our ability to generate revenues.  These events may negatively affect our ability to maintain sales revenue and to develop new business relationships.  For example, one reason for the decrease in our Military sales during the second quarter of fiscal 2008 has been U.S. political pressure to cut costs associated with the war in the Middle East, which resulted in a decreased basic daily food allowance (BDFA) and, consequently, decreased sales by the prime contractors to whom we sell our products.



Moreover, because a significant and growing part of our revenues is derived from sales to customers outside of the United States, terrorist attacks, war and international political instability anywhere may decrease international demand for our products and inhibit customer development opportunities abroad, disrupt our supply chain, or impair our ability to deliver our products, which could materially adversely affect our net revenues or results of operations.



17



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Any of these events may also disrupt global financial markets and precipitate a decline in the price of our common stock.



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



On October 25, 2007, the Company held its 2007 Annual Meeting of Stockholders. At the meeting, the Companys stockholders voted on, and approved, the following matters:



1.

The election of the following directors to serve until the Companys 2008 Annual Meeting of Stockholders:



|                      |  |                  |  |                   
|--------------------- |  | ---------------- |  | ------------------
|Nominee               |  | Shares voted for |  | Authority withheld
|Jean-Louis Vilgrain   |  | 11,697,229       |  | 835,435           
|Stanislas Vilgrain    |  | 11,697,029       |  | 835,635           
|Charles C. McGettigan |  | 12,178,662       |  | 354,002           
|Sebastien Vilgrain    |  | 11,697,779       |  | 834,885           
|Robert van Roijen     |  | 12,178,412       |  | 354,252           
|Hugues Prince         |  | 11,697,729       |  | 834,935           
|John D. Firestone     |  | 12,178,962       |  | 353,702           
|Robert N. Herman      |  | 12,178,762       |  | 353,902           



2.

Proposal to approve the Companys 2007 Equity Incentive Plan:



|                 |  |                      |  |                 
|---------------- |  | -------------------- |  | ----------------
|Shares voted for |  | Shares voted against |  | Shares abstained
|11,559,527       |  | 968,238              |  | 4,899           



3a.

Proposal to approve the proposed amendment to the Companys restated certificate of incorporation to increase the authorized number of shares of capital stock from 20,000,000 to 40,000,000 shares:



|                 |  |                      |  |                 
|---------------- |  | -------------------- |  | ----------------
|Shares voted for |  | Shares voted against |  | Shares abstained
|11,414,739       |  | 1,111,126            |  | 6,799           



3b.

Proposal to approve the proposed amendment to the Companys restated certificate of incorporation to authorize the issuance of two classes of stock to be designated, respectively, common stock and preferred stock, of which 38,000,000 shall be designated common stock and 2,000,000 shall be designated blank-check preferred stock:



|                 |  |                      |  |                 
|---------------- |  | -------------------- |  | ----------------
|Shares voted for |  | Shares voted against |  | Shares abstained
|11,346,529       |  | 1,123,177            |  | 62,958          



3c.

Proposal to approve the proposed amendment to the Companys restated certificate of incorporation to restate the Companys business purpose:



|                 |  |                      |  |                 
|---------------- |  | -------------------- |  | ----------------
|Shares voted for |  | Shares voted against |  | Shares abstained
|12,216,651       |  | 30,909               |  | 285,104         



ITEM 5.

OTHER INFORMATION



Not applicable.





18



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ITEM 6.

EXHIBITS



See the exhibit index.



19



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SIGNATURES



Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.



|                 |  |     |                                        | 
|---------------- |  | --- | -------------------------------------- | 
|                 |  |     | CUISINE SOLUTIONS, INC.               
|                 |  |     |                                       
|                 |  |     |                                        | 
|January 24, 2008 |  | By: | /s/ Ronald Zilkowski                   | 
|                 |  |     | Ronald Zilkowski                       | 
|                 |  |     | Chief Financial Officer, Treasurer and | 
|                 |  |     | Corporate Secretary                    | 



20



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EXHIBIT INDEX



|                 |  |                                                                                                                                                                                             
|---------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit
Number   |  | Description                                                                                                                                                                                 
|3.1              |  | Second Amended and Restated Certificate of Incorporation, incorporated by reference to Exhibit 3.1 of the Registrants Current Report on Form 8-K, filed on October 31, 2007.               
|                 |  |                                                                                                                                                                                             
|3.2              |  | By-laws, incorporated by reference to Exhibit 3-B of the Registrants Form 10-K/A for the year ended June 27, 1992, filed on April 2, 1993.                                                 
|                 |  |                                                                                                                                                                                             
|3.3              |  | First Amendment to By-laws incorporated by reference to Exhibit 3.1 of the Registrants Current Report on Form 8-K/A, filed on January 23, 2008.                                            
|                 |  |                                                                                                                                                                                             
|10.1             |  | Cuisine Solutions, Inc. 2007 Equity Incentive Plan, incorporated by reference to Exhibit 10.1 of the Registrants Current Report on Form 8-K, filed with the Commission on October 31, 2007.
|                 |  |                                                                                                                                                                                             
|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.                                                            
|________________





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