##### 



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, DC 20549
 FORM 10-K
  þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 FOR THE FISCAL YEAR ENDED: June 25, 2005
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 FOR THE TRANSITION PERIOD FROM TO
 COMMISSION FILE NUMBER: 1-32439
 CUISINE
SOLUTIONS, INC.
  Delaware
    
    52-0948383(STATE OR OTHER JURISDICTION OF
INCORPORATION OR ORGANIZATION)
    
    (IRS EMPLOYER
IDENTIFICATION NO.)
 85 South Bragg Street, Suite 600, Alexandria, VA 22312
 
 
 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
 NAME OF EACH EXCHANGETITLE OF EACH CLASS
    
    ON WHICH REGISTEREDCommon Stock, par value $0.01 per share
    
    American Stock Exchange
 SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
 None
  þ o
 o
 o þ
 o þ
   DOCUMENTS INCORPORATED BY REFERENCE
    1




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##### 



TABLE OF CONTENTS
 PART IItem 1.
    
    Business
    
    page  3Item 2.
    
    Properties
    
    page 10Item 3.
    
    Legal Proceedings
    
    page 10Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    page 10PART IIItem 5.
    
    Market for The Registrants Common Stock and Related Stockholder Matters
    
    page 11Item 6.
    
    Selected Financial Data
    
    page 12Item 7.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    page 12Item 7A.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    page 20Item 8.
    
    Financial Statements and Supplementary Data
    
    page 21Item 9.
    
    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    page 21Item 9A.
    
    Controls and Procedures
    
    page 21PART IIIItem 10.
    
    Directors and Executive Officers of the Registrant
    
    page 22Item 11.
    
    Executive Compensation
    
    page 22Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management
    
    page 22Item 13.
    
    Certain Relationships and Related Transactions
    
    page 22Item 14.
    
    Principal Accountant Fees and Services
    
    page 22PART IVItem 15.
    
    Exhibits and Financial Statement Schedules
    
    page 23SIGNATURESEX-21.1:
    
    List of Subsidiaries
    
    page 45EX-23.1:
    
    Consent of Independent Registered Public Accounting Firm
    
    page 46EX-23.2:
    
    Consent of Independent Registered Public Accounting Firm
    
    page 47EX-31.1:
    
    Certification
    
    page 48EX-31.2:
    
    Certification
    
    page 49EX-32.1:
    
    Certification
    
    page 50
 2




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##### 



PART I
 ITEM 1. BUSINESS
  GENERAL
           Cuisine Solutions, US:
  3




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##### 



Cuisine Solutions France:
   Cuisine Solutions Chile:
   
    
    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, Premium frozen packaged foods;
    
    Military: Naval carriers, Army field feeding, and military dining halls and clubs
    
    National Restaurant Chains: Upscale multi-unit restaurants.
 On Board Services
  Foodservice
  4




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##### 



Retail
   Military
  National Restaurant Chain
   5




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##### 



BACKGROUND
         PRODUCTS
  6




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##### 



DISTRIBUTION
   RAW MATERIAL STATUS
  PATENTS AND TRADEMARKS AND OTHER ITEMS IMPORTANT TO OPERATING SEGMENTS
   7




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##### 



CUSTOMER DEPENDENCY
   SEASONALITY
  COMPETITION
   RESEARCH & DEVELOPMENT
  REGULATIONS
   EMPLOYEES
  8




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##### 



GEOGRAPHIC SALES
  EXECUTIVE OFFICERS
  Name
    
    Age
    
    Office held with Company
    
    SinceStanislas Vilgrain
    
    
    46
    
    
    Chief Executive Officer
    
    
    1994Thomas L. Gregg
    
    
    41
    
    
    President
    
    
    2005Felipe Hasselmann
    
    
    36
    
    
    Chief Operating Officer
    
    
    2005Yuyun Tristan Kuo
    
    
    50
    
    
    Vice President of Finance and Corporate Treasurer
and Corporate Secretary
    
    
    2005Gerard Bertholon
    
    
    45
    
    
    Vice President of Sales; President of FIVELEAF
    
    
    2002
      9




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##### 



ITEM 2. PROPERTIES
  ITEM 3. LEGAL PROCEEDINGS
     ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  10




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##### 



PART II
 ITEM 5. MARKET FOR THE REGISTRANTS COMMON STOCK AND RELATED STOCKHOLDER MATTERS COMMON STOCK
  Year ended June 25, 2005
    
    High
    
    LowThird Quarter (beginning February 24, 2005)
    
    
    5.000
    
    
    
    4.250Fourth Quarter
    
    
    8.050
    
    
    
    4.600
  Year ended June 25, 2005
    
    High
    
    LowFirst Quarter
    
    $
    1.880
    
    
    $
    1.600Second Quarter
    
    
    3.400
    
    
    
    1.700Third Quarter (prior to February 24, 2005)
    
    
    4.450
    
    
    
    3.000
 Year ended June 26, 2004
    
    High
    
    LowFirst Quarter
    
    $
    .780
    
    
    $
    .510Second Quarter
    
    
    1.400
    
    
    
    .600Third Quarter
    
    
    1.350
    
    
    
    .950Fourth Quarter
    
    
    1.850
    
    
    
    1.050
 Year ended June 28, 2003
    
    High
    
    LowFirst Quarter
    
    $
    .760
    
    
    $
    .300Second Quarter
    
    
    .510
    
    
    
    .240Third Quarter
    
    
    .800
    
    
    
    .200Fourth Quarter
    
    
    .800
    
    
    
    .280
 563
  11




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##### 



ITEM 6. SELECTED FINANCIAL DATA
 FIVE YEAR SUMMARY
 2005
    
    2004
    
    2003
    
    2002
    
    2001Net Sales
    
    $
    46,246
    
    
    $
    35,335
    
    
    $
    26,626
    
    
    $
    27,361
    
    
    $
    35,384Earnings (Loss) from continuing operations (1)
    
    
    1,886
    
    
    
    (343
    )
    
    
    (3,359
    )
    
    
    (6,008
    )
    
    
    (925
    )Earnings (Loss) from discontinued operations
    
    
    (177
    )
    
    
    (661
    )
    
    
    (733
    )
    
    
    (19
    )
    
    
    64Net earnings (loss) (2)
    
    
    1,709
    
    
    
    (1,004
    )
    
    
    (4,092
    )
    
    
    (6,027
    )
    
    
    (861
    )Earnings (Loss) from continuing operations per share
    
    
    0.12
    
    
    
    (0.02
    )
    
    
    (0.21
    )
    
    
    (0.38
    )
    
    
    (0.06
    )Loss from discontinued operations per share
    
    
    (0.01
    )
    
    
    (0.04
    )
    
    
    (0.05
    )
    
    
    
    
    
    
    Net earnings (loss) per share
    
    
    0.11
    
    
    
    (0.06
    )
    
    
    (0.26
    )
    
    
    (0.38
    )
    
    
    (0.06
    )Total assets
    
    
    18,986
    
    
    
    17,710
    
    
    
    16,428
    
    
    
    18,197
    
    
    
    22,761Long term debt, including current portion
    
    
    3,277
    
    
    
    1,903
    
    
    
    798
    
    
    
    446
    
    
    
    569Stockholders Equity
    
    
    8,651
    
    
    
    6,572
    
    
    
    7,466
    
    
    
    11,156
    
    
    
    16,514
 
 (1)
    
    Includes amortization of $95 and subsequent impairment of pre-operating capitalized web site development cost of $619 in 2002(2)
    
    Includes loss in equity from investment in Brazil of $997 in 2002 and $661 in 2001 respectively. ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
   (a)
    
    a significant change of the Companys relationship with its customers in channels where
concentration of sales to certain number of customers exists;(b)
    
    the impacts on the Companys profitability from the fluctuations in the availability and cost
of raw materials;(c)
    
    the impacts on the Companys reported earnings from fluctuations in foreign currency exchange
rates, particularly the Euro and Norwegian Kroner.
  CRITICAL ACCOUNTING ESTIMATES
   12




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##### 



RECENT ACCOUNTING PRONOUCEMENTS
    13




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##### 



RESULTS OF OPERATIONS
 NET SALES
  Year Ended

    
    % Change2005
    
    2004vs
    
    vsJune 25, 2005
    
    June 26, 2004
    
    June 28, 2003
    
    2004
    
    2003US
    
    $
    29,843,000
    
    
    $
    21,641,000
    
    
    $
    15,698,000
    
    
    
    37.9
    %
    
    
    37.9
    %France
    
    $
    16,403,000
    
    
    $
    13,694,000
    
    
    $
    10,928,000
    
    
    
    19.8
    %
    
    
    25.3
    %Total Net Sales
    
    $
    46,246,000
    
    
    $
    35,335,000
    
    
    $
    26,626,000
    
    
    
    30.9
    %
    
    
    32.7
    %
    Year Ended
    
    %Change2005
    
    2004vs
    
    vsJune 25, 2005
    
    June 26, 2004
    
    June 28, 2003
    
    2004
    
    2003Foodservice
    
    $
    14,776,000
    
    
    $
    11,052,000
    
    
    $
    8,591,000
    
    
    
    33.7
    %
    
    
    28.6
    %On Board Services
    
    
    13,053,000
    
    
    
    11,614,000
    
    
    
    9,886,000
    
    
    
    12.4
    %
    
    
    17.5
    %Retail
    
    
    10,162,000
    
    
    
    9,991,000
    
    
    
    6,413,000
    
    
    
    1.7
    %
    
    
    55.8
    %Military
    
    
    6,222,000
    
    
    
    1,047,000
    
    
    
    904,000
    
    
    
    494.3
    %
    
    
    15.8
    %National Restaurant
Chains / New
Business
    
    
    2,033,000
    
    
    
    1,631,000
    
    
    
    832,000
    
    
    
    24.6
    %
    
    
    96.0
    %Total
    
    $
    46,246,000
    
    
    $
    35,335,000
    
    
    $
    26,626,000
    
    
    
    30.9
    %
    
    
    32.7
    %
  14




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##### 



Year Ended
    
    %Change2005
    
    2004vs
    
    vsJune 25, 2005
    
    June 26, 2004
    
    June 28, 2003
    
    2004
    
    2003Food Service
    
    $
    6,198,000
    
    
    $
    5,842,000
    
    
    $
    4,425,000
    
    
    
    6.1
    %
    
    
    32.0
    %On Board Services
    
    
    10,866,000
    
    
    
    9,558,000
    
    
    
    8,224,000
    
    
    
    13.7
    %
    
    
    16.2
    %Retail
    
    
    4,580,000
    
    
    
    3,595,000
    
    
    
    1,399,000
    
    
    
    27.4
    %
    
    
    157.0
    %Military
    
    
    6,222,000
    
    
    
    1,047,000
    
    
    
    904,000
    
    
    
    494.3
    %
    
    
    15.8
    %National Restaurant Chains
    
    
    1,977,000
    
    
    
    1,599,000
    
    
    
    746,000
    
    
    
    23.6
    %
    
    
    114.3
    %Total
    
    $
    29,843,000
    
    
    $
    21,641,000
    
    
    $
    15,698,000
    
    
    
    37.9
    %
    
    
    37.9
    %
   Year Ended
    
    %Change2005
    
    2004vs
    
    vsJune 25, 2005
    
    June 26, 2004
    
    June 28, 2003
    
    2004
    
    2003Food Service
    
    $
    8,578,000
    
    
    $
    5,210,000
    
    
    $
    4,166,000
    
    
    
    64.6
    %
    
    
    25.1
    %On Board Services
    
    
    2,187,000
    
    
    
    2,056,000
    
    
    
    1,662,000
    
    
    
    6.4
    %
    
    
    23.7
    %Retail
    
    
    5,582,000
    
    
    
    6,396,000
    
    
    
    5,014,000
    
    
    
    (12.7
    %)
    
    
    27.6
    %New Business
    
    
    56,000
    
    
    
    32,000
    
    
    
    86,000
    
    
    
    75.0
    %
    
    
    (62.8
    %)Total
    
    $
    16,403,000
    
    
    $
    13,694,000
    
    
    $
    10,928,000
    
    
    
    19.8
    %
    
    
    25.3
    %
  GROSS MARGIN
  Year EndedJune 25, 2005
    
    June 26, 2004
    
    June 28, 2003Net Sales
    
    $
    46,246,000
    
    
    $
    35,335,000
    
    
    $
    26,626,000Gross margin
    
    $
    12,283,000
    
    
    $
    8,530,000
    
    
    $
    5,410,000Gross margin percentage
    
    
    26.6
    %
    
    
    24.1
    %
    
    
    20.3
    %Earnings (Loss) from continuing operations
    
    $
    1,886,000
    
    
    $
    (343,000
    )
    
    $
    (3,359,000
    )Net earnings (loss)
    
    $
    1,709,000
    
    
    $
    (1,004,000
    )
    
    $
    (4,092,000
    )
  15




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##### 



SELLING AND ADMINISTRATION EXPENSES
  Year Ended
    
    %Change2005
    
    2004vs
    
    vsJune 25, 2005
    
    June 26, 2004
    
    June 28, 2003
    
    2004
    
    2003USA
    
    $
    6,670,000
    
    
    $
    5,793,000
    
    
    $
    6,437,000
    
    
    
    15.1
    %
    
    
    (10.0
    %)France
    
    
    3,467,000
    
    
    
    2,849,000
    
    
    
    2,277,000
    
    
    
    21.7
    %
    
    
    25.1
    %Total SG&A Expenses
    
    $
    10,137,000
    
    
    $
    8,642,000
    
    
    $
    8,714,000
    
    
    
    17.3
    %
    
    
    (0.8
    %)
  DEPRECIATION AND AMORTIZATION
  NON-OPERATING INCOME AND EXPENSE
 
 NET EARNINGS (LOSS) FROM CONTINUING OPERATIONS
  Year EndedJune 25, 2005
    
    June 26, 2004
    
    June 28, 2003Earnings (Loss) from continuing operations
    
    $
    1,886,000
    
    
    $
    (343,000
    )
    
    $
    (3,359,000
    )
  DISCONTINUED OPERATIONS
  16




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##### 



NET EARNINGS (LOSS)
  Year EndedJune 25, 2005
    
    June 26, 2004
    
    June 28, 2003Net earnings (loss)
    
    $
    1,709,000
    
    
    $
    (1,004,000
    )
    
    $
    (4,092,000
    )
   Year EndedJune 25, 2005
    
    
    June 26, 2004
    
    
    June 28, 2003USA
    
    $
    1,677,000
    
    
    $
    (702,000
    )
    
    $
    (3,498,000
    )France
    
    $
    372,000
    
    
    $
    359,000
    
    
    $
    139,000Norway (discontinued operations)
    
    $
    (340,000
    )
    
    $
    (661,000
    )
    
    $
    (733,000
    )Total Net Income (loss)
    
    $
    1,709,000
    
    
    $
    (1,004,000
    )
    
    $
    (4,092,000
    )
   IMPACT OF INFLATION AND THE ECONOMY
  LIQUIDITY AND CAPITAL RESOURCES
  17




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##### 




 
 
 
      18




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##### 



CONTRACTUAL OBLIGATIONS AND COMMERICAL COMMITMENTS
  Payments Due by PeriodContractual Obligations
    
    Total
    
    Less than 1 year
    
    1-3 years
    
    4-5 years
    
    After 5 yearsNotes payable  current
    
    $
    3,186,000
    
    
    $
    3,186,000
    
    
    
    
    
    
    
    
    
    
    
    Notes payable  long term
    
    
    1,063,000
    
    
    
    
    
    
    
    827,000
    
    
    
    170,000
    
    
    
    66,000Capital lease
    
    
    58,000
    
    
    
    40,000
    
    
    
    17,000
    
    
    
    1,000
    
    
    
    Operating lease
    
    
    1,347,000
    
    
    
    480,000
    
    
    
    867,000
    
    
    
    
    
    
    
    Interest
    
    
    69,000
    
    
    
    34,000
    
    
    
    19,000
    
    
    
    11,000
    
    
    
    9,000
  FUTURE PROSPECTS
      19




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##### 



1 2
  ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
   Interest Rate Exposure:
  Foreign Currency Rate Exposure:
  Sales and Marketing Risks:
  20




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##### 



ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
  ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
  ITEM 9A. CONTROLS AND PROCEDURES
    21




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##### 



PART III
 ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
  ITEM 11. EXECUTIVE COMPENSATION
  ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
  ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
  ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
  22




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##### 



PART IV
 ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 10-K
 Page(a) Index to Financial Statements(1) Financial StatementsReport of Independent Registered Public Accounting Firm
BDO Seidman LLP as of and for the year ended June 25,
2005
    
    26Report of Independent Registered Public Accounting Firm
Grant Thornton LLP as of June 26, 2004 and for the year
ended June 26, 2004 and June 28, 2003
    
    27Consolidated Balance Sheets  June 25, 2005 and June 26,
2004
    
    28Consolidated Statements of Operations  Fiscal Years
Ended June 25, 2005, June 26, 2004 and June 28, 2003
    
    29Consolidated Statements of Changes in Stockholders
Equity  Fiscal Years Ended June 25, 2005, June 26, 2004
and June 28, 2003
    
    30Consolidated Statements of Cash Flows  Fiscal Years
Ended June 25, 2005, June 26, 2004 and June 28, 2003
    
    31Notes to Consolidated Financial Statements
    
    32(2) Financial Statement Schedule:Schedule II  Valuation and Qualifying Accounts
    
    44All other schedules are omitted because they are not applicable or the required information is
shown in the financial statements or notes thereto.
    
    44(3) Exhibits:
 ExhibitNumber
    
    Description3.1
    
    Restated Certificate of Incorporation, as amended. (1)3.2
    
    Certificate of Amendment of Restated Certificate of Incorporation. (2)3.3
    
    By-laws. (3)10.46
    
    The Companys Proxy Statement for a Special Meeting of Stockholders, dated June 7, 1991, together
with a conformed copy of the Asset Purchase Agreement between Cuisine Solutions, Inc. and Vie de
France Bakery Yamazaki, Inc. dated May 7, 1991. (4)10.52
    
    The Companys 1986 Stock Option Plan, as amended. (5)10.53
    
    The Companys 1992 Stock Option Plan. (5)10.54
    
    The Companys 1999 Stock Option Plan. (5)10.55
    
    Employment Agreement of Y. Tristan Kuo dated December 15, 2003. (6)
 23




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##### 



ExhibitNumber
    
    Description10.56
    
    Employment Agreement of Thomas L. Gregg dated January 1, 2004. (6)10.57
    
    Amendment No.1 to Loan Agreement with FIC dated October 22, 2003; previously filed as Exhibit
(31.10.1) to the Companys Form 10-Q for the fiscal quarter ended December 15, 2003, and herein
incorporated by reference. (6)10.59
    
    Credit Agreement with Bank of Charles Town adopted June 25, 2004. (6)21.1
    
    List of Subsidiaries.23.1
    
    Consent of Grant Thornton LLP, Independent Registered Public Accounting Firm.23.2
    
    Consent of BDO Seidman LLP, Independent Registered Public Accounting Firm.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)
    
    Filed herewith.(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.(4)
    
    Incorporated by reference from an identically numbered exhibit to the Companys Annual
Report on Form 10-K for the year ended June 29, 1991.(5)
    
    Incorporated by reference from the Companys two Registration Statements
on Form S-8, dated April 5, 1993.(6)
    
    Incorporated by reference to exhibit 10.55 of the Registrants Form 10-K
for the year ended June 26, 2004, filed with the Commission on April 2, 1993.
     24




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##### 



SIGNATURES
  CUISINE SOLUTIONS, INC.(Registrant)By:
    
    /s/ Stanislas VilgrainStanislas VilgrainChief Executive Officer(Principal Executive Officer)
  Signature
    
    Title
    
    Date/s/ Jean-Louis Vilgrain
    
    Chairman of the Board
    
    September 22, 2005Jean-Louis Vilgrain/s/ Stanislas Vilgrain
    
    Chief Executive Officer
    
    September 22, 2005Stanislas Vilgrain/s/ Sebastien Vilgrain
    
    Director
    
    September 22, 2005Sebastien Vilgrain/s/ Charles McGettigan
    
    Director
    
    September 22, 2005Charles McGettigan/s/ Robert van Roijen
    
    Director
    
    September 22, 2005Robert van Roijen/s/ Hugues Prince
    
    Director
    
    September 22, 2005Hugues Prince/s/ John D. Firestone
    
    Director
    
    September 22, 2005John D. Firestone/s/ Robert Herman
    
    Director
    
    September 22, 2005Robert Herman/s/ Yuyun Tristan Kuo
    
    Vice President of Finance, Treasurer
    
    September 22, 2005Yuyun Tristan Kuo
    
    and Corporate Secretary (Principal Financial Accounting Official)
 25




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##### 



Report of Independent Registered Public Accounting Firm
 The Board of Directors and Stockholders
CUISINE SOLUTIONS, INC.:
     /s/ BDO Seidman, LLPBDO Seidman, LLP
 
 26




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##### 



Report of Independent Registered Public Accounting Firm
 The Board of Directors and Stockholders  CUISINE SOLUTIONS, INC.:
    /s/ Grant Thornton LLPGrant Thornton LLP
 
 27




---



##### 



CUISINE SOLUTIONS, INC.
 CONSOLIDATED BALANCE SHEETS
 June 25, 2005
    
    
    June 26, 2004ASSETSCurrent AssetsCash and cash equivalents
    
    $
    2,171,000
    
    
    $
    1,395,000Trade accounts receivable, net (Note 3)
    
    
    3,758,000
    
    
    
    3,754,000Inventory, net (Note 4)
    
    
    6,929,000
    
    
    
    5,420,000Prepaid expenses
    
    
    344,000
    
    
    
    140,000Accounts receivable, related party
    
    
    94,000
    
    
    
    58,000Other current assets
    
    
    255,000
    
    
    
    266,000Assets from discontinued operations
    
    
    39,000
    
    
    
    1,972,000TOTAL CURRENT ASSETS
    
    
    13,590,000
    
    
    
    13,005,000Investments, non-current
    
    
    1,465,000
    
    
    
    1,114,000Fixed assets, net
    
    
    3,885,000
    
    
    
    3,545,000Other assets
    
    
    46,000
    
    
    
    46,000TOTAL ASSETS
    
    $
    18,986,000
    
    
    $
    17,710,000LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilitiesLine-of-credit
    
    $
    1,774,000
    
    
    $
    Current portion of long-term debt
    
    
    422,000
    
    
    
    921,000Accounts payable and accrued expenses
    
    
    4,227,000
    
    
    
    4,260,000Accrued payroll and related liabilities
    
    
    1,631,000
    
    
    
    1,340,000Liabilities from discontinued operations
    
    
    1,200,000
    
    
    
    3,635,000Total current liabilities
    
    
    9,254,000
    
    
    
    10,156,000Long-term debt, less current portion
    
    
    1,081,000
    
    
    
    982,000TOTAL LIABILITIES
    
    
    10,335,000
    
    
    
    11,138,000Commitments and Contingencies
    
    
    
    
    
    
    Stockholders equityCommon stock  $.01 par value,
20,000,000 shares authorized,
16,073,288 and 15,834,788 shares
issued and outstanding
at June 25, 2005 and June 26, 2004,
respectively
    
    
    161,000
    
    
    
    159,000Class B Stock  $.01 par value, 175,000
shares authorized,
none issued
    
    
    
    
    
    
    Additional paid-in capital
    
    
    26,754,000
    
    
    
    26,380,000Accumulated deficit
    
    
    (18,781,000
    )
    
    
    (20,490,000
    )Accumulated Other Comprehensive IncomeUnrealized (loss) gain on debt and
equity investments
    
    
    (7,000
    )
    
    
    17,000Cumulative translation adjustment
    
    
    524,000
    
    
    
    506,000TOTAL STOCKHOLDERS EQUITY
    
    
    8,651,000
    
    
    
    6,572,000TOTAL LIABILITIES AND STOCKHOLDERS
EQUITY
    
    $
    18,986,000
    
    
    $
    17,710,000
  28




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##### 



CUISINE SOLUTIONS, INC.
 CONSOLIDATED STATEMENTS OF OPERATIONS
 Year EndedJune 25, 2005
    
    
    June 26, 2004
    
    
    June 28, 2003Net sales
    
    $
    46,246,000
    
    
    $
    35,335,000
    
    
    $
    26,626,000Cost of goods sold
    
    
    33,963,000
    
    
    
    26,805,000
    
    
    
    21,216,000Gross margin
    
    
    12,283,000
    
    
    
    8,530,000
    
    
    
    5,410,000Selling and administration
    
    
    10,137,000
    
    
    
    8,642,000
    
    
    
    8,714,000Depreciation and amortization
    
    
    175,000
    
    
    
    170,000
    
    
    
    257,000Other operating income
    
    
    (37,000
    )
    
    
    (32,000
    )
    
    
    (55,000
    )Earnings (Loss) from continuing operations
    
    
    2,008,000
    
    
    
    (250,000
    )
    
    
    (3,506,000
    )Non operating income (expense)Investment income
    
    
    64,000
    
    
    
    66,000
    
    
    
    143,000Interest expense
    
    
    (169,000
    )
    
    
    (76,000
    )
    
    
    (27,000
    )Other income (expense)
    
    
    2,000
    
    
    
    (65,000
    )
    
    
    47,000Total non-operating income (expense)
    
    
    (103,000
    )
    
    
    (75,000
    )
    
    
    163,000Earnings (Loss) before income taxes
    
    
    1,905,000
    
    
    
    (325,000
    )
    
    
    (3,343,000
    )Provision for income tax expense
    
    
    (19,000
    )
    
    
    (18,000
    )
    
    
    (16,000
    )Earnings (Loss) from continuing operations before
discontinued operations
    
    
    1,886,000
    
    
    
    (343,000
    )
    
    
    (3,359,000
    )Loss from discontinued operationsLoss from operations of Cuisine Solutions Norway
    
    
    (67,000
    )
    
    
    (661,000
    )
    
    
    (733,000
    )Loss from translation adjustment
    
    
    (110,000
    )
    
    
    
    
    
    
    Net loss from discontinued operations
    
    
    (177,000
    )
    
    
    (661,000
    )
    
    
    (733,000
    )NET EARNINGS (LOSS)
    
    $
    1,709,000
    
    
    $
    (1,004,000
    )
    
    $
    (4,092,000
    )Basic and diluted earnings (loss) per common share:Earnings (Loss) from continuing operations
before discontinued operations
(after income taxes) per common
share-basic
    
    $
    0.12
    
    
    $
    (0.02
    )
    
    $
    (0.21
    )Earnings (Loss) from continuing operations
before discontinued operations
(after income taxes) per common
share-diluted
    
    $
    0.11
    
    
    $
    (0.02
    )
    
    $
    (0.21
    )Loss from discontinued operations per common
share-basic and diluted
    
    $
    (0.01
    )
    
    $
    (0.04
    )
    
    $
    (0.05
    )Net earnings (loss) per common share-basic
    
    $
    0.11
    
    
    $
    (0.06
    )
    
    $
    (0.26
    )Net earnings (loss) per common share-diluted
    
    $
    0.10
    
    
    $
    (0.06
    )
    
    $
    (0.26
    )Weighted average shares outstanding-basic
    
    
    15,927,524
    
    
    
    15,827,755
    
    
    
    15,824,788Common stock equivalents
    
    
    1,610,746
    
    
    
    
    
    
    
    Weighted average shares outstanding-diluted
    
    
    17,538,270
    
    
    
    15,827,755
    
    
    
    15,824,788
  29




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##### 



CUISINE SOLUTIONS, INC.
 CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
 UnrealizedRetained
    
    
    GainsAdditional
    
    
    Earnings
    
    
    (Losses) on Debt
    
    
    Cumulative
    
    
    TotalCommon
    
    
    Paid-In
    
    
    (Accumulated
    
    
    and Equity
    
    
    Translation
    
    
    StockholdersStock
    
    
    Capital
    
    
    Deficit)
    
    
    Investments
    
    
    Adjustment
    
    
    EquityBalance, June 29,
2002
    
    $
    159,000
    
    
    $
    26,284,000
    
    
    $
    (15,394,000
    )
    
    $
    10,000
    
    
    $
    97,000
    
    
    $
    11,156,0002003 Net loss
    
    
    
    
    
    
    
    
    
    
    (4,092,000
    )
    
    
    
    
    
    
    
    
    
    
    (4,092,000
    )Other Comprehensive
IncomeUnrealized
gains on debt
and equity
investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    49,000
    
    
    
    
    
    
    
    49,000Translation
adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    353,000
    
    
    
    353,000Other Comprehensive
Income/(Loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    402,000Comprehensive Loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,690,000
    )Balance, June 28,
2003
    
    
    159,000
    
    
    
    26,284,000
    
    
    
    (19,486,000
    )
    
    
    59,000
    
    
    
    450,000
    
    
    
    7,466,000Exercise of common
stock options
    
    
    
    
    
    
    7,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,000Stock-based
compensation
    
    
    
    
    
    
    89,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    89,0002004 Net loss
    
    
    
    
    
    
    
    
    
    
    (1,004,000
    )
    
    
    
    
    
    
    
    
    
    
    (1,004,000
    )Other Comprehensive
IncomeUnrealized
losses on debt
and equity
investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (42,000
    )
    
    
    
    
    
    
    (42,000
    )Translation
adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    56,000
    
    
    
    56,000Other Comprehensive
Income/(Loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,000Comprehensive Loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (894,000
    )Balance, June 26,
2004
    
    
    159,000
    
    
    
    26,380,000
    
    
    
    (20,490,000
    )
    
    
    17,000
    
    
    
    506,000
    
    
    
    6,572,000Exercise of common
stock options
    
    
    2,000
    
    
    
    208,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    210,000Stock-based
compensation
    
    
    
    
    
    
    166,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    166,0002005 Net earnings
    
    
    
    
    
    
    
    
    
    
    1,709,000
    
    
    
    
    
    
    
    
    
    
    
    1,709,000Other Comprehensive
IncomeUnrealized
losses on debt
and equity
investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (24,000
    )
    
    
    
    
    
    
    (24,000
    )Translation
adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,000
    
    
    
    18,000Other Comprehensive
Income/(Loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,000
    )Comprehensive Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,703,000Balance, June 25,
2005
    
    $
    161,000
    
    
    $
    26,754,000
    
    
    $
    (18,781,000
    )
    
    $
    (7,000
    )
    
    $
    524,000
    
    
    $
    8,651,000
  30




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##### 



CUISINE SOLUTIONS, INC.
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 Year EndedJune 25, 2005
    
    
    June 26, 2004
    
    
    June 28, 2003CASH FLOWS FROM OPERATING ACTIVITIESNet earnings (loss)
    
    $
    1,709,000
    
    
    $
    (1,004,000
    )
    
    $
    (4,092,000
    )Adjustments to reconcile net earnings (loss) to net cash
(used in) provided
by operating activitiesDepreciation and amortization
    
    
    901,000
    
    
    
    838,000
    
    
    
    842,000Allowance for doubtful accounts
    
    
    441,000
    
    
    
    301,000
    
    
    
    118,000Inventory obsolescence reserve
    
    
    317,000
    
    
    
    106,000
    
    
    
    215,000Stock based compensation
    
    
    166,000
    
    
    
    89,000
    
    
    
    Gain on disposal of assets of discontinued operations
    
    
    (577,000
    )
    
    
    
    
    
    
    Changes in assets and liabilities, net of effects of
non-cash transactions:Increase in trade accounts receivable
    
    
    (445,000
    )
    
    
    (875,000
    )
    
    
    (575,000
    )(Increase) decrease in inventory
    
    
    (1,826,000
    )
    
    
    (1,887,000
    )
    
    
    (73,000
    )(Increase) decrease in prepaid expenses
    
    
    (204,000
    )
    
    
    310,000
    
    
    
    (160,000
    )(Increase) decrease in related parties receivable
    
    
    (36,000
    )
    
    
    (26,000
    )
    
    
    11,000Decrease (increase) in other assets
    
    
    11,000
    
    
    
    (70,000
    )
    
    
    86,000(Decrease) increase in accounts payable and
accrued expenses
    
    
    (36,000
    )
    
    
    790,000
    
    
    
    864,000Increase in accrued payroll and related liabilities
    
    
    291,000
    
    
    
    167,000
    
    
    
    52,000Increase in other liabilities
    
    
    3,000
    
    
    
    55,000
    
    
    
    30,000Changes in assets and liabilities of discontinued
operations
    
    
    (300,000
    )
    
    
    938,000
    
    
    
    563,000Net cash provided by (used in) by operating activities
    
    
    415,000
    
    
    
    (268,000
    )
    
    
    (2,119,000
    )CASH FLOWS
FROM INVESTING ACTIVITIESProceeds from investments
    
    
    
    
    
    
    175,000
    
    
    
    1,326,000Capital expenditures
    
    
    (1,241,000
    )
    
    
    (546,000
    )
    
    
    (955,000
    )Net cash (used in) provided by investing activities
    
    
    (1,241,000
    )
    
    
    (371,000
    )
    
    
    371,000CASH FLOWS FROM FINANCING ACTIVITIESProceeds from issuance of common stock
    
    
    210,000
    
    
    
    7,000
    
    
    
    Net borrowings on line-of-credit
    
    
    1,774,000
    
    
    
    
    
    
    
    Borrowings on notes payable
    
    
    295,000
    
    
    
    1,294,000
    
    
    
    527,000Payments on notes payable
    
    
    (695,000
    )
    
    
    (189,000
    )
    
    
    (175,000
    )Net cash provided by financing activities
    
    
    1,584,000
    
    
    
    1,112,000
    
    
    
    352,000Net increase (decrease) in cash and cash equivalents
    
    
    758,000
    
    
    
    473,000
    
    
    
    (1,396,000
    )Effect of exchange rate on cash
    
    
    18,000
    
    
    
    55,000
    
    
    
    353,000Cash and cash equivalents, beginning of period
    
    
    1,395,000
    
    
    
    867,000
    
    
    
    1,910,000CASH and CASH EQUIVALENTS, END OF PERIOD
    
    $
    2,171,000
    
    
    $
    1,395,000
    
    
    $
    867,000SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATIONCash paid during the year for interest
    
    $
    188,000
    
    
    $
    51,000
    
    
    $
    13,000
  31




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##### 



CUISINE SOLUTIONS, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 1  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 NATURE OF OPERATIONS
  PRINCIPLES OF CONSOLIDATION
   FISCAL YEAR
  USE OF ESTIMATES
  REVENUE RECOGNITION
  SEGMENT REPORTING
  CASH AND CASH EQUIVALENTS
   INVESTMENTS
  32




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##### 



INVENTORY
   FIXED ASSETS
    WEB SITE DEVELOPMENT COSTS
  SHIPPING AND HANDLING COSTS
  RESEARCH AND DEVELOPMENT COSTS
  INCOME AND OTHER TAXES
  IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF
  33




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##### 



ACCOUNTING FOR STOCK-BASED COMPENSATION
   June 25, 2005
    
    
    June 26, 2004
    
    
    June 28, 2003Net earnings (loss) applicable to common
shareholders
    
    $
    1,709,000
    
    
    $
    (1,004,000
    )
    
    $
    (4,092,000
    )Add: Stock-based employee compensation cost,
net of taxes,
included in reported net earnings (loss)
    
    $
    166,000
    
    
    $
    89,000
    
    
    
    Less: Total stock-based compensation expense
determined under
the fair value method
    
    $
    (716,000
    )
    
    $
    (72,000
    )
    
    $
    (171,000
    )Pro forma net earnings (loss)
    
    $
    1,159,000
    
    
    $
    (987,000
    )
    
    $
    (4,263,000
    )Earnings (loss) per common share:Basic  as reported
    
    $
    0.11
    
    
    $
    (0.06
    )
    
    $
    (0.26
    )Diluted  as reported
    
    $
    0.10
    
    
    $
    (0.06
    )
    
    $
    (0.26
    )Basic  pro forma
    
    $
    0.07
    
    
    $
    (0.06
    )
    
    $
    (0.27
    )Diluted  pro forma
    
    $
    0.07
    
    
    $
    (0.06
    )
    
    $
    (0.27
    )Weighted average common shares
outstanding-basic
    
    
    15,927,524
    
    
    
    15,827,755
    
    
    
    15,824,588Common stock equivalents
    
    
    1,610,746
    
    
    
    
    
    
    
    Weighted average common shares
outstanding-diluted
    
    
    17,538,270
    
    
    
    15,827,755
    
    
    
    15,824,788
 EARNINGS PER SHARE
  FOREIGN CURRENCY TRANSLATION
  COMPREHENSIVE INCOME
  FAIR VALUE OF FINANCIAL INSTRUMENTS
  34




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##### 



RECENT ACCOUNTING PRONOUNCEMENTS
      NOTE 2  LIQUIDITY AND OPERATIONS
   35




---



##### 



NOTE 3  ACCOUNTS RECEIVABLE
  June 25, 2005
    
    
    June 26, 2004TRADE ACCOUNTS RECEIVABLE
    
    $
    4,251,000
    
    
    $
    3,822,000ALLOWANCE FOR DOUBTFUL ACCOUNTS
    
    
    (493,000
    )
    
    
    (68,000
    )TRADE ACCOUNTS RECEIVABLE, NET
    
    $
    3,758,000
    
    
    $
    3,754,000
  NOTE 4  INVENTORY
  June 25, 2005
    
    
    June 26, 2004RAW MATERIAL
    
    $
    1,935,000
    
    
    $
    1,586,000FROZEN PRODUCT & OTHER FINISHED GOODS
    
    
    4,337,000
    
    
    
    3,335,000PACKAGING
    
    
    988,000
    
    
    
    661,0007,260,000
    
    
    
    5,582,000LESS OBSOLESCENCE RESERVE
    
    
    (331,000
    )
    
    
    (162,000
    )$
    6,929,000
    
    
    $
    5,420,000
 NOTE 5  FIXED ASSETS
  June 25, 2005
    
    
    June 26, 2004Land
    
    $
    71,000
    
    
    $
    71,000Building
    
    
    2,571,000
    
    
    
    2,537,000Machinery & equipment
    
    
    10,892,000
    
    
    
    10,398,000Machinery & equipment under capital lease
    
    
    589,000
    
    
    
    592,000Leasehold improvements
    
    
    2,384,000
    
    
    
    2,323,000Furniture & fixtures
    
    
    241,000
    
    
    
    232,000Computer software
    
    
    1,090,000
    
    
    
    1,089,000Construction in progress
    
    
    391,000
    
    
    
    20,00018,229,000
    
    
    
    17,262,000Less Accumulated depreciation and amortization
    
    
    (14,073,000
    )
    
    
    (13,505,000
    )Less Accumulated amortization on capital leases
    
    
    (270,000
    )
    
    
    (212,000
    )$
    3,886,000
    
    
    $
    3,545,000
 NOTE 6  INVESTMENTS
   36




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##### 



Gross Unrealized
    
    
    EstimatedCost
    
    
    Gains
    
    
    Losses
    
    
    Fair ValueU.S. Government agencies
    
    $
    953,000
    
    
    $
    
    
    
    $
    5,000
    
    
    $
    948,000Corporate debt
    
    
    144,000
    
    
    
    
    
    
    
    2,000
    
    
    
    142,000Total investments
    
    $
    1,097,000
    
    
    $
    
    
    
    $
    7,000
    
    
    $
    1,090,000
  Gross Unrealized
    
    
    EstimatedCost
    
    
    Gains
    
    
    Losses
    
    
    Fair ValueU.S. Government agencies
    
    $
    953,000
    
    
    $
    15,000
    
    
    $
    
    
    
    $
    968,000Corporate debt
    
    
    144,000
    
    
    
    2,000
    
    
    
    
    
    
    
    146,000Total investments
    
    $
    1,097,000
    
    
    $
    17,000
    
    
    $
    
    
    
    $
    1,114,000
 NOTE 7  DISCONTINUED OPERATIONS
   June 25, 2005
    
    
    June 26, 2004Assets of discontinued operations:Cash
    
    $
    36,000
    
    
    $
    96,000Accounts receivable, net
    
    
    
    
    
    
    83,000Other assets
    
    
    3,000
    
    
    
    345,000Fixed assets, net
    
    
    
    
    
    
    1,448,000Total assets of discontinued operations
    
    $
    39,000
    
    
    $
    1,972,000Liabilities of discontinued operations:Accounts payable and accrued liabilities
    
    $
    169,000
    
    
    $
    1,265,000Note payable
    
    
    1,031,000
    
    
    
    2,370,000Total liabilities of discontinued operations
    
    $
    1,200,000
    
    
    $
    3,635,000
    37




---



##### 



Year endedJune 25, 2005
    
    
    June 26, 2004
    
    
    June 28, 2003Net Sales
    
    $
    32,000
    
    
    $
    1,386,000
    
    
    $
    1,186,000Expenses:Cost of goods sold
    
    
    127,000
    
    
    
    1,990,000
    
    
    
    1,659,000Selling and administrative expense
    
    
    1,000
    
    
    
    22,000
    
    
    
    43,000Other operating expense
    
    
    463,000
    
    
    
    
    
    
    
    Interest expense
    
    
    86,000
    
    
    
    135,000
    
    
    
    236,000Other expense (income)
    
    
    (1,000
    )
    
    
    (100,000
    )
    
    
    (19,000
    )Loss from discontinued operations
    
    
    (644,000
    )
    
    
    (661,000
    )
    
    
    (733,000
    )Gain from disposal of assets
    
    
    577,000
    
    
    
    
    
    
    
    Loss from translation adjustments
    
    
    (110,000
    )Net earnings (Loss) from discontinued operations
    
    $
    (177,000
    )
    
    $
    (661,000
    )
    
    $
    (733,000
    )
 NOTE 8  DEBT
  2005 Principal
    
    
    2004 PrincipalLender
    
    Description
    
    Maturity
    
    Outstanding
    
    
    OutstandingNORBAIL
    
    Capital Lease
    
    November, 20, 2005
    
    $
    33,000
    
    
    $
    131,000CDN
    
    Term Loan
    
    October 22, 2012
    
    
    181,000
    
    
    
    202,000BNP Paribas
    
    Term Loan
    
    March 6, 2008
    
    
    210,000
    
    
    
    277,000Emprunt CIN
    
    Term Loan
    
    June 15,2008
    
    
    53,000
    
    
    
    69,000Emprunt CIN
    
    Term Loan
    
    June 20, 2010
    
    
    77,000
    
    
    
    FIC
    
    Term Loan
    
    October 22, 2005
    
    
    231,000
    
    
    
    424,000FIC
    
    Term Loan
    
    December 10, 2004
    
    
    
    
    
    
    300,000FRC
    
    Term Loan
    
    November 10, 2006
    
    
    500,000
    
    
    
    500,000BCT
    
    Line of credit
    
    December 1, 2005
    
    
    1,774,000
    
    
    
    BCT
    
    Term Loan
    
    March 15, 2010
    
    
    192,000
    
    
    
    Volvo
    
    Capital Lease
    
    September 18, 2008
    
    
    13,000
    
    
    
    Volks Wagen
    
    Capital Lease
    
    February 26, 2008
    
    
    13,000
    
    
    
    Total
    
    $
    3,277,000
    
    
    $
    1,903,000Less current portion
    
    
    2,196,000
    
    
    
    921,000Non-current portion
    
    $
    1,081,000
    
    
    $
    982,000
     38




---



##### 



2006
    
    $
    2,196,0002007
    
    
    669,0002008
    
    
    175,0002009
    
    
    94,0002010
    
    
    77,000Thereafter
    
    
    66,000Total
    
    $
    3,277,000
 NOTE 9  STOCKHOLDERS EQUITY
  NOTE 10  INCOME TAXES
  Year EndedJune 25, 2005
    
    
    June 26, 2004
    
    
    June 28, 2003Current:Federal
    
    $
    
    
    
    $
    
    
    
    $
    Foreign
    
    
    19,000
    
    
    
    18,000
    
    
    
    16,000State
    
    
    
    
    
    
    
    
    
    
    19,000
    
    
    
    18,000
    
    
    
    16,000Deferred:Federal
    
    $
    
    
    
    $
    
    
    
    $
    Foreign
    
    
    
    
    
    
    
    
    
    
    State
    
    
    
    
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    Income tax expense (benefit)
    
    $
    19,000
    
    
    $
    18,000
    
    
    $
    16,000
 39




---



##### 



Year EndedJune 25, 2005
    
    
    June 26, 2004
    
    
    June 28, 2003Federal tax benefit at statutory rates
    
    $
    581,000
    
    
    $
    (238,000
    )
    
    $
    (1,209,000
    )Loss from foreign operations and investment
    
    
    (584,000
    )
    
    
    (103,000
    )
    
    
    (202,000
    )State income taxes, net
    
    
    57,000
    
    
    
    (60,000
    )
    
    
    (249,000
    )France minimum taxes
    
    
    19,000
    
    
    
    18,000
    
    
    
    16,000Credits
    
    
    (27,000
    )
    
    
    
    
    
    
    Period effect of change in valuation allowance
    
    
    222,000
    
    
    
    387,000
    
    
    
    1,764,000Permanent differences
    
    
    (249,000
    )
    
    
    13,000
    
    
    
    (104,000
    )Other, net
    
    
    
    
    
    
    1,000
    
    
    
    Total
    
    $
    19,000
    
    
    $
    18,000
    
    
    $
    16,000
   Year EndedJune 25, 2005
    
    
    June 26, 2004Deferred tax assets:NOL  US
    
    $
    5,408,000
    
    
    $
    5,875,000NOL  Norway
    
    
    1,356,000
    
    
    
    1,220,000NOL  France
    
    
    566,000
    
    
    
    744,000Capital losses
    
    
    63,000
    
    
    
    141,000Foreign other
    
    
    74,000
    
    
    
    74,000Inventory adjustment
    
    
    203,000
    
    
    
    124,000Basis difference in investments
    
    
    1,381,000
    
    
    
    755,000Property and equipment
    
    
    240,000
    
    
    
    330,000AMT Credit
    
    
    27,000
    
    
    
    Other
    
    
    248,000
    
    
    
    81,000Total Deferred tax assets
    
    
    9,566,000
    
    
    
    9,344,000Less Foreign valuation allowance
    
    
    (9,566,000
    )
    
    
    (9,344,000
    )Net deferred tax assets
    
    
    
    
    
    
    Deferred tax liabilities
    
    
    
    
    
    
    Net Deferred tax liabilities
    
    $
    
    
    
    $
    
     NOTE 11  EMPLOYEE BENEFITS
  40




---



##### 



June 25, 2005

    
    June 26, 2004

    
    June 28, 2003Expected dividend yield
    
    
    
    
    
    
    
    
    
    
    Risk-free interest rate
    
    
    4.2
    %
    
    
    4.5
    %
    
    
    4.3
    %Expected life (in years)
    
    
    6
    
    
    
    10
    
    
    
    6Expected volatility
    
    
    251
    %
    
    
    96
    %
    
    
    116
    %
 The following summarizes stock option activity under both of the Companys plans:
 2005
    
    
    2004
    
    
    2003Weighted-Average

    
    
    
    
    
    Weighted-Average

    
    
    
    
    
    Weighted-AverageOptions
    
    Shares
    
    
    Exercise Price

    
    Shares
    
    
    Exercise Price

    
    Shares
    
    
    Exercise PriceOutstanding at Beginning of Year
    
    
    2,893,616
    
    
    
    1.01
    
    
    
    1,914,500
    
    
    
    1.11
    
    
    
    2,348,500
    
    
    
    1.17Granted
    
    
    188,852
    
    
    
    1.34
    
    
    
    1,089,616
    
    
    
    0.89
    
    
    
    232,500
    
    
    
    0.25Cancelled
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (82,500
    )
    
    
    0.58Exercised
    
    
    (238,500
    )
    
    
    0.88
    
    
    
    (10,000
    )
    
    
    0.70
    
    
    
    
    
    
    
    Forfeited
    
    
    (48,000
    )
    
    
    2.98
    
    
    
    (100,500
    )
    
    
    1.65
    
    
    
    (584,000
    )
    
    
    1.09Outstanding at end of year
    
    
    2,795,968
    
    
    
    1.02
    
    
    
    2,893,616
    
    
    
    1.01
    
    
    
    1,914,500
    
    
    
    1.11Options exercisable at year-end
    
    
    2,252,218
    
    
    
    
    
    
    
    1,979,241
    
    
    
    
    
    
    
    1,539,500Weighted-average fair value of options
Granted during the year
    
    $
    2.21
    
    
    
    
    
    
    $
    0.90
    
    
    
    
    
    
    $
    0.22Total option life
    
    
    10
    
    
    
    
    
    
    
    10
    
    
    
    
    
    
    
    10% Exercisable
    
    
    81
    %
    
    
    
    
    
    
    68
    %
    
    
    
    
    
    
    80
    %Average years exercisable
    
    
    3
    
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    3Average remaining contractual life
    
    
    7
    
    
    
    
    
    
    
    7
    
    
    
    
    
    
    
    7
 The following table summarizes information about stock options outstanding at June 25, 2005:
 Stock Options Outstanding
    
    
    
    
    Stock Options ExercisableNumber
    
    
    Weighted-Average

    
    
    
    
    
    NumberOutstanding
    
    
    Remaining

    
    Weighted-Avg
    
    
    Exercisable
    
    
    Weighted-AvgRANGE OF EXERCISE PRICES
    
    at 6/25/05
    
    
    Contractual Life

    
    Exercise Price
    
    
    at 6/25/05
    
    
    Exercise Price$0.01 TO $0.24
    
    
    143,468
    
    
    
    9.02
    
    
    $
    0.01
    
    
    
    143,468
    
    
    $
    0.01$0.25 TO $0.6561
    
    
    125,000
    
    
    
    7.32
    
    
    $
    0.25
    
    
    
    93,750
    
    
    $
    0.25$0.6562 TO $1.03
    
    
    1,316,500
    
    
    
    5.46
    
    
    $
    0.87
    
    
    
    854,000
    
    
    $
    0.86$1.031 TO $1.37
    
    
    650,000
    
    
    
    5.02
    
    
    $
    1.14
    
    
    
    615,000
    
    
    $
    1.14$1.38 TO $1.50
    
    
    405,500
    
    
    
    2.06
    
    
    $
    1.38
    
    
    
    405,500
    
    
    $
    1.38$1.51 TO $2.00
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $2.01 TO $2.50
    
    
    145,000
    
    
    
    0.71
    
    
    $
    2.15
    
    
    
    130,000
    
    
    $
    2.15$3.01 TO $3.50
    
    
    10,500
    
    
    
    0.13
    
    
    $
    3.40
    
    
    
    10,500
    
    
    $
    3.132,795,968
    
    
    
    
    
    
    
    
    
    
    
    2,252,218
 41




---



##### 



NOTE 12  COMMITMENTS
  Fiscal Year2006
    
    $
    480,0002007
    
    
    494,0002008
    
    
    373,0002009
    
    
    $
    1,347,000
  NOTE 13  TRANSACTIONS WITH RELATED PARTIES
     42




---



##### 



NOTE 14  SALES TO MAJOR CUSTOMERS
     NOTE 15  LITIGATION
   NOTE 16  QUARTERLY CONSOLIDATED FINANCIAL DATA (UNAUDITED)
  (in thousands, except per share amounts)FISCAL YEAR 2005 QUARTERS ENDEDSeptember 18, 2004
    
    
    December 11, 2004
    
    
    April 2, 2005
    
    
    June 25, 2005Net sales
    
    $
    8,703
    
    
    $
    11,062
    
    
    $
    14,355
    
    
    $
    12,126Gross margin
    
    
    2,030
    
    
    
    2,996
    
    
    
    3,802
    
    
    
    3,455Earnings(Loss) from continuing operations
    
    
    280
    
    
    
    532
    
    
    
    511
    
    
    
    570Earnings(Loss) from discontinued operations
    
    
    (118
    )
    
    
    61
    
    
    
    
    
    
    
    (120
    )Net earnings
    
    
    162
    
    
    
    593
    
    
    
    511
    
    
    
    443Net earnings per share-basic
    
    $
    0.01
    
    
    $
    0.04
    
    
    $
    0.03
    
    
    $
    0.03Net earnings per share-diluted
    
    $
    0.01
    
    
    $
    0.03
    
    
    $
    0.03
    
    
    $
    0.03
 43




---



##### 



FISCAL YEAR 2004 QUARTERS ENDEDSeptember 20, 2003
    
    
    December 13, 2003
    
    
    April 3, 2004
    
    
    June 26, 2004Net sales
    
    $
    6,735
    
    
    $
    8,764
    
    
    $
    10,912
    
    
    $
    8,924Gross margin
    
    
    1,301
    
    
    
    2,155
    
    
    
    2,374
    
    
    
    2,700Earnings(Loss) from continuing operations
    
    
    (42
    )
    
    
    135
    
    
    
    (245
    )
    
    
    (191
    )Earnings(Loss) from discontinued operations
    
    
    (139
    )
    
    
    (72
    )
    
    
    (316
    )
    
    
    (134
    )Net earnings (loss)
    
    
    (181
    )
    
    
    63
    
    
    
    (561
    )
    
    
    (325
    )Net loss per share basic and diluted
    
    $
    (0.01
    )
    
    $
    
    
    
    $
    (0.03
    )
    
    $
    (0.02
    )
 FISCAL YEAR 2003 QUARTERS ENDEDSeptember 11, 2002
    
    
    December 14, 2002
    
    
    April 5, 2003
    
    
    June 28, 2003Net sales
    
    $
    5,933
    
    
    $
    6,442
    
    
    $
    7,463
    
    
    $
    6,788Gross margin
    
    
    1,260
    
    
    
    1,309
    
    
    
    1,352
    
    
    
    1,489Loss from continuing operations
    
    
    (554
    )
    
    
    (626
    )
    
    
    (1,230
    )
    
    
    (949
    )Loss from discontinued operations
    
    
    (220
    )
    
    
    (221
    )
    
    
    (247
    )
    
    
    (45
    )Net loss
    
    
    (774
    )
    
    
    (847
    )
    
    
    (1,477
    )
    
    
    (994
    )Net loss per share basic and diluted
    
    $
    (0.05
    )
    
    $
    (0.05
    )
    
    $
    (0.10
    )
    
    $
    (0.06
    )
 SCHEDULE II
CUISINE SOLUTIONS, INC.
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
 Balance at
    
    
    Additions
    
    
    Reduction/
    
    
    Balance atBeginning
    
    
    charged to
    
    
    write-off to
    
    
    End ofof Period
    
    
    operations
    
    
    allowance
    
    
    PeriodYear ended June 28, 2003Allowance for doubtful accounts
    
    $
    168,000
    
    
    $
    118,000
    
    
    $
    224,000
    (3)
    
    $
    62,000Allowance for obsolete inventory
    
    $
    504,000
    
    
    $
    215,000
    (1)
    
    $
    294,000
    
    
    $
    425,000Year ended June 26, 2004Allowance for doubtful accounts
    
    $
    62,000
    
    
    $
    301,000
    (3)
    
    $
    295,000
    
    
    $
    68,000Allowance for obsolete inventory
    
    $
    425,000
    
    
    $
    106,000
    (1)
    
    $
    369,000
    
    
    $
    162,000Year ended June 25, 2005Allowance for doubtful accounts
    
    $
    68,000
    
    
    $
    441,000
    (2)
    
    $
    16,000
    
    
    $
    493,000Allowance for obsolete inventory
    
    $
    162,000
    
    
    $
    317,000
    
    
    $
    148,000
    
    
    $
    331,000
 
 (1)
    
    Additional reserves for obsolete inventory(2)
    
    Additional allowance for doubtful accounts(3)
    
    Reclassification to Other Current Assets 44