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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549


FORM 10-K

(MARK ONE)

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|- |  | ------------------------------------------------------------------------------------------------------
|x |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE  ACT OF 1934 [FEE REQUIRED]

FOR THE FISCAL YEAR ENDED: June 28, 2003

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|- |  | -------------------------------------------------------------------------------------------------------------
|o |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

FOR THE TRANSITION PERIOD FROM ___________________ TO ______________________

COMMISSION FILE NUMBER: 0-12800

CUISINE SOLUTIONS, INC.




(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)


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|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 52-0948383                          
|                                                               |  |                                     
|(STATE OR OTHER JURISDICTION OF
INCORPORATION OR ORGANIZATION) |  | (I.R.S. EMPLOYER
IDENTIFICATION NO.)

85 South Bragg Street, Suite 600, Alexandria, VA 22312




(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)(ZIP CODE)


REGISTRANTS TELEPHONE NUMBER, INCLUDING AREA CODE: (703) 270-2900

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

|                    |  |                      
|------------------- |  | ---------------------
|                    |  | NAME OF EACH EXCHANGE
|TITLE OF EACH CLASS |  | ON WHICH REGISTERED  
|                    |  |                      
|None                |  | None                 

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

Common Stock, par value $.01 per Share




(TITLE CLASS)


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

Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrants knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. o

The aggregate market value of the voting stock held by non-affiliates of the
registrant, based upon the closing sale price of the Common Stock on September
12, 2003 as reported on the NASDAQ/OTC Bulletin Board Market Quotation System,
was approximately $2,664,000. Shares of Common Stock held by each officer and
director and by each person who owns 5% or more of the outstanding Common Stock
have been excluded in that such persons may be deemed to be affiliates. This
determination of affiliate status is not necessarily a conclusive determination
for other purposes.

As of September 12, 2003, there were 15,824,788 shares outstanding of the
Registrants Common Stock.

DOCUMENTS INCORPORATED BY REFERENCE

Parts of the following document are incorporated by reference in Parts III and
IV of this Form 10-K Report: Proxy Statement for Registrants 2003 Annual
Meeting of Stockholders to be filed  Items 10, 11, 12 and 13.

Exhibit Index is located on page 16.

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PART I

ITEM 1. BUSINESS

FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS

Cuisine Solutions produces and markets prepared foods to the Food Service
Industry to include sales channels such as airlines, passenger trains, harbor
cruise lines, retail supermarket in-store delis, national restaurants and hotel
banquets. During the fiscal year 1999, the Company started in a second industry
segment relating to international management services. The Company will provide
ongoing management advisory services under separate service contracts to
include global management and food manufacturing expertise. No fees were earned
for management services during fiscal year 2003.

GENERAL

Cuisine Solutions has been providing high quality entrees to the Foodservice
market for over twelve years. The company is recognized in the market place as
having the highest quality frozen food product line in the world.

Cuisine Solutions unique use of sous-vide processing allows Cuisine Solutions
to produce high quality entrees and sauces for use in hotel banquets,
restaurants, first class and business class meal service and retail frozen
foods and prepared products for retail in-store delis.

The Cuisine Solutions strategy began in 1988 when as Vie de France, Management
recognized the growing trend and future demand for high quality foods at value
prices.

In addition to quality, Management also saw the growing need for clean
ingredient statements, meaning reduced use of chemical preservatives to enhance
flavor and shelf life.

The special cooking process involved in the preparation of Cuisine Solutions
products use chef developed recipes and only the finest quality ingredients.
The cooking process involves slowly cooking the products for a longer period of
time than most food companies and at lower cooking temperatures. This special
process is a culmination of culinary art and food science in that it requires
precise controls of the cooking process, and each precise control is applied to
each individual recipe. This process involved a decade of research and
development to produce the wide range of high quality products currently
offered by Cuisine Solutions. This entire process is managed through
computerized cooking equipment under the supervision of culinary professionals.

What does this mean to the market place? Todays consumer trends are moving
heavily towards fast food and convenience. What has suffered in the meantime is
culinary quality and nutrition. The trend also includes an increased demand for
high quality, unique ethnic recipes.

The Cuisine Solutions product line enables foodservice providers requiring
exceptional quality to purchase fully cooked, high quality products from
Cuisine Solutions rather than the alternative of preparing products from
scratch.

Cuisine Solutions products also enable foodservice providers to provide a wide
range of products and eliminate the need for raw materials and logistics,
especially for last minute events. Our products help reduce the labor required
to prepare food products, increase food safety by reducing manual product
handling, reduce yield losses, and provide consistent portion sizes.

In addition to the above benefits, Cuisine Solutions products do not require
additional preservatives normally found in prepared foods due to our unique
cooking process. This makes Cuisine Solutions products especially attractive to
foodservice establishments, national restaurant chains, retail frozen and
in-store deli prepared foods, health care facilities, as well as large upscale
event caterers.

Supported by the best and most experienced technical team in this cooking
technology and enhanced by the collaboration of some of the best culinary chefs
in the industry, Cuisine Solutions provides unique value to the market place
with its quality consistent products. It gives the struggling, overworked,
understaffed foodservice operators expanded menu lines, labor savings,
flexibility, serving time reduction, reduced yield losses and increased food
safety.

The Company has strategically positioned itself to be a high quality provider
of prepared foods, with unique product capabilities at competitive market
prices with three operating production facilities in Europe and in the USA.

Cuisine Solutions has a strong presence in both North America and Europe,
having the unique capability to service target airlines both to and from
Europe.

A significant part of the Cuisine Solutions strategy is to locate production
facilities in places where finished goods are in demand, as well as in
countries that are the most efficient source of quality raw materials such as
Norway for salmon, and Chile for white fish and seafood.

The Company maintains manufacturing facilities in the United States, Norway and
France. A new joint venture facility with a Euro-Chilean partnership will be
opened in Chile during fiscal 2004.

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Cuisine Solutions, USA:

Cuisine Solutions operates a thirty-nine thousand square feet manufacturing
facility located in Alexandria, Virginia. The facility is USDA and HACCP
certified, and has the ability to produce the complete range of Cuisine
Solutions products including a high volume enrobed pasta line.

Cuisine Solutions Norway:

Cuisine Solutions operates a sixteen thousand square feet facility located on a
fjord in Hjelmeland, Norway. The award winning facility produces fully cooked
salmon in a variety of sizes and flavors. This HACCP certified facility uses
only the highest quality Norwegian Salmon in its facility, and produces product
that is shipped to North America, Europe and Scandinavia.

Cuisine Solutions France:

Acquired by Cuisine Solutions in 1999, Cuisine Solutions France is
strategically located a short drive North from Paris in Louviers, France. This
fifteen thousand square feet HACCP certified facility produces a full range of
traditional French recipes for the European foodservice market as well as the
French retail market. The recently expanded facility can produce all of Cuisine
Solutions products with the addition of retail packaging capabilities. Cuisine
Solutions France is the training area for many Cuisine Solutions Operations
Managers since the facility has the most collective experience using the
sous-vide process, and adheres to strict culinary discipline, a culture that is
passed on to all of our facilities.

Cuisine Solutions Chile:

In June 2001 Cuisine Solutions entered into a joint venture agreement with a
Euro-Chilean partnership that will build a processing facility in Chile to
produce a wide range of seafood items. The sous-vide process works
exceptionally well with seafood, and the proximity to the source of high
quality, lower cost materials should place Cuisine Solutions with a significant
advantage in regard to both product quality and cost. The original agreement
was terminated without any prejudice between the partners during the third
quarter of fiscal year 2003 due to administrative difficulties. However, the
partners continue with the development of the facility and anticipate the
facility to be in place by the end of calendar 2003. A new trade agreement has
been signed between the partners subsequently to the end of fiscal year 2003.

Cuisine Solutions has been growing consistently since fiscal year 1998, until
the events of September 11, 2001 negatively impacted the travel industry which
is a major source of the Companys revenue. As a result, the Company
consolidated the sales channels, placing airlines, national restaurant chains,
hotels and banquets under one Management Group. Cuisine Solutions has been able
to successfully reduce administrative cost through the elimination of positions
and reduction of business travel. Management continues its strategic plan to
provide product awareness in the retail and hotel banquet sales channels as
well as increased market share of the airline and railroad market
opportunities.

Cuisine Solutions currently serves product 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 Superbowl, and the Olympics;
Retail: Supermarket In-Store Deli, Premium frozen packaged foods
Military: Sales through distributors supplying USA military
Restaurant Chains, local & national

The On Board Services (OBS) channel includes customers that provide
transportation services to the general public and serve meals. With chef
created high quality fully cooked pasteurized products, and the ability to make
changes quickly and easily, Cuisine Solutions has become the preferred supplier
to the worlds top airlines for their business and first class services.
Airlines and On Board Service caterers also recognize the value of Cuisine
Solutions global presence, which allows them to design high-class menus to the
United States from Europe and South America. The ability to create high quality
meals in three continents gives Cuisine Solutions a strong competitive edge in
the development of standardized quality meals for non-USA and USA airlines with
flight routes departing from South America and Europe. Most USA carriers are
now working with Cuisine Solutions and the Company is developing commercial
relations with large European and South American airlines and caterers. The
Company is also the supplier of choice for national railroad companies in the
USA and France. Focused effort and services towards this market has allowed
Cuisine Solutions to increase its market share. The On Board Services channel
experienced consistent growth over the past years, until the negative impact of
the September 11, 2001 terrorist attacks in the USA resulted in extremely
limited business travel during the subsequent months, a major source of Cuisine
Solutions sales revenue via sales to the airlines and the hotel banquet
industries. However, Cuisine Solutions reputation for high quality products and
services along with its international presence should allow the Company to
rebound as the airline industry recovers. Management will continue to
strengthen the business relationships with most of the major US airlines and
passenger rail lines through providing continued value, service and flexible
solutions depending upon the current demand in the industry. This includes, for
example, a Buy-on-Board meal service for the airline industry.

The Foodservice sales channel serves product to hotel banquets, hotel
restaurants, sports stadiums, large special event caterers, and national
restaurant chains. Cuisine Solutions products are attractive for foodservice
operators who are often understaffed and

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overworked, as it improves both their revenue capability and their meal costs.
Revenue capability is improved as Cuisine Solutions products and menu services
enhance and enlarge food operators menu offerings, increases their table
rotation through faster delivery of meals, and improves the quality, safety and
consistency of their menu offerings. Cuisine Solutions products facilitate the
offerings of special menu and promotions programs, which result in higher
customer headcount and a higher average check per customer. The cost of meals
is reduced for the food operator as Cuisine Solutions products and technical
services reduce labor cost and yield losses, and lower utility and equipment
use time. Cuisine Solutions products also offer a unique way of controlling
portion costs and recipe execution. Pre-prepared entrees also offer additional
savings in kitchen space, equipment, capital investment and leasehold
improvement costs.

There are many prepared food manufacturers in the industry, but most can be
classified as large processors with mass production and lower quality
associated with mass production frozen foods. They operate large, heavily
capitalized facilities, providing very little flexibility, variety and
responsiveness to the market place. Smaller manufacturers can provide more
flexibility and variety, but are limited in capacity, and do not have global
expansion opportunities. Our competitors do not have access to our sous-vide
technology that involves significant R&D in addition to specialized equipment
and equipment knowledge. The Foodservice channel provides the highest gross
margins to the Company. Objectives for Fiscal 2004 include continued
penetration into key national accounts, banquet centers and casinos. Management
intends to pursue larger accounts during fiscal 2004 since Cuisine Solutions
pricing, both current and future, will be affected by the number of products
and the efficiency and productivity of both the sales force and production
facilities. Customers in the Foodservice sales channel place high value on the
labor savings, quality, consistency and food safety associated with Cuisine
Solutions products. Management believes this value increases in the current
economic and political situation challenging todays business environment. In
the meantime, Management has, and will continue to initiate further cost
reduction programs and product line changes to meet the changing needs of the
industry.

Cuisine Solutions initiated its strategic involvement in the retail sales
channel upon completion of the acquisition of the French subsidiary, Cuisine
Solutions France, in December 1999. Cuisine Solutions France has been achieving
considerable success with its retail partnership with French retailers in the
packaged, premium private label category. Cuisine Solutions France has had
consistent sales growth in the previous years in the retail channel. French
consumers are demanding when it involves food quality. Cuisine Solutions offers
better quality, consistency, cost reduction and food safety, as well as the
culinary expertise to help the retailer enhance product selections and seasonal
varieties. To evaluate retail opportunities in the USA, Cuisine Solutions
initiated a strategy to introduce its product line to the USA retailers via the
in-store deli market. The marketing strategy enabled Cuisine Solutions to take
advantage of the quality, consistency, cost and safety benefits provided to the
Companys Foodservice customers and initiate in-store deli programs in the USA
with minimal additional marketing investments. The deli program also caught the
attention of retail frozen food executives which resulted in the first packaged
product line sold in the USA under the Cuisine Solutions Brand. The Company
plans to continue these efforts as the retail market trends show increasing
demand for high quality, value priced items that are simple to prepare in both
the retail store and in the home of consumers. Retail objectives for fiscal
year 2004 include further penetration into the USA in-store deli of targeted
retailers as well as a planned national roll-out of premium frozen retail
products into the USA market.

Military sales involve sales through distributors for the USA armed forces with
an emphasis on sales to the US Navy. Military sales continue to be managed via
a broker/distributor. The Company has placed specific objectives for the broker
and eliminated a commission compensation structure, invoicing the broker
directly for all orders and placing the responsibility for inventory and
accounts receivable management on the broker/distributor. The military channel
could not realize the volume from the previous year as a result of the ships
assigned to sea duty in the preparation for the war with the Iraq. The Company
will further support the opportunity for this sales channel by offering our
product to other branches of the military and government agencies. The Cuisine
Solutions product line is ideal for situations that call for long shelf life,
high quality, easy preparation and high levels of food safety.

Cuisine Solutions, Inc. was incorporated in the State of Delaware in 1974. Its
principal executive offices are located at 85 South Bragg Street, Suite 600,
Alexandria, VA 22312 and its telephone number at that location is (703)
270-2900.

The Company desires to take advantage of the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. Therefore, this report
contains forward looking statements that are subject to risks and
uncertainties, including, but not limited to, the reliance on key customers,
fluctuations in operating results and other risks detailed from time to time in
the Companys filings with the Securities and Exchange Commission. These risks
could cause the Companys actual results for 2003 and beyond to differ
materially from those expressed in any forward looking statements made by, or
on behalf of, the Company.

BACKGROUND

The Company commenced operations in 1972 as a wholesale producer of French
bread for daily delivery to the Washington, DC area. The Company expanded its
markets throughout the 1970s. In fiscal year 1979, the Company began offering
its product through Company-owned retail bakeries where the products could be
freshly baked throughout the day. During the 1980s, the Company expanded its
frozen dough product line and developed processes to facilitate the baking of
these products at the point-of-sale. As of May 1994, the Company owned and
operated 31 retail units. The Company sold the Bakery Division and the
Restaurant Division to Vie de France Bakery Yamazaki, Inc. in 1991 and 1994,
respectively.

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The Company began development of the Culinary Division business in 1987, in
conjunction with research previously performed by Nouvelle Carte France, a
related French Company. As a result of the growth in the application of high
quality frozen products in Europe, the Board authorized the establishment of
the Vie de France Culinary Corporation for the express purpose of the research
into and development of high quality frozen products for the U.S. market. This
Company was formed in 1987, and was later merged into Vie de France
Corporation. In 1989, construction began on a 30,000 square foot plant in
Alexandria, Virginia designed to manufacture its sous-vide product line under
the trade name Vie de France Culinary. The Culinary plant began operations in
May 1990, and expanded into a 39,000 square feet building. The Company
constructed a manufacturing facility in Norway, and initiated production in
August 1994. The primary focus of the Norwegian facility was to supply the
Company with all salmon products.

During fiscal years 1991 through 1996, the Culinary Division successfully built
its sales volume from zero to over $2 million in fiscal year 1991, and by
fiscal year 1996 to $16 million. During fiscal year 1997, the Company
restructured its sales organization to develop a focused sales and marketing
strategy. The Company embarked on strategic marketing campaigns to educate the
market place to the advantages of sous-vide processing and increase awareness
of the existence of the Company and its product line. During this first year of
the strategic marketing effort and re-organization, fiscal year 1997 sales
declined to about $14 million. During fiscal year 1998 the Company continued
its reorganization while sales remained steady at $14 million. During fiscal
year 1999, sales increased to over $20 million, an increase of approximately
48%.

In 1998, the Company entered into a joint venture to construct a manufacturing
facility in Brasilia, Brazil to service airlines in the Mercusor markets, our
European retail customers that have a strong presence in Brazil, and to provide
low cost poultry and beef product exports to the European markets. The
Brazilian facility established regular operations at the beginning of fiscal
year 2002. Towards the end of fiscal year 2002, the Company filed a civil
lawsuit in the Federal District Court of Brasilia against the controlling
partner in the Cuisine Solutions Inc. joint venture, Cuisine Solutions do
Brasil Ltda, as a result of the Brazilian partners failure to disclose
financial information and operating results of Cuisine Solutions do Brasil Ltda
to Cuisine Solutions Inc. according to both the joint venture agreement and
Brazilian law. Due to the continued lack of cooperation from the Brazilian
partner, the inability to obtain any financial disclosures and the Joint
Venture Partners termination of Cuisine Solutions Inc. business activity in
Brazil, Cuisine Solutions, Inc has written off 100% of its investment in Brazil
through the end of fiscal year ended June 29, 2002.

In 1999, the Company acquired the French company, Nouvelle Carte, to supply
airline customers in Europe as well as supply global foodservice and retail
customers.

During fiscal year 2000, sales increased to $36 million, an increase of 30.2%
over fiscal 1999. Fiscal year 2001 sales slightly increased over $36 million
while fiscal year 2002 sales decreased by 21% to $29 million due to the
economic downturn during fiscal year 2002 precipitated largely by the terrorist
attacks in the USA on September 11, 2001 and the subsequent negative impact on
the travel industry.

Fiscal year 2003 sales decreased by 3% to $28 million primarily due to the
decreased revenue of the Military, the On Board Services and the Foodservice
channel in the USA.

PRODUCTS

The Company develops, produces and markets chef-created fully cooked, fully
prepared entrees and sauces. The products are high quality items without the
high-end price since they can be produced in large volumes. The product line
consists of items not usually available to our customers such as Osso Buco,
Chilean Sea Bass, Beef Wellington, Lamb Shanks and Stuffed Pork Chops as well
as staple items such as plain and stuffed chicken breast. The precise cooking
process allows the Company to prepare a perfect duck breast, rack of lamb or
veal chop. The combination of the unique cooking process, the internal culinary
expertise and international distribution has been critical to the Companys
strategy to date.

The sous-vide cooking process involves preparing a product with the required
spices, vacuum sealing the product, and cooking the product under water for
precise times at precise temperatures. This precision in time and temperature
allows the Company to produce the exact specification on any protein item
produced. The process is controlled by computerized systems, and each item is
exact every time. The cooking process also provides an eighteen-month shelf
life on most protein items without the need for any food additives or
preservatives. The product has enormous application with health conscience
retailers and health care organizations due to the omission of additives in our
products.

The Company packages its products in two ways, Foodservice packs and Retail
carton packs. Most Foodservice pack products are vacuum-sealed and frozen in
either single or multi-serving packaging and then case-packed. Single-pack
items provide maximum customer flexibility, while multi-serving packs provide
additional efficiency and economy for large-scale preparations. The USA and
French facility packages retail cartons for the frozen and refrigerated retail
sales area for retail supermarkets.

DISTRIBUTION

The majority of Company sales are frozen products shipped throughout the USA
and Europe. Cuisine Solutions Norway provides most of the salmon products
globally while France and the USA produce non-salmon products for Europe and
the USA respectively. All products are shipped frozen except for some retail
sales in France, which are refrigerated. The French retail sales are all final
sales,

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and the retailer bears the risk for any unsold product. The French facility
maintains one additional third party warehouse for storage, while the USA
maintains four third party outside warehouses at the end of fiscal year 2003.
Most of the warehouses were created to support the Foodservice sales
requirements for short lead times and product availability. The Company can
quickly and easily add or subtract additional outside warehouses when and where
it is deemed necessary.

The Company sells one hundred percent of its product through its own sales
personnel located in either France or the USA. Norway does not have a sales
force. Norwegian product is sold to either France or the USA as inter-company
sales, or sold by the sales team to ship directly from Norway to customers
located in Europe. All USA sales are to USA markets, and French sales to
European markets.

RAW MATERIAL STATUS

The Company historically purchased its raw materials from a number of different
suppliers at spot market prices except for USA poultry which is purchased by
contract. The practice of spot market purchasing and bidding out to suppliers
does not allow the Company to take advantage of annual low prices in certain
commodity markets, nor does it allow the Company to develop strategic
partnerships with suppliers. Since systems now provide forecast capabilities
and the related material requirements, the Company does engage in a more
strategic approach to procurement and developed strategic purchasing programs.
During fiscal year 2003, the spot market price of raw salmon remained
relatively stable.

PATENTS AND TRADEMARKS AND OTHER ITEMS IMPORTANT TO OPERATING SEGMENTS

The Company believes that its Cuisine Solutions, Inc. and Vie de France
Corporation trademarks are important to its business success. Accordingly, it
takes the necessary steps to protect them. During fiscal year 1998 the Company
assured its protection by transferring the ownership of all trademarks it owns
to Cuisine Solutions, Inc. in addition to maintaining the Vie de France
Corporation trademark. The Company and Vie de France Bakery Yamazaki, Inc.
entered into a Trademark and Service Mark License Agreement in 1991 and, in
conjunction with the sale of the Restaurant Division, amended and restated this
agreement. In 1997, the Company secured the use of a packaging trademark called
MicroRoast and MicroRoti to be used in the U.S. and European market,
respectively. This new packaging is designed for use in microwave ovens and
imparts a roasted quality to our value-added entrees.

During fiscal year 2002, the company has secured in Europe and in the USA the
service trade mark Your Culinary Partner and Votre Partenaire Culinaire
which is being used in our global advertising campaign.

CUSTOMER DEPENDENCY

The Companys largest customers involve two airline distributors that buy
product from Company based upon related demand from airline customers. The
Company sells product to many major airline companies, and does not have a
dependency on any one airline.

The Foodservice channel consists of a wide base of hotel banquet and convention
centers in a decentralized purchase decision environment and no single customer
can have a material impact on the total Company.

SEASONALITY

The seasonality of the hotel banquet industry, in which sales demand typically
peaks in September through December, and March through June, no longer has a
major impact on the total Company due to growing sales of the other sales
channels.

COMPETITION

The Company considers itself to be a leader in the sous-vide product line
within the food service industry in the USA. At present, limited competition
exists within the USA frozen wholesale component of this product line. Other
firms exist in France within the retail and refrigerated components of the
sous-vide prepared foods. As such, the Company primarily competes for sales
against food service providers in the frozen and raw segment, rather than
against other sous-vide suppliers. The Company offers value-added products, but
must offer these products in a price range that makes it economically
advantageous for its users to convert from other methods of food preparation.

The Company believes its products can compete against these other methods in
price, product performance and convenience. The Company also offers
implementation and menu development services, as well as equipment to its
customers as another means of building sales. The Company depends upon its
product development, marketing, and menu items as a means of maintaining its
leadership position within the sous-vide industry.

RESEARCH & DEVELOPMENT

The Company invested $240,000, $395,000 and $593,000 in research and
development activities in fiscal years 2003, 2002 and 2001, respectively. The
Company maintains a staff of experienced culinary and food science
professionals in order to provide the marketplace with innovative products on a
continuous basis. The international staffing in the USA and in France provides
the Company with the latest in culinary trends on both sides of the Atlantic.
The French facility provides a source of dedicated culinary professionals since
the French culinary training is known for its dedication to the art of
perfection with regard to food preparation.

REGULATION

The Company is subject to various Federal, state and local laws affecting its
business, including health, sanitation and safety

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regulations. The U.S. plant operates under USDA supervision over the handling
and labeling of its products. The Company believes its operations comply in all
material respects with applicable laws and regulations. In addition to USDA
standards, all subsidiary facilities are HACCP certified.

The Companys production facilities in Norway and France meet European
Community standards and regulations. The Norwegian products, along with certain
raw materials, are subject to import regulations.

EMPLOYEES

The Company employs approximately 180 people including full-time and part-time
workers and corporate staff.

GEOGRAPHIC SALES

The Companys sales are primarily focused in the United States, with sales
representing 56.4%, 63.2% and 70.4% of total sales for fiscal years 2003, 2002
and 2001, respectively.

ITEM 2. PROPERTIES

The Company owns the French facility and property, and leases its USA office
and its USA and Norwegian manufacturing facilities. The French facility located
in Louviers, France is approximately 15,000 square feet. The U.S. plant,
located in Alexandria, Virginia, is approximately 39,000 square feet. The
Norway plant, located in Hjelmeland, Norway, is approximately 16,000 square
feet. The Companys Norway plant is structured as a twenty-year capital lease
whereby the Company will own the facility at the end of the lease term on
August 31, 2014. The Company owns substantially all of the equipment used in
its facilities. Lease commitments and future minimum lease payments are shown
in Note 9 to the Consolidated Financial Statements, which is included in this
Form 10-K.

ITEM 3. LEGAL PROCEEDINGS

During fiscal 1999, the Company became a partner in a limited liability company
with a Brazilian partner, Sanoli Indsutria E Commercio Alimentacao Ltda, which
has built a manufacturing facility and is marketing product in the Mercusor
market. Cuisine Solutions Inc. owns 39% of this Brazilian joint venture. The
Company contributed technology to the partnership in lieu of a cash
contribution. The Company performed management services to assist with the
design and construction of the manufacturing facility as well as ongoing
management service for operations, research and development, marketing and
administrative support.

The Companys investment in Cuisine Solutions do Brasil Ltda consisted of
advances, Accounts Receivables for services performed and a loan in the amount
of $763,000 that was granted to the Joint Venture Partner during fiscal year
2001. The loan bears interest at the London Interbank Offered Rate (LIBOR)
plus spread accepted by the Central Bank of Brazil at the time of repayment.
The loan was to be repaid within one year and was in default at June 28, 2003.

At the end of fiscal year 2002, the Company has filed a civil lawsuit in the
Federal District Court of Brasilia against the controlling partner in the joint
venture, Cuisine Solutions do Brasil Ltda, as a result of the Brazilian
partners failure to disclose financial information and operating results of
Cuisine Solutions do Brasil Ltda to Cuisine Solutions Inc. according to both
the joint venture agreement and Brazilian law. The Company claims full recovery
of the amounts owed by Cuisine Solutions do Brasil Ltda, including the loan of
$763,000, and in addition the management and administrative fees of $895,000
according to the Joint Venture agreement with the Brazilian Partner. The
managing directors of Cuisine Solutions do Brasil Ltda, Jose Sanchez Aguayo and
Rodrigo Sanchez, were named as nominal defendants in the lawsuit. Due to the
current stage of the filed lawsuit, management cannot predict a judgement from
this lawsuit.

Cuisine Solutions, Inc. has been named as a Co-Defendant in a civil garnishment
action in the amount of $625,000 styled Caisse Regionale du Morbihan et de
Loire Atlantique du Credit Maritime v. Food Research Corporation at law No.
210370, currently pending in the Circuit Court of Fairfax County, Virginia. In
this case, Plaintiff alleges that it obtained a judgment against Food Research
Corp. in France, which it now seeks to enforce upon assets of the entity and
Cuisine Solutions, Inc. in the Commonwealth of Virginia.

Earlier this month (September 2003), Cuisine Solutions filed its answer to
Plaintiffs garnishment summons, denying that it possesses or controls any
funds, assets or any other property belonging to Food Research Corp.
Accordingly, Cuisine Solutions denies any liability in this case.

There are no other material pending legal proceedings, other than ordinary,
routine litigation incidental to the Companys business, to which the Company
is a party or to which any of its property is subject. Management does not
believe that any amounts it may be required to pay by reason thereof will have
a material effect on the Companys financial position or results of operations.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

7



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PART II

ITEM 5. MARKET FOR THE REGISTRANTS COMMON STOCK AND RELATED STOCKHOLDER MATTERS COMMON STOCK

The Companys capital stock is divided into two classes: Common Stock and Class
B Stock. The Class B Stock, which is reserved for issuance to employees under
stock options plans, is identical in all respects to the Common Stock except
that the holders thereof have no voting rights unless otherwise required by
law. The Companys Common Stock is traded in the over-the-counter market on the
NASD National Market System under the symbol CUIS. The following table sets
forth for the quarters indicated the high and low sales prices per share as
reported on the National Market System:

|                         |  |      |      |     |  |   |      | 
|------------------------ |  | ---- | ---- | --- |  | - | ---- | 
|Year ended June 28, 2003 |  | High |      | Low
|First Quarter            |  | $    | .760 |     |  | $ | .300 | 
|Second Quarter           |  |      | .510 |     |  |   | .240 | 
|Third Quarter            |  |      | .800 |     |  |   | .200 | 
|Fourth Quarter           |  |      | .800 |     |  |   | .280 | 

|                         |  |      |       |     |  |   |      | 
|------------------------ |  | ---- | ----- | --- |  | - | ---- | 
|Year ended June 29, 2002 |  | High |       | Low
|First Quarter            |  | $    | 1.250 |     |  | $ | .880 | 
|Second Quarter           |  |      | 1.070 |     |  |   | .550 | 
|Third Quarter            |  |      | .900  |     |  |   | .250 | 
|Fourth Quarter           |  |      | .800  |     |  |   | .500 | 

|                         |  |      |       |     |  |   |       | 
|------------------------ |  | ---- | ----- | --- |  | - | ----- | 
|Year ended June 30, 2001 |  | High |       | Low
|First Quarter            |  | $    | 1.625 |     |  | $ | 1.031 | 
|Second Quarter           |  |      | 2.125 |     |  |   | 1.031 | 
|Third Quarter            |  |      | 2.000 |     |  |   | 1.094 | 
|Fourth Quarter           |  |      | 1.410 |     |  |   | .950  | 

As of September 12, 2003 there were approximately 605 holders of record of the
Companys Common Stock.

No dividends were paid during fiscal year 2003, 2002 and 2001.

On November 30, 1998, the Company was notified by NASDAQ that it no longer met
the minimum $1.00 bid requirement to be included in the NASDAQ National Market
and was delisted. The Company currently trades on the OTC Bulletin Board.

ITEM 6. SELECTED FINANCIAL DATA

FIVE YEAR SUMMARY
(in thousands, except per share amounts)

|                                          |  |      |        |      |  |      |        |      |  |      |        |   |  |   |        |   |  |   |        |  
|----------------------------------------- |  | ---- | ------ | ---- |  | ---- | ------ | ---- |  | ---- | ------ | - |  | - | ------ | - |  | - | ------ | -
|                                          |  | 2003 |        | 2002 |  | 2001 |        | 2000 |  | 1999
|                                          |  |      |        |      |  |      |        |      |  |     
|Net Sales                                 |  | $    | 27,812 |      |  | $    | 28,616 |      |  | $    | 36,138 |   |  | $ | 35,810 |   |  | $ | 27,492 |  
|Loss from operations (1)                  |  |      | (4,022 | )    |  |      | (4,944 | )    |  |      | (660   | ) |  |   | (2,313 | ) |  |   | (1,523 | )
|Net loss (2)                              |  |      | (4,092 | )    |  |      | (6,027 | )    |  |      | (861   | ) |  |   | (1,980 | ) |  |   | (634   | )
|Loss from operations per share            |  |      | (0.25  | )    |  |      | (0.31  | )    |  |      | (0.04  | ) |  |   | (0.16  | ) |  |   | (0.10  | )
|Net loss per share                        |  |      | (0.26  | )    |  |      | (0.38  | )    |  |      | (0.06  | ) |  |   | (0.13  | ) |  |   | (0.04  | )
|Total assets                              |  |      | 16,428 |      |  |      | 18,197 |      |  |      | 22,761 |   |  |   | 24,357 |   |  |   | 26,874 |  
|Long term debt, including
current portion |  |      | 3,661  |      |  |      | 2,924  |      |  |      | 2,582  |   |  |   | 2,449  |   |  |   | 2,569  |  
|Stockholders Equity                      |  |      | 7,466  |      |  |      | 11,156 |      |  |      | 16,514 |   |  |   | 17,392 |   |  |   | 19,342 |  
|Dividends per share                       |  |      |       |      |  |      |       |      |  |      |       |   |  |   |       |   |  |   |       |  

8



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---

|(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

CRITICAL ACCOUNTING ESTIMATES

A summary of the Companys significant accounting policies is included in Note
1 to the Consolidated Financial Statements. Management believes that the
application of these policies on a consistent basis enables the Company to
provide the users of the financial statements with useful and reliable
information about the Companys operating results and financial condition.

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities, disclosure of
contingent assets and liabilities and the reported amounts of revenue and
expenses. Judgments and assessments of uncertainties are required in applying
the Companys accounting policies in many areas.

Statement of Financial Accounting Standards (SFAS) No. 144, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of,
requires management judgments regarding the future operating and disposition
plans for underperforming assets, and estimates of expected realizable values
for assets to be sold. The application of SFAS No. 144 has affected the amounts
and timing of charges to operating results in recent years. Long-lived assets
are assessed for possible impairment whenever events or changes in
circumstances indicate that the carrying amounts may not be recoverable, or
whenever management has committed to a plan to dispose of the assets. Assets to
be held and used affected by such an impairment loss are depreciated or
amortized at their new carrying amount over the remaining estimated useful
life; assets to be sold or otherwise disposed of are not subject to further
depreciation or amortization. Management determines the depreciable lives based
on estimates of the period over which the assets will be of economic benefit to
the Company and management periodically reviews the remaining depreciable lives
based upon actual experience and expected future utilization.

Inventories are valued at the lower of cost, determined by the first-in,
first-out method, or market. Included in inventory costs are raw materials,
labor and manufacturing overhead. Obsolete or unusable inventories are
reflected at their estimated realizable values.

The Company accounts for corporate income taxes in accordance with SFAS No.
109, Accounting for Income Taxes, which requires and asset and liability
approach. This approach results in the recognition of deferred tax assets
(future tax benefits) and liabilities for the expected future tax consequences
of temporary timing differences between the book carrying amounts and the tax
basis of assets and liabilities. Future tax benefits are subject to a valuation
allowance to the extent of the likelihood that the deferred tax assets may not
be realized. The Company has fully reserved it deferred tax asset as a result
of recurring losses and current projections of future operating results.

RESULTS OF OPERATIONS

Fiscal year 2003 revenue of $27,812,000 reflects a consolidated sales decrease
of 2.8% from fiscal year 2002 revenue of $28,616,000. The decrease in sales was
due to a 13.2% decrease in US sales, partially offset by a 17.9% increase in
sales from France and a 5.6% decrease in non-inter-company sales from the
Norwegian subsidiary. The overall sales decline was driven by reduced travel
and cost saving programs of large Cuisine Solutions customers, specifically the
airlines, in addition to the slow down in the economy during the reporting
period. Cuisine Solutions Norway gross sales in US dollars increased by 19.4%
while gross sales in Norwegian Kroner decreased by 1.5%. Approximately 74% of
the sales from Cuisine Solutions Norway are inter-company sales to the USA and
French subsidiaries, and eliminated during the financial consolidation process.

Net losses for fiscal year 2003 were $4,092,000: $1,935,000 lower than fiscal
year 2002 losses of $6,027,000 due primarily to the amortization and impairment
charges recognized of approximately $714,000 relating to the FIVELEAF website
and recognition of losses in the amount of $997,000 from the write-down of the
Brazil investment during fiscal year 2002. Additionally, the Company was
successful in lowering costs in fiscal 2003 by the reduction of plant personnel
and salaries in Alexandria. The return of sales to the airline industry to pre
September 11, 2001 levels has not yet been achieved, however, the Company is
working on flexible solutions to foster sales growth and meet the changing
needs of the industry.

Cuisine Solutions France had the fourth consecutive profitable year since the
acquisition by Cuisine Solutions 1999. Since the acquisition, the French
subsidiary has contributed more than one and a half million US dollars in cash
flow to the Company. In spite of the lackluster economy during the last two
years, the French subsidiary reported profitable results and double digit
growth in the Foodservice channel in France. Although the overall travel
industry suffered declines during the past fiscal year, Management credits both
the thirty-five hour work week rule and its impact on labor cost in France for
the increase in demand for the Foodservice channel as well as aggressive cost
control for the delivery a positive net income in France.

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Cuisine Solutions Norway recorded a loss of $733,000 for fiscal year 2003
comparing to a loss of $19,000 in fiscal year 2002. The loss was due to the
decreased demand of the Norway product line after the economic slowdown ;
consequently fixed overhead costs were spread over smaller production
quantities, which resulted in higher cost of sales and lower net result. The
Company placed the Norwegian operations under the management of Cuisine
Solutions France to implement initiatives to improve operating results and
liquidity of the subsidiary.

Net losses for fiscal year 2002 and 2001 were $6,027,000 and $861,000
respectively against sales of $28,616,000 in fiscal 2002 and $36,138,000 in
fiscal 2001. The increase in losses from 2002 to 2001 was due to the decline in
USA sales, the amortization and impairment of the FIVELEAF website in the
amount of $714,000 and the recognition of losses in connection with the
write-down of the investment in Brazil in the amount of $997,000.

SALES AND GROSS MARGINS

The Companys sales of high-quality foods are sold to airlines, retail
supermarkets, hotel and convention center banquets, passenger rail lines and
harbor cruise lines. USA sales account for 56.4 % of total revenue, while
France and Norway account for 39.3% and 4.3%, respectively after elimination
inter-company sales. Norway produces product for both France and the USA and
total Norwegian production accounts for approximately 12.3% of total Company
sales.

A comparison of net sales, gross margin percentages and losses from operations
as follows:

|                        |  |          |            |          |  |            |            |   |  |   |            |  
|----------------------- |  | -------- | ---------- | -------- |  | ---------- | ---------- | - |  | - | ---------- | -
|                        |  |          |            |          |  | Year Ended |            |   |  |  
|                        |  | June 28, |            | June 29, |  | June 30,  
|                        |  | 2003     |            | 2002     |  | 2001      
|                        |  |          |            |          |  |           
|Net Sales               |  | $        | 27,812,000 |          |  | $          | 28,616,000 |   |  | $ | 36,138,000 |  
|Gross margin percentage |  |          | 17.8       | %        |  |            | 16.4       | % |  |   | 24.7       | %
|Loss from operations    |  | $        | (4,022,000 | )        |  | $          | (4,944,000 | ) |  | $ | (660,000   | )

The Companys net sales decreased by 2.8% to $27,812,000 in fiscal 2003 from
$28,616,000 in fiscal 2002 due to the continued crisis in the travel and
lodging industry. The current year sales decreases primarily affected the
Foodservice, On Board Service and Military channels and were driven by the
reduction in travel, temporary cost saving programs of large customers and
missed opportunities to promote our products to the US Navy. During fiscal
2003, approximately 40% of Cuisine Solutions global sales involved meals to
airlines through airline caterers. Fiscal year 2003 On Board Services and
Foodservices sales decreased each by 7%. Military sales decreased by 60% while
the Retail channel grew by 20% during fiscal 2003.

Gross margins as a percent of sales increased to 17.8% for fiscal 2003 compared
to 16.4% in fiscal 2002, and 24.7% in fiscal 2001. Gross margins increased due
to the refocus and reclassification from cost of goods sold to selling and
administrative expenses of the Companys engineering resources from US
operations to the strategic involvement in the foreign entities to promote
future expansion. This resulted in lower cost of goods, whereas selling and
administrative expenses increased. The reclassification of operations
management expenses amounted to $579,000 for fiscal year 2003 and was included
under Selling and Administrative expenses, whereas $583,000 of similar cost
were included in Cost of goods sold last fiscal year. Consolidated gross margin
would have been 15.7% for fiscal year 2003 excluding the effects of the above
reclassification. In order to reduce cost of sales and improve margins,
personnel in Alexandria was reduced by 15% during the fourth quarter of fiscal
year 2003. The reduction in personnel cost were accompanied by a focused effort
to sell off and reduce excess inventory. Fiscal year 2003 Cost of goods sold
included a significant obsolescence charge of $215,000 relating primarily to
inventory produced for the airlines fall and winter 2001 menus which were never
ordered due to the September 2001 terrorist attacks. Further cost reductions
have been achieved through alternate sources of supply and product mix changes.
Fiscal year 2001 gross margins were considerably higher than 2002 and 2003 due
to the significant higher sales accompanied by lower overhead cost in relation
to those sales.

Cuisine Solutions has strategically built other sales channels over the
previous years to include military and retail accounts and meals for passenger
trains, and has seen consistent results in its French subsidiary.

While there are increased concerns in the marketplace, Management of Cuisine
Solutions will continue the execution of its strategic plans for fiscal 2004,
and remain pro-active during this period of uncertainty.

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SELLING AND ADMINISTRATION EXPENSES

A comparison of selling and general administrative costs follows:

|           |  |          |           |          |  |   |           | 
|---------- |  | -------- | --------- | -------- |  | - | --------- | 
|Year Ended
|          
|June 28,   |  | June 29, |           | June 30,
|2003       |  | 2002     |           | 2001    
|           |  |          |           |         
|$8,757,000 |  | $        | 8,702,000 |          |  | $ | 9,451,000 | 

Selling and administration costs as a percentage of sales were 31.5% in fiscal
2003, 30.4% in fiscal 2002 and 26.1% in fiscal 2001. The percentage increase in
selling expenses from fiscal 2003 versus fiscal 2002 is a result of the
reclassification of the Companys engineering expenses from Cost of goods sold
to selling and administrative expenses. The expenses related to the engineering
resources in the USA amounted to $579,000 for fiscal 2003 and were included in
selling and administrative expenses compared to last years expenses of
$583,000 which were included in Cost of goods sold (see SALES AND GROSS
MARGINS). Excluding the impact of the reclassifications, SG&A costs decreased
by $524,000 or 6% on a consolidated basis compared to the previous year. The
cost reductions in the USA were partially offset by increased SG&A expenses in
France as a result of the increased sales volume and additional costs incurred
relating to the acquisition of a new distribution plant.

DEPRECIATION AND AMORTIZATION

The fiscal year 2003 depreciation and amortization costs decreased by $248,000
over fiscal year 2002 to $1,007,000 as a result of an increased amount of
machinery and equipment becoming fully depreciated during 2003. Actual fiscal
year 2002 depreciation and amortization costs increased by $133,000 over fiscal
year 2001 to $1,255,000 as a result of machinery and equipment acquisitions and
the initial amortization of the FIVELEAF website since the launch of the
website in February 2002.

NON-OPERATING INCOME AND EXPENSE

The non-operating loss for fiscal 2003 of $54,000 primarily consists of
investment income from funds invested in corporate bonds and treasury bills,
and interest expenses relates to the borrowings of the Companys Norwegian and
French subsidiaries, including the Norwegian capital lease.

Management maintains these funds in a trust account with the majority of the
funds invested in government securities. The Company realized a gain of $67,000
on the sale of investments during fiscal year 2003.

At June 28, 2003, the Company had borrowings of $3,661,000, bearing interest at
rates ranging from 3.3% to 6.6%. The majority of these borrowings of $2,863,000
were through its Norwegian subsidiary and includes an outstanding principal
amount of $1,221,000 for the capital lease on the building in Norway and
$1,047,000 in a working capital line of credit. The Company reduced the working
capital line of credit with Den norske Bank by $286,000 during the fourth
quarter of fiscal year 2003 to lower the interest expense for Cuisine Solutions
Norway. Cuisine Solutions France has a remaining principal balance on a term
loan in the amount of $33,000 at 5.6% obtained to finance plant expansion. The
original loan amount equated to approximately $500,000 in September 1998 and
the loan is due September 2003. Additionally, in December 2000, Cuisine
Solutions France entered into a five-year capital lease obligation for a
cooking machine with an initial principal amount of $435,000 and 6% interest on
the outstanding balance of the loan. The current portion of this loan is
$116,000 and the total outstanding principal amounts to $238,000 at June 28,
2003. In October 2002, Cuisine Solutions France entered into a ten year term
loan to finance the acquisition of land and a building to be used as a
distribution plant in the amount of EURO190,000 or $217,000. This loan bears
interest of 5.7% and is due in October 2012. The current portion of this loan
is $17,000 and the total outstanding principal amounts to $207,000 at June 28,
2003. In March 2003, Cuisine Solutions France entered into a five year term
loan to further expand the facility in the amount of EURO280,000 or $320,000.
This loan bears interest of 3.3% and the total outstanding principal amounts to
$320,000 at June 28, 2003.

IMPACT OF INFLATION AND THE ECONOMY

Inflation in labor and ingredient costs can significantly affect the Companys
operations. Many of the Companys employees are paid hourly rates related to,
but generally higher than the federal minimum rates. The Companys sales
pricing structure allows for the fluctuation of raw material prices. As a
result, market price variations do not significantly affect the gross margin
realized on product sales. However, most customers require a sixty-day notice
for price changes in order to update their internal systems and evaluate the
impact of price changes. Therefore, in the event of a continuous accelerated
commodity price increase, the Company must either absorb the price increase
during that sixty day period or discontinue sales to the customer, and risk
losing the long term business relationship.

LIQUIDITY AND CAPITAL RESOURCES

In fiscal year 2003, the Company experienced a considerable decrease in its
liquidity due to recurring losses from operations. This resulted in an increase
in Accounts Payables and Accrued Expenses. Inventories have been further
reduced during fiscal 2003 as a result of aggressive management and efforts to
minimize the effect of cash tied up in inventory in addition to improved
production planning. Accounts Receivables decreased in the USA and Norway due
to the decreased sales volume and focused cash collection management, but
increased in France as a result of the increased sales volume during fiscal
2003.

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The Company held cash and short-term investments of $1,357,000 and $1,958,000
at June 28, 2003 and June 29, 2002 respectively. Additionally, the Company held
long term investments, those with maturities greater than one year, of
$1,331,000 and $2,608,000 at June 28, 2003 and June 29, 2002 respectively. Long
term investments of $1,165,000 secure the overdraft credit facility of the
Norwegian subsidiary at June 28, 2003. Cash in the amount of $1,393,000 was
provided by investing activities from the sale of the long term investments
during fiscal 2003. The cash used by investing activities was primarily related
to investments in buildings as well as machinery and equipment during fiscal
2003.

In fiscal year 2002, the Company experienced an increase in its liquidity due
to decreases in inventory and Accounts Receivables. In fiscal year 2001, the
Company experienced an increase in its liquidity through the sale of securities
for capital gains while inventory increased due to the higher sales volume and
the corresponding requirement to maintain adequate inventory to accommodate
customer demand. This resulted in an increase in cash tied up in inventory. The
Company held cash and short-term investments of $773,000 and investments with
maturities greater than one year of $2,491,000 at June 30, 2001.

Cash used by operations in fiscal year 2003 amounted to $1,581,000 compared to
cash provided in fiscal 2002 of $2,073,000, and cash used in fiscal year 2001
of $719,000. The cash used in fiscal year 2003 relates primarily to the funds
needed to finance the Companys operating losses. The cash provided in fiscal
year 2002 was a result of the aggressive inventory and accounts receivables
management as well as the lower sales volume. The cash used in fiscal year 2001
related to the funds needed to finance the Companys operations, investments in
Brazil and increased inventories.

During fiscal year 2003, the Company made capital expenditures of $1,150,000. A
significant part of these capital expenditures was due to the fact that the
EURO gained about 15% of its value versus the US Dollar during fiscal 2003
which made these investments more expensive when converting to US Dollars.
During fiscal year 2003, Cuisine Solutions France invested over half a million
dollars in the further expansion of the plant, including the acquisition of
land, building, machinery and equipment for a distribution plant. During fiscal
year 2002, the Company made capital expenditures of $1,230,000. These
investments involved the acquisition of machinery and equipment, personal
computers and software upgrades. A portion of the investment in machinery and
equipment was related to the improvement of the refrigeration system and to a
packaging line for private labeling of retail products. A significant part of
the increased capital expenditures is due to the EURO and the Norwegian Kroner
increasing in value between 15% and 20% during fiscal 2002 which made these
investments more expensive when converting to US Dollars. During fiscal year
2001, the Company made capital expenditures of $811,000.

The Companys Norwegian subsidiary has secured a working capital commitment for
its liquidity needs in Norway in the form of an overdraft facility. The
overdraft facility has been reduced during the fiscal year from $1,333,000 to
$1,047,000 through an inter-company loan from Cuisine Solutions France in the
amount of EURO250,000 or $286,000. The overdraft facility is secured by a
letter of credit posted by the U.S. operations banking institution that is
renewed annually. $1,165,000 of the long-term investments secure the letter of
credit and borrowings of $37,000 were available under the overdraft facility at
June 28, 2003.

Contractual Obligations and Commercial Commitments

The Companys significant contractual obligations as of June 28, 2003 are for
debt and operating leases. Debt by year of maturity and future rental payments
under operating lease agreements are presented below. As of June 28, 2003, the
Company does have an outstanding balance on its line of credit of the Norwegian
subsidiary in the amount of $1,010,000 but does not have any purchase
obligations. The Company has not engaged in off-balance sheet financing,
commodity contract trading or significant related party transactions besides
the accrued amount of $268,000 to SOMDIAA related to health and retirement
plans for certain employees.

|                          |  |                        |           |      |  |             |           |           |  |       |         |  |  |  |         |         |  |  |         | 
|------------------------- |  | ---------------------- | --------- | ---- |  | ----------- | --------- | --------- |  | ----- | ------- |  |  |  | ------- | ------- |  |  | ------- | 
|Contractual Obligations   |  | Payments Due by Period
|                          |  |                       
|                          |  |                        |           |      |  | Less than 1 |           |           |  |       |         |  |  |  |         | After 5
|                          |  | Total                  |           | year |  | 1-3 years   |           | 4-5 years |  | years
|                          |  |                        |           |      |  |             |           |           |  |      
|Notes payable  current   |  | $                      | 1,970,000 |      |  | $           | 1,970,000 |           |  |       |        |  |  |  |        |         |  |  |        | 
|Notes payable  long term |  |                        | 1,691,000 |      |  |             |          |           |  |       | 636,000 |  |  |  | 462,000 |         |  |  | 593,000 | 
|Operating lease           |  |                        | 1,779,000 |      |  |             | 435,000   |           |  |       | 707,000 |  |  |  | 637,000 |         |  |  |        | 
|                          |  |                        |           |      |  |             |           |           |  |       |         |  |  |  |         |         |  |  |         | 

LIQUIDITY AND OPERATIONS

With the restructuring of US operations in May 2003, management has taken steps
that it believes are necessary to improve the Companys ability to meet its
cash flow needs for fiscal year 2004 and thereafter. Management closely reviews
the Companys operations and plans to implement additional cost cutting
programs to reduce the Companys operating expenses further. Management does
not believe further cost reductions would materially impair the Companys
ability to carry out planned operations.

Assuming that there are no significant changes to the Companys business plan,
management anticipates to generate cash flow positive results during fiscal
year 2004. Management believes that the combination of cash on hand, cash flows
from operations and if

12



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required outside funding will provide sufficient liquidity to meet the
Companys ongoing cash requirements. However, there can be no assurance that
the Company can or will obtain sufficient funds from operations or from
additional financings on terms acceptable to the Company.

FUTURE PROSPECTS

During fiscal year 2003, the Company continued its focus on the existing sales
channels obtaining penetration into the airline industry, obtaining a large
portion of the market share of the passenger rail market, and expanding as a
retail supplier via the in-store-deli market as well as supplier for premium
frozen food products. These objectives were in addition to gaining a larger
share of the hotel and convention center banquet business. However, due to the
downturn of the economy and especially after the impact of the September 11,
2001 terrorist attacks on the travel industry did now allow the Company to
realize their objectives during fiscal 2003.

Cuisine Solutions plans to return to sales growth from the previous years by
continuing its strong sales efforts in the airline business by a continued
push for new USA accounts and a new focus on the European airline market. While
there are increased concerns in the market place, management of Cuisine
Solutions will continue to strengthen the business relationships with most of
the major airlines, passenger rail lines and harbor cruise lines through
continued value and increase in service by offering flexible solutions upon the
current demand in the industry.

The Company will continue to focus its efforts on large food service
contractors and event planners rather than sales to individual smaller hotels.
Demand for foodservice product in France increased significantly during fiscal
2003 and continued growth is expected for fiscal 2004 due to the continued
customer satisfaction with the quality and variety of product offered by
Cuisine Solutions. Foodservice operators in France are forced to deal with the
thirty-five hour work week constraint and have discovered the Cuisine Solutions
product line offers a solution to the limited availability and higher cost of
labor created as a result of the mandatory work hour rules. Customers in the
Foodservice sales channel place high value on the labor savings, quality,
consistency and food safety associated with Cuisine Solutions product.
Management believes this value increases in the current economic and political
situation challenging todays business environment. In the meantime, Management
has and will continue to initiate aggressive cost reduction programs and
product line changes to meet the changing needs of the industry.

The Retail Sales channel was formally created during fiscal year 2000 with the
objective of penetrating the In-Store Deli category of major North American
retailers. The sales channel and related growth is following a strategy plan
for large volume opportunities with high quality products. Cuisine Solutions is
providing retailers with a heat and serve program that allows supermarkets to
upgrade the variety and quality of meals offered. The Company is working with
retailers to develop the best methodology to execute a larger scale roll-out of
the program and has already introduced the idea to some of the largest
retailers in the USA. The Company has also placed premium private label
products successfully into the retail industry, and industry that is
experiencing a significant increase in frozen food sales versus the traditional
demand for fresh products. A successful retail program would allow the Company
to capture the high volume benefits of USA retail without the marketing
investment usually required in doing business with USA retailers. The increase
in demand, especially from USA retailers, will also allow the Company to move
towards a customer base that has a higher purchase quantity per order and away
from small orders that disrupt the manufacturing process and add costs due to
changeover, start-up loss of efficiency and poor productivity.

Military sales opportunities were lost during fiscal year 2003 as US Navy
carriers were deployed and did not return while the Company did not had the
re-supply chain overseas in place. This channel continues to be managed via a
broker/distributor, adding very little in terms of sales and administrative
expenses. In addition, a consultant has been retained by the Company to further
support the growing opportunity for this sales channel not only with the Navy
but also with the US Army, Air Force and Marine Corps.

The Company will further pursue its role as a supplier for national restaurant
chains that have found that the Companys product quality and ease of use makes
an attractive alternative for providing promotional menu items.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The principal market risks (i.e., the risk of loss arising from adverse changes
in market rates and prices) to which we are exposed are:

Interest rates, foreign exchange rates, sales and marketing.

Interest Rate Exposure:

The Companys exposure to market risk for changes in interest rates relates
primarily to the Companys investment and debt portfolio. The Company has not
used derivative financial instruments in its investment portfolio. The Company
places its investments with high quality issuers. A portion of the debt
portfolio has fluctuating interest rates that change with changes in the
market. Information about the Companys investment portfolio is set forth in
Footnote 4 of Item 14(a) of the Form 10-k.

Foreign Currency Rate Exposure:

International operations constitute 43.6% of fiscal year 2003 Company sales.
The majority of the Companys sales are denominated in

13



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##### 



U.S. dollars, thereby limiting the Companys risk to changes in foreign
currency rates. The Norwegian subsidiarys sales are denominated in Norwegian
Kroner while the French subsidiary reports in EURO. As currency exchange rates
change, translation of the income statements of the Norway and French
operations into U.S. dollars affects year-over-year comparability of operating
results. Sales that are subject to these foreign currency fluctuations are
approximately 44% of the Companys sales. The net assets of the subsidiaries
are approximately 47% of the Companys net assets. The Company does not enter
into hedges to minimize volatility of reported earnings because it does not
believe it is justified by the exposure or the cost. Information about the
Companys foreign currency translation policy is set forth in Footnote 1 of
Item 14(a)(1) of this Form 10-K.

Sales and Marketing Risks:

The future performance of the Companys efforts will depend on a number of
factors. One is the complete recovery of the travel industry, and specifically
the airlines, which have been a major source of Cuisine Solutions revenue and
formal business strategy. The others involve the introduction and roll-out of
new product lines into the Retail sector. Although the economic situation with
the airlines is believed to be temporary, Management cannot forecast the length
and total impact of the current economic cycle. Cuisine Solutions will position
itself to provide maximum value to our airline partners during this difficult
period and remain prepared to resume business growth when the industry
recovers. Cuisine Solutions Management has placed additional focus on the
opportunities available in the retail sector and the success rate will be
contingent upon market acceptance of the product line, price points and
execution of its marketing strategy.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The information required by this Item 8 is included at Item 14(a)(1) and (2).

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures

Our management evaluated, with the participation of our Chief Executive Officer
and our Chief Financial Officer, the effectiveness of our disclosure controls
and procedures as of the end of the period covered by this Annual Report on
Form 10-K. Based on this evaluation, our Chief Executive Officer and our Chief
Financial Officer have concluded that our disclosure controls and procedures
are effective to ensure that information we are required to disclose in reports
that we file or submit under the Securities Exchange Act of 1934 is recorded,
processed, summarized and reported within the time periods specified in
Securities and Exchange Commission rules and forms.

Changes in internal control over financial reporting

There was no change in our internal control over financial reporting that
occurred during the period covered by this Annual Report on Form 10-K that has
materially affected, or is reasonably likely to materially affect, our internal
control over financial reporting.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information required under this Item 10 is shown in the Proxy Statement to
be filed under Regulation 14A, under the caption Election of Directors, and
such information is incorporated herein by reference.

EXECUTIVE OFFICERS

The following list and narrative sets forth the name and age of each present
executive officer of the Company, all positions held by the person with the
Company, the year in which the person first became an officer, and the
principal occupations of each person named.

|                   |  |     |    |                          |  |                                                            |  |  |      | 
|------------------ |  | --- | -- | ------------------------ |  | ---------------------------------------------------------- |  |  | ---- | 
|Name               |  | Age |    | Office held with Company |  | Since                                                     
|                   |  |     |    |                          |  |                                                           
|Stanislas Vilgrain |  |     | 44 |                          |  | President and Chief Executive Officer                      |  |  | 1994 | 
|Andreas Pfann      |  |     | 37 |                          |  | Chief Financial Officer, Treasurer
and Corporate Secretary |  |  | 2002 | 
|Gerard Bertholon   |  |     | 43 |                          |  | President of FIVELEAF                                      |  |  | 2002 | 

14



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##### 



Mr. Vilgrain was appointed President and Chief Executive Officer in October
1993, having served as President and Chief Operating Officer since June 1991
and as a director since 1991. He served as President of the Vie de France
Culinary Division from July 1987 to June 1991. Previously, he was employed by
Vie de France Corporation as Director of Staff Operations from August 1986
through June 1987. He was Manager of the Vie de France Corporations San
Francisco bakery from January 1986 through August 1986, after having served as
Assistant Manager of the Denver bakery from July 1984 through December 1985.
Prior to joining Vie de France Corporation, he was Assistant to the Director of
Research & Development for the Bakery Division of Grands Moulins de Paris from
June 1983 to July 1984, and was Regional Manager of Operations and Sales from
July 1982 through May 1983 for O.F.U.P., a publication distributor in Paris,
France.

Mr. Pfann was appointed Chief Financial Officer and Treasurer in October 2002,
after being Vice President Finance since July 2001 and the Companys Corporate
Controller since October 2000. Mr. Pfann has over eight years of experience in
public accounting with KPMG in Europe and previously as an audit manager with
Ernst & Young in Germany and the United States.

Mr. Bertholon joined Cuisine Solutions in August 1989 as Director of Research &
Development then VP of International Sales in 1997 and VP of Marketing in
December 2000. Mr. Bertholon was appointed President for FIVELEAF in January
2002. He has over 26 years of experience in the international foodservice
industry. Prior to joining the Company, Mr. Bertholon was Executive Chef for 9
years in the United States.

ITEM 11. EXECUTIVE COMPENSATION

The information required under this Item 11 is shown in the Proxy Statement to
be filed under Regulation 14A, under the caption Executive Compensation, and
such information, except for the information required by Item 402(k) and Item
402(l) of Regulation S-K, is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information required under this Item 12 is shown in the Proxy Statement to
be filed under Regulation 14A, under the caption Voting Securities and
Principal Holders Thereof, and such information is incorporated herein by
reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required under this Item 13 is shown in the Proxy Statement to
be filed under Regulation 14A, under the caption Certain Transactions, and
such information is incorporated herein by reference.

PART IV

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required under this Item 14 is disclosed in the Proxy Statement
to be filed under Regulation 14A, under the caption Principal Accountant Fees
and Services, and such information is incorporated herein by reference.

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 10-K

(a)  Index to Financial Statements

|                         |                                                                                                                                  |  |  |      |  | 
|------------------------ | -------------------------------------------------------------------------------------------------------------------------------- |  |  | ---- |  | 
|                         |                                                                                                                                  |  |  | Page
|                         |                                                                                                                                  |  |  |     
|(1) Financial Statements |                                                                                                                                  |  |  |     
|                        
|                         | Report of Independent Accountants
Grant Thornton LLP as of and for the year ended June 28,
2003, June 29, 2002 and June 30, 2001 |  |  | 18   | 
|                         | Consolidated Balance Sheets  June 28, 2003 and June 29,
2002                                                                    |  |  | 19   | 
|                         | Consolidated Statement of Operations  Fiscal Years
Ended June 28, 2003, June 29, 2002 and June 30, 2001                         |  |  | 20   | 
|                         | Consolidated Statement of Changes in Stockholders
Equity  Fiscal Years Ended June 28, 2003, June 29, 2002
and June 30, 2001    |  |  | 21   | 
|                         | Consolidated Statement of Cash Flows  Fiscal Years
Ended June 28, 2003, June 29, 2002 and June 30, 2001                         |  |  | 22   | 
|                         | Notes to Consolidated Financial Statements                                                                                       |  |  | 23   | 

15



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##### 



|                                                |                                   |  |      |  | 
|----------------------------------------------- | --------------------------------- |  | ---- |  | 
|                                                |                                   |  | Page
|                                                |                                   |  |     
|                                                | (2) Financial Statement Schedule: |  |      |  | 
|Schedule II  Valuation and Qualifying Accounts |                                   |  | 35   | 

All other schedules are omitted because they are not applicable or the required
information is shown in the financial statements or notes thereto.

(3)  Exhibits:

The following exhibits are incorporated in this report by reference from
identically numbered exhibits to the Companys Amendment to its Annual Report
for the year ended June 27, 1992 on Form 8 dated February 26, 1993:

|        |  |                                                                     
|------- |  | --------------------------------------------------------------------
|Exhibit |  |                                                                     
|No.     |  | Description of Exhibit                                              
|        |  |                                                                     
|3-A     |  | The Certificate of Incorporation of the Company, as amended to date.
|        |  |                                                                     
|3-B     |  | The By-Laws of the Company, as amended to date.                     

The following exhibits are incorporated in this report by reference from an
identically numbered exhibit to the Companys Annual Report on Form 10-K for
the year ended June 29, 1991:

|      |  |                                                                                                                                                                                                                                                   
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|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.

The following exhibits are incorporated in this report by reference from the
Companys two Registration Statements on Form S-8, dated April 5, 1993:

|      |  |                                                  
|----- |  | -------------------------------------------------
|10.52 |  | The Companys 1986 Stock Option Plan, as amended.
|      |  |                                                  
|10.53 |  | The Companys 1992 Stock Option Plan.            
|      |  |                                                  
|10.54 |  | The Companys 1999 Stock Option Plan.            

The following exhibits are filed as exhibits to this report in the indicated
sections.

23 Consent of Independent Accountants.

31.1 Written statement of Chief Executive Officer and Chief Financial Officer
pursuant to section 302 of the Sarbanes-Oxley Act of 2002

32.1 Written statement of Chief Executive Officer and Chief Financial Officer
pursuant to section 906 of the Sarbanes-Oxley Act of 2002

(b)  Exhibits:

Exhibits required to be filed in response to this paragraph of Item 13 are
listed above in subparagraph (a)(3).

(c)  Financial Statement Schedule:

Schedules and reports thereon by independent accountants required to be filed
in response to this paragraph of Item 13 are listed in Item13(a)(2).

16



---



##### 



SIGNATURES

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

CUISINE SOLUTIONS, INC.
(Registrant)

| |                               |                        | 
| | ----------------------------- | ---------------------- | 
| | By:                           | /s/ Stanislas Vilgrain | 
| |                               |                        | 
| | Stanislas Vilgrain           
| | President                    
| | and Chief Executive Officer  
| | (Principal Executive Officer)

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

|                        |  |                                    |  |                   
|----------------------- |  | ---------------------------------- |  | ------------------
|Signature               |  | Title                              |  | Date              
|                        |  |                                    |  |                   
|/s/ Jean-Louis Vilgrain |  | Chairman of the Board              |  | September 26, 2003
|                        |  |                                    |  |                   
|Jean-Louis Vilgrain     |  |                                    |  |                   
|                        |  |                                    |  |                   
|/s/ Stanislas Vilgrain  |  | President,                         |  | September 26, 2003
|                        |  | Chief Executive Officer            |  |                   
|Stanislas Vilgrain      |  |                                    |  |                   
|                        |  |                                    |  |                   
|/s/ Sebastien Vilgrain  |  | Director                           |  | September 26, 2003
|                        |  |                                    |  |                   
|Sebastien Vilgrain      |  |                                    |  |                   
|                        |  |                                    |  |                   
|/s/ Charles McGettigan  |  | Director                           |  | September 26, 2003
|                        |  |                                    |  |                   
|Charles McGettigan      |  |                                    |  |                   
|                        |  |                                    |  |                   
|/s/ Robert van Roijen   |  | Director                           |  | September 26, 2003
|                        |  |                                    |  |                   
|Robert van Roijen       |  |                                    |  |                   
|                        |  |                                    |  |                   
|/s/ Andreas Pfann       |  | Chief Financial Officer, Treasurer |  | September 26, 2003
|                        |  | and Corporate Secretary (Principal |  |                   
|Andreas Pfann           |  | Financial and Accounting Official) |  |                   

17



---



##### 



Independent Auditors Report

The Board of Directors and Stockholders
CUISINE SOLUTIONS, INC.:

We have audited the accompanying consolidated balance sheets of Cuisine
Solutions, Inc., and subsidiaries as of June 28, 2003 and June 29, 2002, and
the related consolidated statements of operations, changes in stockholders
equity and cash flows for each of the three years in the period ended June 28,
2003. In connection with our audit of the consolidated financial statements we
also have audited the financial statement schedule for each of the three years
in the period ended June 28, 2003 as listed in the accompanying index. These
consolidated financial statements and financial statement schedule are the
responsibility of the Companys management. Our responsibility is to express an
opinion on these consolidated financial statements and financial statement
schedule based on our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Cuisine Solutions,
Inc., and subsidiaries as of June 28, 2003 and June 29, 2002, and the results
of their operations, and their cash flows for each of the three years in the
period ended June 28, 2003, in conformity with accounting principles generally
accepted in the United States of America. Also, in our opinion, the related
financial statement schedule for each of the three years in the period ended
June 28, 2003, when considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly, in all material respects, the
information set forth therein.

| |                   
| | ------------------
| | GRANT THORNTON LLP

Vienna, Virginia
September 5, 2003

18



---



##### 



CUISINE SOLUTIONS, INC.

CONSOLIDATED BALANCE SHEETS


|                                                                                                                                                       |                                            |                      |                            |                           |            |           |             |            |            |            |           | 
|------------------------------------------------------------------------------------------------------------------------------------------------------ | ------------------------------------------ | -------------------- | -------------------------- | ------------------------- | ---------- | --------- | ----------- | ---------- | ---------- | ---------- | --------- | 
|                                                                                                                                                       |                                            |                      |                            |                           |            | June 28,  |             | June 29,  
|                                                                                                                                                       |                                            |                      |                            |                           |            | 2003      |             | 2002      
|                                                                                                                                                       |                                            |                      |                            |                           |            |           |             |           
|ASSETS                                                                                                                                                 |                                            |                      |                            |                           |            |           |             |           
|Current Assets                                                                                                                                         |                                            |                      |                            |                           |            |           |             |           
|                                                                                                                                                       | Cash and cash equivalents                  |                      | $                          | 1,357,000                 |            |           | $           | 1,958,000  |           
|                                                                                                                                                       | Accounts receivable, trade                 |                      |                            | 3,479,000                 |            |           |             | 3,272,000  |           
|Inventory                                                                                                                                              |                                            |                      | 4,056,000                  |                           |            |           | 4,419,000   |           
|Prepaid expenses                                                                                                                                       |                                            |                      | 450,000                    |                           |            |           | 291,000     |           
|Current portion of notes receivable, related party                                                                                                     |                                            |                      | 32,000                     |                           |            |           | 5,000       |           
|Other current assets                                                                                                                                   |                                            |                      | 450,000                    |                           |            |           | 477,000     |           
|                                                                                                                                                       |                                            |                      |                            |                           |            |           |             |           
|                                                                                                                                                       |                                            | TOTAL CURRENT ASSETS |                            |                           | 9,824,000  |           |             |            | 10,422,000 |           
|Investments, non current                                                                                                                               |                                            |                      | 1,331,000                  |                           |            |           | 2,608,000   |           
|Fixed assets, net                                                                                                                                      |                                            |                      | 5,264,000                  |                           |            |           | 5,121,000   |           
|Note receivable, officer and related party,
including accrued interest, less current portion                                                           |                                            |                      |                           |                           |            |           | 38,000      |           
|Other assets                                                                                                                                           |                                            |                      | 9,000                      |                           |            |           | 8,000       |           
|                                                                                                                                                       |                                            |                      |                            |                           |            |           |             |           
|                                                                                                                                                       |                                            | TOTAL ASSETS         |                            | $                         | 16,428,000 |           |             | $          | 18,197,000 |           
|                                                                                                                                                       |                                            |                      |                            |                           |            |           |             |           
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                   |                                            |                      |                            |                           |            |           |             |           
|Current liabilities                                                                                                                                    |                                            |                      |                            |                           |            |           |             |           
|                                                                                                                                                       | Current portion of long-term debt          |                      |                            | 1,970,000                 |            |           |             | 1,585,000  |           
|                                                                                                                                                       | Accounts payable and accrued expenses      |                      |                            | 3,950,000                 |            |           |             | 2,811,000  |           
|                                                                                                                                                       | Accrued payroll and related liabilities    |                      |                            | 1,351,000                 |            |           |             | 1,306,000  |           
|                                                                                                                                                       |                                            |                      |                            |                           |            |           |             |           
|                                                                                                                                                       |                                            |                      |                            | Total current liabilities |            |           | 7,271,000   |            |            |            | 5,702,000 | 
|Long-term debt, less current portion                                                                                                                   |                                            |                      | 1,691,000                  |                           |            |           | 1,339,000   |           
|                                                                                                                                                       |                                            |                      |                            |                           |            |           |             |           
|                                                                                                                                                       |                                            |                      | TOTAL LIABILITIES          |                           |            | 8,962,000 |             |            |            | 7,041,000  |          
|                                                                                                                                                       |                                            |                      |                            |                           |            |           |             |           
|Stockholders equity                                                                                                                                   |                                            |                      |                            |                           |            |           |             |           
|Common stock  $.01 par value, 20,000,000 shares authorized,
15,824,788 shares issued and outstanding
at June 28, 2003 and June 29, 2002, respectively |                                            |                      | 159,000                    |                           |            |           | 159,000     |           
|Class B Stock  $.01 par value, 175,000 shares authorized,
none issued                                                                                 |                                            |                      |                           |                           |            |           |            |           
|Additional paid-in capital                                                                                                                             |                                            |                      | 26,284,000                 |                           |            |           | 26,284,000  |           
|Accumulated deficit                                                                                                                                    |                                            |                      | (19,486,000                | )                         |            |           | (15,394,000 | )         
|Accumulated Other Comprehensive Income                                                                                                                 |                                            |                      |                            |                           |            |           |             |           
|Unrealized gain on debt and equity investments                                                                                                         |                                            |                      | 59,000                     |                           |            |           | 10,000      |           
|Cumulative translation adjustment                                                                                                                      |                                            |                      | 450,000                    |                           |            |           | 97,000      |           
|Treasury Stock, at cost (0 shares at June 28, 2003
and June 29, 2002)                                                                                  |                                            |                      |                           |                           |            |           |            |           
|                                                                                                                                                       |                                            |                      |                            |                           |            |           |             |           
|                                                                                                                                                       |                                            |                      | TOTAL STOCKHOLDERS EQUITY |                           |            | 7,466,000 |             |            |            | 11,156,000 |          
|                                                                                                                                                       |                                            |                      |                            |                           |            |           |             |           
|                                                                                                                                                       | TOTAL LIABILITIES AND STOCKHOLDERS EQUITY |                      | $                          | 16,428,000                |            |           | $           | 18,197,000 |           
|                                                                                                                                                       |                                            |                      |                            |                           |            |           |             |           

See accompanying notes to consolidated financial statements.

19



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##### 



CUISINE SOLUTIONS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS


|                                             |                                          |   |            |            |          |   |            |            |   |   |            |            |  
|-------------------------------------------- | ---------------------------------------- | - | ---------- | ---------- | -------- | - | ---------- | ---------- | - | - | ---------- | ---------- | -
|                                             |                                          |   | Year Ended
|                                             |                                          |   |           
|                                             |                                          |   | June 28,   |            | June 29, |   | June 30,  
|                                             |                                          |   | 2003       |            | 2002     |   | 2001      
|                                             |                                          |   |            |            |          |   |           
|                                             | Net sales                                |   | $          | 27,812,000 |          |   | $          | 28,616,000 |   |   | $          | 36,138,000 |  
|                                             | Cost of goods sold                       |   |            | 22,875,000 |          |   |            | 23,928,000 |   |   |            | 27,212,000 |  
|                                             |                                          |   |            |            |          |   |            |            |   |   |            |           
|Gross margin                                 |                                          |   | 4,937,000  |            |          |   | 4,688,000  |            |   |   | 8,926,000  |           
|                                             | Selling and administration               |   |            | 8,757,000  |          |   |            | 8,702,000  |   |   |            | 9,451,000  |  
|                                             | Depreciation and amortization            |   |            | 257,000    |          |   |            | 377,000    |   |   |            | 250,000    |  
|                                             | Impairment FIVELEAF asset                |   |            |           |          |   |            | 619,000    |   |   |            |           |  
|                                             | Other operating income                   |   |            | (55,000    | )        |   |            | (66,000    | ) |   |            | (115,000   | )
|                                             |                                          |   |            |            |          |   |            |            |   |   |            |           
|Loss from operations                         |                                          |   | (4,022,000 | )          |          |   | (4,944,000 | )          |   |   | (660,000   | )         
|                                             |                                          |   |            |            |          |   |            |            |   |   |            |           
|Non operating income (expense)               |                                          |   |            |            |          |   |            |            |   |   |            |           
|                                             | Investment income                        |   |            | 143,000    |          |   |            | 172,000    |   |   |            | 202,000    |  
|                                             | Interest expense                         |   |            | (263,000   | )        |   |            | (195,000   | ) |   |            | (199,000   | )
|                                             | Loss in equity from investment in Brazil |   |            |           |          |   |            | (997,000   | ) |   |            | (661,000   | )
|                                             | Other income (expense)                   |   |            | 66,000     |          |   |            | (49,000    | ) |   |            | 460,000    |  
|                                             |                                          |   |            |            |          |   |            |            |   |   |            |           
|Total non-operating income (expense)         |                                          |   | (54,000    | )          |          |   | (1,069,000 | )          |   |   | (198,000   | )         
|                                             |                                          |   |            |            |          |   |            |            |   |   |            |           
|                                             | Loss before income taxes                 |   |            | (4,076,000 | )        |   |            | (6,013,000 | ) |   |            | (858,000   | )
|                                             | Provision for income tax expense         |   |            | (16,000    | )        |   |            | (14,000    | ) |   |            | (3,000     | )
|                                             |                                          |   |            |            |          |   |            |            |   |   |            |           
|Net loss                                     |                                          | $ | (4,092,000 | )          |          | $ | (6,027,000 | )          |   | $ | (861,000   | )         
|                                             |                                          |   |            |            |          |   |            |            |   |   |            |           
|Basic and diluted net loss per common share: |                                          |   |            |            |          |   |            |            |   |   |            |           
|                                             | Net loss per common share                |   | $          | (0.26      | )        |   | $          | (0.38      | ) |   | $          | (0.06      | )
|Weighted average shares outstanding          |                                          |   | 15,824,788 |            |          |   | 15,824,588 |            |   |   | 14,776,215 |           
|                                             |                                          |   |            |            |          |   |            |            |   |   |            |           

See accompanying notes to consolidated financial statements.

20



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##### 



CUISINE SOLUTIONS, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY


|                            |               |                                   |                                       |                                                 |   |        |            |         |   |              |             |             |   |             |          |                  |  |               |          |                  |  |       |            |   |  |           |            |            |         |        |          |  
|--------------------------- | ------------- | --------------------------------- | ------------------------------------- | ----------------------------------------------- | - | ------ | ---------- | ------- | - | ------------ | ----------- | ----------- | - | ----------- | -------- | ---------------- |  | ------------- | -------- | ---------------- |  | ----- | ---------- | - |  | --------- | ---------- | ---------- | ------- | ------ | -------- | -
|                            |               |                                   |                                       |                                                 |   |        |            |         |   |              |             |             |   | Retained    |          |                  |  |               |          | Unrealized Gains |  |       |            |   |  |           |            |           
|                            |               |                                   |                                       |                                                 |   |        |            |         |   | Additional   |             | Earnings    |   | Cumulative  |          | (Losses) on Debt |  |               |          |                  |  | Total
|                            |               |                                   |                                       |                                                 |   | Common |            | Paid-In |   | (Accumulated |             | Translation |   | and Equity  |          | Treasury         |  | Stockholders
|                            |               |                                   |                                       |                                                 |   | Stock  |            | Capital |   | Deficit)     |             | Adjustment  |   | Investments |          | Stock            |  | Equity       
|                            |               |                                   |                                       |                                                 |   |        |            |         |   |              |             |             |   |             |          |                  |  |              
|Balance, June 24, 2000      |               | $                                 | 156,000                               |                                                 |   | $      | 28,276,000 |         |   | $            | (8,506,000  | )           |   | $           | (34,000  | )                |  | $             | (453,000 | )                |  | $     | (2,047,000 | ) |  | $         | 17,392,000 |           
|                            |               |                                   |                                       |                                                 |   |        |            |         |   |              |             |             |   |             |          |                  |  |               |          |                  |  |       |            |   |  |           |            |           
|                            |               |                                   | Exercise of common stock
options      |                                                 | $ | 1,000  |            |         | $ | 57,000       |             |             |   |             |          |                  |  |               |          |                  |  |       |            |   |  |           |            |            | $       | 58,000 |         
|                            | 2001 net loss |                                   |                                       |                                                |   |        |            |        |   |              |             | (861,000    | ) |             |          |                 |  |               |          |                 |  |       |            |  |  |           |            | (861,000   | )      
|                            |               |                                   | Other Comprehensive Income            |                                                 |   |        |            |         |   |              |             |             |   |             |          |                  |  |               |          |                  |  |       |            |   |  |           |            |            |         |        |         
|                            |               |                                   |                                       | Unrealized gains on debt
and equity investments |   |        |           |         |   |              |            |             |   |             |         |                  |  |               |         |                  |  |       | 346,000    |   |  |           |           |            |         |        | 346,000  |  
|                            |               |                                   |                                       | Translation adjustment                          |   |        |           |         |   |              |            |             |   |             |         |                  |  |               | (421,000 | )                |  |       |           |   |  |           |           |            |         |        | (421,000 | )
|                            |               |                                   |                                       |                                                 |   |        |            |         |   |              |             |             |   |             |          |                  |  |               |          |                  |  |       |            |   |  |           |            |           
|                            |               | Other Comprehensive               |                                       |                                                 |   |        |            |         |   |              |             |             |   |             |          |                  |  |               |          |                  |  |       |            |   |  |           |            |            |         |       
|                            |               | Income/(Loss)                     |                                       |                                                 |   |        |            |         |   |              |             |             |   |             |          |                  |  |               |          |                  |  |       |            |   |  |           |            |            | (75,000 | )     
|Comprehensive Income/(Loss) |               |                                   |                                       |                                                 |   |        |            |         |   |              |             |             |   |             |          |                  |  |               |          |                  |  |       |            |   |  |           | (936,000   | )         
|                            |               |                                   |                                       |                                                 |   |        |            |         |   |              |             |             |   |             |          |                  |  |               |          |                  |  |       |            |   |  |           |            |           
|Balance, June 30, 2001      |               | $                                 | 157,000                               |                                                 |   | $      | 28,333,000 |         |   | $            | (9,367,000  | )           |   | $           | (455,000 | )                |  | $             | (107,000 | )                |  | $     | (2,047,000 | ) |  | $         | 16,514,000 |           
|                            |               |                                   |                                       |                                                 |   |        |            |         |   |              |             |             |   |             |          |                  |  |               |          |                  |  |       |            |   |  |           |            |           
|                            |               |                                   | Issuance of unregistered
common stock |                                                 | $ | 2,000  |            |         | $ | (2,000       | )           |             |   |             |          |                  |  |               |          |                  |  |       |            |   |  |           |            |            |         |       |         
|                            |               |                                   | and treasury shares                   |                                                 |   |        |            |         |   | (2,047,000   | )           |             |   |             |          |                  |  |               |          |                  |  |       |            |   |  | 2,047,000 |            |            |         |       |         
|                            | 2002 net loss |                                   |                                       |                                                |   |        |            |        |   |              |             | (6,027,000  | ) |             |          |                 |  |               |          |                 |  |       |            |  |  |           |            | (6,027,000 | )      
|                            |               |                                   | Other Comprehensive Income            |                                                 |   |        |            |         |   |              |             |             |   |             |          |                  |  |               |          |                  |  |       |            |   |  |           |            |            |         |        |         
|                            |               |                                   |                                       | Unrealized gains on debt
and equity investments |   |        |           |         |   |              |            |             |   |             |         |                  |  |               |         |                  |  |       | 117,000    |   |  |           |           |            |         |        | 117,000  |  
|                            |               |                                   |                                       | Translation adjustment                          |   |        |           |         |   |              |            |             |   |             |         |                  |  |               | 552,000  |                  |  |       |           |   |  |           |           |            |         |        | 552,000  |  
|                            |               |                                   |                                       |                                                 |   |        |            |         |   |              |             |             |   |             |          |                  |  |               |          |                  |  |       |            |   |  |           |            |           
|                            |               | Other Comprehensive
Income/(Loss) |                                       |                                                 |   |        |            |         |   |              |             |             |   |             |          |                  |  |               |          |                  |  |       |            |   |  |           |            |            | 669,000 |       
|Comprehensive Income/(Loss) |               |                                   |                                       |                                                 |   |        |            |         |   |              |             |             |   |             |          |                  |  |               |          |                  |  |       |            |   |  |           | (5,358,000 | )         
|                            |               |                                   |                                       |                                                 |   |        |            |         |   |              |             |             |   |             |          |                  |  |               |          |                  |  |       |            |   |  |           |            |           
|Balance, June 29, 2002      |               | $                                 | 159,000                               |                                                 |   | $      | 26,284,000 |         |   | $            | (15,394,000 | )           |   | $           | 97,000   |                  |  | $             | 10,000   |                  |  | $     |           |   |  | $         | 11,156,000 |           
|                            |               |                                   |                                       |                                                 |   |        |            |         |   |              |             |             |   |             |          |                  |  |               |          |                  |  |       |            |   |  |           |            |           
|                            | 2003 net loss |                                   |                                       |                                                |   |        |            |        |   |              |             | (4,092,000  | ) |             |          |                 |  |               |          |                 |  |       |            |  |  |           |            | (4,092,000 | )      
|                            |               |                                   | Other Comprehensive Income            |                                                 |   |        |            |         |   |              |             |             |   |             |          |                  |  |               |          |                  |  |       |            |   |  |           |            |            |         |        |         
|                            |               |                                   |                                       | Unrealized gains on debt
and equity investments |   |        |           |         |   |              |            |             |   |             |         |                  |  |               |         |                  |  |       | 49,000     |   |  |           |           |            |         |        | 49,000   |  
|                            |               |                                   |                                       | Translation adjustment                          |   |        |           |         |   |              |            |             |   |             |         |                  |  |               | 353,000  |                  |  |       |           |   |  |           |           |            |         |        | 353,000  |  
|                            |               |                                   |                                       |                                                 |   |        |            |         |   |              |             |             |   |             |          |                  |  |               |          |                  |  |       |            |   |  |           |            |           
|                            |               | Other Comprehensive
Income/(Loss) |                                       |                                                 |   |        |            |         |   |              |             |             |   |             |          |                  |  |               |          |                  |  |       |            |   |  |           |            |            | 402,000 |       
|Comprehensive Income/(Loss) |               |                                   |                                       |                                                 |   |        |            |         |   |              |             |             |   |             |          |                  |  |               |          |                  |  |       |            |   |  |           | (3,690,000 | )         
|                            |               |                                   |                                       |                                                 |   |        |            |         |   |              |             |             |   |             |          |                  |  |               |          |                  |  |       |            |   |  |           |            |           
|Balance, June 28, 2003      |               | $                                 | 159,000                               |                                                 |   | $      | 26,284,000 |         |   | $            | (19,486,000 | )           |   | $           | 450,000  |                  |  | $             | 59,000   |                  |  | $     |           |   |  | $         | 7,466,000  |           
|                            |               |                                   |                                       |                                                 |   |        |            |         |   |              |             |             |   |             |          |                  |  |               |          |                  |  |       |            |   |  |           |            |           

See accompanying notes to consolidated financial statements.

21



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##### 



CUISINE SOLUTIONS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS


|                                                                                      |                                                                             |                                                                |            |            |           |          |            |            |           |   |          |            |            |  
|------------------------------------------------------------------------------------- | --------------------------------------------------------------------------- | -------------------------------------------------------------- | ---------- | ---------- | --------- | -------- | ---------- | ---------- | --------- | - | -------- | ---------- | ---------- | -
|                                                                                      |                                                                             |                                                                |            | Year Ended
|                                                                                      |                                                                             |                                                                |            |           
|                                                                                      |                                                                             |                                                                |            | June 28,   |           | June 29, |            | June 30,  
|                                                                                      |                                                                             |                                                                |            | 2003       |           | 2002     |            | 2001      
|                                                                                      |                                                                             |                                                                |            |            |           |          |            |           
|CASH FLOWS FROM OPERATING ACTIVITIES                                                  |                                                                             |                                                                |            |            |           |          |            |            |           |   |          |           
|Net loss                                                                              |                                                                             | $                                                              | (4,092,000 | )          |           | $        | (6,027,000 | )          |           | $ | (861,000 | )         
|Adjustments to reconcile net loss to net cash (used) provided
by operating activities
|                                                                                      | Depreciation and amortization                                               |                                                                |            | 1,007,000  |           |          |            | 1,255,000  |           |   |          | 1,122,000  |           
|                                                                                      | (Gain) Loss on sale of investments                                          |                                                                |            | (67,000    | )         |          |            |           |           |   |          | 158,000    |           
|                                                                                      | Loss in equity from investment in Brazil                                    |                                                                |            |           |           |          |            | 944,000    |           |   |          | 661,000    |           
|                                                                                      | Change in cumulative translation adjustment                                 |                                                                |            | 353,000    |           |          |            | 552,000    |           |   |          | (421,000   | )         
|                                                                                      | Changes in assets and liabilities, net of
effects of non-cash transactions: |                                                                |            |            |           |          |            |            |           |   |          |            |           
|                                                                                      |                                                                             | (Increase) decrease in trade accounts receivable, net          |            |            | (207,000  | )        |            |            | 1,644,000 |   |          |            | 945,000    |  
|                                                                                      |                                                                             | Decrease (increase) in inventory                               |            |            | 363,000   |          |            |            | 1,982,000 |   |          |            | (1,218,000 | )
|                                                                                      |                                                                             | (Increase) decrease in prepaid expenses                        |            |            | (159,000  | )        |            |            | 5,000     |   |          |            | (237,000   | )
|                                                                                      |                                                                             | Decrease in notes receivable, related party                    |            |            | 11,000    |          |            |            | 417,000   |   |          |            | 239,000    |  
|                                                                                      |                                                                             | Decrease (increase) in other assets                            |            |            | 26,000    |          |            |            | 849,000   |   |          |            | (256,000   | )
|                                                                                      |                                                                             | Increase (decrease) in accounts payable
and accrued expenses   |            |            | 1,139,000 |          |            |            | 45,000    |   |          |            | (619,000   | )
|                                                                                      |                                                                             | Increase (decrease) in accrued payroll and related liabilities |            |            | 45,000    |          |            |            | 410,000   |   |          |            | (204,000   | )
|                                                                                      |                                                                             | Decrease in other non current liabilities                      |            |            |          |          |            |            |          |   |          |            | (22,000    | )
|                                                                                      |                                                                             | Decrease in other accrued taxes                                |            |            |          |          |            |            | (3,000    | ) |          |            | (6,000     | )
|                                                                                      |                                                                             |                                                                |            |            |           |          |            |            |           |   |          |           
|Net cash (used) provided by operating activities                                      |                                                                             |                                                                | (1,581,000 | )          |           |          | 2,073,000  |            |           |   | (719,000 | )         
|                                                                                      |                                                                             |                                                                |            |            |           |          |            |            |           |   |          |           
|CASH FLOWS FROM INVESTING ACTIVITIES                                                  |                                                                             |                                                                |            |            |           |          |            |            |           |   |          |           
|                                                                                      | Sale of investments                                                         |                                                                |            | 1,393,000  |           |          |            |           |           |   |          | 2,412,000  |           
|                                                                                      | Increase in investment in Brazil                                            |                                                                |            |           |           |          |            |           |           |   |          | (1,248,000 | )         
|                                                                                      | Capital expenditures                                                        |                                                                |            | (1,150,000 | )         |          |            | (1,230,000 | )         |   |          | (811,000   | )         
|                                                                                      |                                                                             |                                                                |            |            |           |          |            |            |           |   |          |           
|Net cash provided (used) by investing activities                                      |                                                                             |                                                                | 243,000    |            |           |          | (1,230,000 | )          |           |   | 353,000  |           
|                                                                                      |                                                                             |                                                                |            |            |           |          |            |            |           |   |          |           
|CASH FLOWS FROM FINANCING ACTIVITIES                                                  |                                                                             |                                                                |            |            |           |          |            |            |           |   |          |           
|                                                                                      | Increase in capital                                                         |                                                                |            |           |           |          |            |           |           |   |          | 58,000     |           
|                                                                                      | Additions to debt                                                           |                                                                |            | 1,309,000  |           |          |            | 691,000    |           |   |          | 133,000    |           
|                                                                                      | Reductions of debt                                                          |                                                                |            | (572,000   | )         |          |            | (349,000   | )         |   |          |           |           
|                                                                                      |                                                                             |                                                                |            |            |           |          |            |            |           |   |          |           
|Net cash provided by financing activities                                             |                                                                             |                                                                | 737,000    |            |           |          | 342,000    |            |           |   | 191,000  |           
|                                                                                      |                                                                             |                                                                |            |            |           |          |            |            |           |   |          |           
|                                                                                      | Net (decrease) increase in cash and cash equivalents                        |                                                                |            | (601,000   | )         |          |            | 1,185,000  |           |   |          | (175,000   | )         
|                                                                                      | Cash and cash equivalents, beginning of period                              |                                                                |            | 1,958,000  |           |          |            | 773,000    |           |   |          | 948,000    |           
|                                                                                      |                                                                             |                                                                |            |            |           |          |            |            |           |   |          |           
|CASH and CASH EQUIVALENTS, END OF PERIOD                                              |                                                                             | $                                                              | 1,357,000  |            |           | $        | 1,958,000  |            |           | $ | 773,000  |           
|                                                                                      |                                                                             |                                                                |            |            |           |          |            |            |           |   |          |           
|SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION                                     |                                                                             |                                                                |            |            |           |          |            |            |           |   |          |           
|Cash paid during the year for:                                                        |                                                                             |                                                                |            |            |           |          |            |            |           |   |          |           
|                                                                                      | Interest                                                                    |                                                                | $          | 263,000    |           |          | $          | 196,000    |           |   | $        | 129,000    |           
|                                                                                      | Income taxes, net                                                           |                                                                | $          |           |           |          | $          |           |           |   | $        |           |           
|                                                                                      |                                                                             |                                                                |            |            |           |          |            |            |           |   |          |           
|Non-cash activities                                                                   |                                                                             |                                                                |            |            |           |          |            |            |           |   |          |           
|                                                                                      | Equipment purchased under capital lease                                     |                                                                | $          | 152,000    |           |          | $          | 87,000     |           |   | $        | 73,000     |           
|                                                                                      | Unrealized gain on debt and equity investments                              |                                                                | $          | 49,000     |           |          | $          | 117,000    |           |   | $        | 346,000    |           
|                                                                                      |                                                                             |                                                                |            |            |           |          |            |            |           |   |          |           

See accompanying notes to consolidated financial statements

22



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CUISINE SOLUTIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF OPERATIONS

The Company develops, produces and markets chef-created fully cooked, fully
prepared entrees and sauces for the banquet, airline, passenger rail service,
retail and restaurant industries.

The Company services the airlines in both the USA and Europe. The Norwegian and
French facilities distribute product throughout Europe servicing the
Foodservice customers through distributors and Cuisine Solutions France, a
French manufacturer and distributor of sous-vide products. Norway production
supplies most salmon sales in the USA and France.

PRINCIPLES OF CONSOLIDATION

The financial statements include the consolidated accounts of Cuisine
Solutions, Inc. and its subsidiaries, Cuisine Solutions Norway and Cuisine
Solutions France, (collectively the Company). All significant inter-company
transactions have been eliminated in the financial statements.

FISCAL YEAR

The Company utilizes a 52/53 week fiscal year which ends on the last Saturday
in June.

USE OF ESTIMATES

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

REVENUE RECOGNITION

The Company recognizes revenue at the time products are shipped to its
customers, with the exception of some of its United States airline
distributors. For U.S. airline distributors that purchase salmon products
directly from the Companys Norway facility, the Company recognizes revenue
when the customer receives the products.

SEGMENT REPORTING

The Company operates in two segments, Food Service Industry and International
Management Services. No management service fees were earned during fiscal 2003.

CASH AND CASH EQUIVALENTS

Cash equivalents consist of highly liquid investments with original maturities
of three months or less.

As of June 28, 2003 and June 29, 2002, $1,067,000 and $1,085,000
respectively were held in foreign financial institutions.

INVESTMENTS

Investment securities consist of U.S. Treasury, mortgage-backed instruments,
corporate debt and equity securities. The Company has classified its
investments as available-for-sale. Securities classified as available for
sale include securities which could be sold in response to changes in interest
rates or for general liquidity needs. Such securities are carried at estimated
fair value with unrealized gains or losses recorded as a separate component of
equity.

BASIS OF CONSOLIDATION AND ACCOUNTING FOR INVESTMENTS

The consolidated financial statements include 100% of the assets, liabilities,
revenues, expenses, income, loss and cash flows of Cuisine Solutions, Inc. and
all companies in which Cuisine Solutions, Inc. has a controlling voting
interest (subsidiaries), as if Cuisine Solutions, Inc. and its subsidiaries
were a single company. Significant inter-company accounts and transactions
between the consolidated companies have been eliminated.

Investments in companies in which Cuisine Solutions, Inc. has significant
influence, but less than a controlling voting interest, are accounted for using
the equity method. Under the equity method, only Cuisine Solutions, Inc.
investment in and amounts due to and from the equity investee are included in
the consolidated balance sheet; only Cuisine Solutions, Inc.s share of the
investees earnings is included in the consolidated operating results; and only
the dividends, cash distributions, loans other cash received from the investee,
less any additional cash investments, loan repayments or other cash paid to the
investee, are included in the consolidated cash flows.

23



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##### 



INVENTORY

Inventories are valued at the lower of cost, determined by the first-in,
first-out method, or market. Included in inventory costs are raw materials,
labor and manufacturing overhead.

At the end of fiscal year 2003, the Company recorded an obsolescence reserve of
$425,000 primarily for inventory related to production for the fall and winter
2001 airline menus which were never ordered due to the September 2001 terrorist
attacks. However, the Company sells significant quantities of the inventory
which is reserved for through the diverse sales channels.

Inventory consisted of:

|                                      |  |          |           |          |  |   |           |  
|------------------------------------- |  | -------- | --------- | -------- |  | - | --------- | -
|                                      |  | JUNE 28, |           | JUNE 29,
|                                      |  | 2003     |           | 2002    
|                                      |  |          |           |         
|RAW MATERIAL                          |  | $        | 1,140,000 |          |  | $ | 1,207,000 |  
|FROZEN PRODUCT & OTHER FINISHED GOODS |  |          | 2,892,000 |          |  |   | 3,252,000 |  
|PACKAGING                             |  |          | 449,000   |          |  |   | 464,000   |  
|                                      |  |          |           |          |  |   |           |  
|                                      |  |          | 4,481,000 |          |  |   | 4,923,000 |  
|LESS OBSOLESCENCE RESERVE             |  |          | (425,000  | )        |  |   | (504,000  | )
|                                      |  |          |           |          |  |   |           |  
|                                      |  | $        | 4,056,000 |          |  | $ | 4,419,000 |  
|                                      |  |          |           |          |  |   |           |  

FIXED ASSETS

Machinery, equipment, furniture and fixtures are depreciated using the
straight-line method over estimated useful lives which range from two to ten
years. Leasehold improvements are amortized using the straight-line method over
the shorter of terms of the leases which range from four to twenty years, or
the estimated useful life of the improvement.

Expenditures for maintenance and repairs are charged to expense, and
significant improvements are capitalized. Maintenance and repairs charged to
expense approximated $398,000 in 2003, $362,000 in 2002 and $418,000 in 2001.

Included in fixed assets are assets located in Europe, totaling approximately
$3,492,000 and $2,971,000 as of June 28, 2003 and as of June 29, 2002,
respectively.

The components of fixed assets were as follows:

|                                               |  |          |             |          |  |   |             |  
|---------------------------------------------- |  | -------- | ----------- | -------- |  | - | ----------- | -
|                                               |  | JUNE 28, |             | JUNE 29,
|                                               |  | 2003     |             | 2002    
|                                               |  |          |             |         
|LAND                                           |  | $        | 102,000     |          |  | $ | 61,000      |  
|BUILDING                                       |  |          | 2,385,000   |          |  |   | 1,781,000   |  
|BUILDING UNDER CAPITAL LEASE                   |  |          | 1,699,000   |          |  |   | 1,505,000   |  
|MACHINERY & EQUIPMENT                          |  |          | 11,707,000  |          |  |   | 10,953,000  |  
|MACHINERY & EQUIPMENT UNDER CAPITAL LEASE      |  |          | 556,000     |          |  |   | 482,000     |  
|LEASEHOLD IMPROVEMENTS                         |  |          | 2,323,000   |          |  |   | 2,318,000   |  
|FURNITURES & FIXTURES                          |  |          | 232,000     |          |  |   | 227,000     |  
|COMPUTER SOFTWARE                              |  |          | 1,041,000   |          |  |   | 1,037,000   |  
|CONSTRUCTION IN PROGRESS                       |  |          | 18,000      |          |  |   | 28,000      |  
|                                               |  |          |             |          |  |   |             |  
|                                               |  |          | 20,063,000  |          |  |   | 18,392,000  |  
|LESS ACCUMULATED DEPRECIATION AND AMORTIZATION |  |          | (14,799,000 | )        |  |   | (13,271,000 | )
|                                               |  |          |             |          |  |   |             |  
|                                               |  | $        | 5,264,000   |          |  | $ | 5,121,000   |  
|                                               |  |          |             |          |  |   |             |  

WEB SITE DEVELOPMENT COSTS

The Company capitalizes web site development costs in accordance with EITF 00-2
Accounting Web Site Development Costs and therefore adopted AICPA SOP No.
98-1, Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use, as the company plans to use the web site internally. SOP No. 98-1
requires that certain external costs and internal payroll and payroll-

24



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##### 



related costs be capitalized during the application development and
implementation stages of a software development project and amortized over the
softwares useful life. Training and research and development costs are to be
expensed as incurred. Capitalized amounts are to be amortized straight-line
over the remaining estimated economic life beginning when the software is ready
for its intended use. The Company initiated a complete overhaul of their
Corporate web site at the end of fiscal 2003 and capitalized $18,000 of related
cost under Construction in Progress. The Company plans to amortize the
capitalized cost on a straight line basis after the completion of the project
in fiscal year 2004.

INCOME AND OTHER TAXES

The Company computes income taxes using the asset and liability method whereby
deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
basis. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.

IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF

The Company adopted the provisions of SFAS No. 144, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of
(Statement 144), on June 29, 2002 (fiscal year 2002). Statement 144 requires
that long-lived assets and certain identifiable intangibles be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability of assets to
be held and used is measured by a comparison of the carrying amount of an asset
to future net cash flows expected to be generated by the asset. If such assets
are considered to be impaired, the impairment to be recognized is measured by
the amount by which the carrying amounts of the assets exceed the fair value of
the assets. Assets to be disposed of are reported at the lower of the carrying
amount or fair value less costs to sell. In fiscal year 2002, the Company
recorded an impairment charge of $619,000 relating to capitalized web site
development costs of FIVELEAF.com.

ACCOUNTING FOR STOCK-BASED COMPENSATION

The Company accounts for employee stock option grants using the intrinsic
method in accordance with Accounting Principles Board (APB) Opinion No. 25
Accounting for Stock Issued to Employees and accordingly associated
compensation expense, if any, is measured as the excess of the underlying stock
price over the exercise price on the date of grant. The Company complies with
the disclosure option of Statement of Financial Accounting Standards (SFAS) No.
123 Accounting for Stock Based Compensation, as amended by SFAS No. 148
Accounting for Stock-Based CompensationTransition and Disclosure which
requires pro-forma disclosure of compensation expense associated with stock
options under the fair value method.

Had compensation cost been recognized based on the fair values of options at
the grant dates consistent with the provisions of SFAS No. 123, the Companys
net income (loss) and basic and diluted net income (loss) per common share
would have been changed to the following pro forma amounts:

|                                                                                    |                                 |   |            |            |          |   |            |            |   |   |            |            |  
|----------------------------------------------------------------------------------- | ------------------------------- | - | ---------- | ---------- | -------- | - | ---------- | ---------- | - | - | ---------- | ---------- | -
|                                                                                    |                                 |   | June 28,   |            | June 29, |   | June 30,  
|                                                                                    |                                 |   | 2003       |            | 2002     |   | 2001      
|                                                                                    |                                 |   |            |            |          |   |           
|Net loss applicable to common shareholders                                          |                                 | $ | (4,092,000 | )          |          | $ | (6,027,000 | )          |   | $ | (861,000   | )         
|Less: Total stock-based compensation expense
determined under the fair value method |                                 | $ | (171,000   | )          |          | $ | (193,000   | )          |   | $ | (186,000   | )         
|Pro forma net loss                                                                  |                                 | $ | (4,263,000 | )          |          | $ | (6,220,000 | )          |   | $ | (1,047,000 | )         
|Earnings per common share:                                                          |                                 |   |            |            |          |   |            |            |   |   |            |           
|                                                                                    | Basic and diluted  as reported |   | $          | (0.26      | )        |   | $          | (0.38      | ) |   | $          | (0.06      | )
|                                                                                    | Basic and diluted  pro forma   |   | $          | (0.27      | )        |   | $          | (0.39      | ) |   | $          | (0.07      | )
|Weighted average common shares outstanding:                                         |                                 |   |            |            |          |   |            |            |   |   |            |           
|                                                                                    | Basic and diluted               |   |            | 15,824,788 |          |   |            | 15,824,588 |   |   |            | 14,776,215 |  

EARNINGS PER SHARE

Basic earnings (loss) per common share is computed by dividing net earnings
(loss) by the weighted average number of common shares outstanding during the
period. Diluted earnings (loss) per common share also includes common stock
equivalents outstanding during the period if dilutive. The Companys common
stock equivalents consist of stock options . The weighted average number of
shares outstanding related to stock options were 1,539,500 for the year ended
June 28, 2003. For the fiscal years ended June 28, 2003, June 29, 2002 and June
30, 2001, the assumed exercise price of the Companys outstanding stock options
are not included in the calculation as the effect would be anti-dilutive.

FOREIGN CURRENCY TRANSLATION

The statements of operations of the Companys Norwegian and French subsidiaries
(the Subsidiaries) have been translated to U.S. dollars using the average
currency exchange rates in effect during the year. The Subsidiaries balance
sheet has been translated using the currency exchange rate as of the end of the
fiscal year. The impact of currency exchange rate changes on the translation of
the Subsidiarys balance sheet is reflected in stockholders equity.

25



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COMPREHENSIVE INCOME

In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, Reporting Comprehensive Income
(Statement 130). Statement 130 establishes standards for the reporting and
display of comprehensive income and its components in the financial statements.
The Company adopted the provisions of the statement during fiscal year 1999.
Components of other comprehensive income include foreign currency translation
gains and losses and unrealized gains and losses on debt and equity securities.
Comprehensive income is shown on the consolidated statement of changes in
stockholders equity.

FAIR VALUE OF FINANCIAL INSTRUMENTS

Under Statement of Financial Accounting Standards No. 107, Disclosures about
Fair Value of Financial Instruments, effective for fiscal years that end after
December 15, 1996, the Company is required to provide fair value disclosures of
its financial instruments. The Company estimates the fair value of its
financial instruments using the following methods and assumptions: (1) quoted
market prices, when available, are used to estimate the fair value of
investments in marketable debt and equity securities; (2) carrying amounts in
the balance sheet approximate fair value for cash, notes receivable and short
term borrowings.

RECENT ACCOUNTING PRONOUNCEMENTS

In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based
Compensation  Transition and Disclosure. This Statement amends the transition
alternatives for companies choosing to adopt the fair value method of
accounting for the compensation cost of options issued to employees and
requires additional disclosure on all stock-based compensation plans. The
Company has adopted the disclosure provisions.

In January 2003, the FASB issued FIN No. 46, Consolidation of Variable
Interest Entities. FIN No. 46 addresses the requirements for business
enterprises to consolidate related entities in which they are determined to be
primary economic beneficiary as a result of their variable economic interests.
The adoption FIN No. 46 did not have a material impact on the Companys
financial statements.

In April 2003, FASB issued SFAS 149, Amendment of Statement 133 on Derivative
Instruments and Hedging Activities. SFAS 149 amends and clarifies accounting
for derivative instruments, including certain derivative instruments embedded
in other contracts and for hedging activities under SFAS 133, Accounting for
Derivative Instruments and Hedging Activities. SFAS 149 is generally effective
for derivative instruments, including derivative instruments embedded in
certain contracts, entered into or modified after June 30, 2003 and for hedging
relationships designated after June 30, 2003. We do not expect the adoption of
SFAS 149 to have a material impact on its financial position or results of
operations.

In May 2003, FASB issued SFAS 150, Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity. SFAS 150
improves the accounting for certain financial instruments that, under previous
guidance, issuers could account for as equity and requires that those
instruments be classified as liabilities (or assets in certain circumstances)
in statements of financial position. SFAS 150 also requires disclosures about
alternative ways of settling the instruments and the capital structure of
entities all of whose shares are mandatory redeemable. SFAS 150 is generally
effective for all financial instruments entered into or modified after May 31,
2003, and otherwise is effective at the beginning of the first interim period
beginning after June 15, 2003. We do not expect the adoption of SFAS 150 to
have a material impact on its financial position or results of operations.

NOTE 2  LIQUIDITY AND OPERATIONS

In fiscal year 2003, the Company experienced a considerable decrease in its
liquidity due to the recurrent losses from operations. This resulted in an
increase in Accounts Payables and Accrued Expenses. Inventories have been
further reduced during fiscal 2003 as a result of the aggressive management and
efforts to minimize the effect of cash tied up in inventory in addition to
improved production planning. Accounts Receivables decreased in the USA and
Norway due to the decreased sales volume and focused cash collection
management, but increased in France as a result of the increased sales volume
during fiscal 2003.

The Company held cash and short-term investments of $1,357,000 and $1,958,000
at June 28, 2003 and June 29, 2002 respectively. Additionally, the Company held
long term investments, those with maturities greater than one year, of
$1,331,000 and $2,608,000 at June 28, 2003 and June 29, 2002 respectively.
$1,165,000 of the long-term investments secure a letter of credit from U.S.
operations banking institution for the overdraft facility of the Norwegian
subsidiary at June 28, 2003. Cash in the amount of $1,393,000 was provided by
investing activities from the sale of the long term investments during fiscal
2003. The cash used by investing activities was primarily related to
investments in buildings as well as machinery and equipment during fiscal 2003.

In May 2003, the Company reduced 15% of its workforce at the plant in the USA
and eliminated several positions at its Corporate headquarter during fiscal
year 2003 to restructure the Company. The restructuring was required to further
reduce operational cost of US operations and minimize overhead to meet the
current challenge of the industry. The Company recorded $78,000 of accrued
severance for these eliminations at the end of fiscal year 2003. The total
amount charged to operations during fiscal year 2003 was $119,000 for all
severance packages. The position of the Chief Operating Officer was eliminated
and the former officer was given a half year guaranteed severance package in
the amount of $85,000. Three other positions in Customer Service and
Procurement were eliminated during the fiscal year and were given each
severance payments between one and four months. Related severance, in the
aggregate amounted to $47,000. The accrued severance packages at June 28, 2003
will be paid by August and November 2003, respectively.

26



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With the restructuring of US operations in May 2003, management has taken steps
that it believes are necessary to improve the Companys ability to meet its
cash flow needs for fiscal year 2004 and thereafter. Management closely reviews
the Companys operations and plans to implement additional cost cutting
programs to reduce the Companys operating expenses further. Management does
not believe further cost reductions would materially impair the Companys
ability to carry out planned operations.

Assuming that there are no significant changes to the Companys business plan,
management anticipates to generate cash flow positive results during fiscal
year 2004. Management believes that the combination of cash on hand, cash flows
from operations and if required outside funding will provide sufficient
liquidity to meet the Companys ongoing cash requirements. However, there can
be no assurance that the Company can or will obtain sufficient funds from
operations or from additional financings on terms acceptable to the Company.

NOTE 3  ACCOUNTS RECEIVABLE

Accounts Receivable consisted of:

|                                |  |          |           |          |  |   |           |  
|------------------------------- |  | -------- | --------- | -------- |  | - | --------- | -
|                                |  | JUNE 28, |           | JUNE 29,
|                                |  | 2003     |           | 2002    
|                                |  |          |           |         
|TRADE ACCOUNTS RECEIVABLE       |  | $        | 3,541,000 |          |  | $ | 3,440,000 |  
|ALLOWANCE FOR DOUBTFUL ACCOUNTS |  |          | (62,000   | )        |  |   | (168,000  | )
|                                |  |          |           |          |  |   |           |  
|TRADE ACCOUNTS RECEIVABLE, NET  |  | $        | 3,479,000 |          |  | $ | 3,272,000 |  
|                                |  |          |           |          |  |   |           |  

The Company provides allowances for estimated credit losses, product returns,
spoilage, 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, notes, and other receivables is also
dependent on future economic and other conditions that may be beyond
managements control.

NOTE 4  INVESTMENTS

The Companys investments are classified as available-for-sale. These
securities are carried at estimated fair value and unrealized gains and losses
are reported as a separate component of stockholders equity. During fiscal
year 2003, the Company realized gains of $67,000 on the sale of investments. At
June 28, 2003, $1,165,000 of the Companys long-term investments secure a
letter of credit from the U.S. operations banking institution to collateralize
the overdraft facility of the Companys Norwegian subsidiary with Den norske
Bank.

The following is a summary of the Companys investments at June 28, 2003:

|                         |                   |  |      |           |       |  |            |        |       |  |   |        |  |  |           |           | 
|------------------------ | ----------------- |  | ---- | --------- | ----- |  | ---------- | ------ | ----- |  | - | ------ |  |  | --------- | --------- | 
|                         |                   |  |      |           |       |  |            |        |       |  |   |        |  |  | ESTIMATED
|                         |                   |  |      |           |       |  | UNREALIZED |        | FAIR 
|                         |                   |  | COST |           | GAINS |  | LOSSES     |        | VALUE
|                         |                   |  |      |           |       |  |            |        |      
|U.S. Government agencies |                   |  |      |           |       |  |            |        |       |  |   |        |  |  |           |          
|                         | Current           |  | $    |          |       |  | $          |       |       |  | $ |       |  |  | $         |          | 
|                         | Non-current       |  |      | 953,000   |       |  |            | 77,000 |       |  |   |       |  |  |           | 1,030,000 | 
|Corporate debt           |                   |  |      |           |       |  |            |        |       |  |   |        |  |  |           |          
|                         | Current           |  |      |          |       |  |            |       |       |  |   |       |  |  |           |          | 
|                         | Non-current       |  |      | 319,000   |       |  |            |       |       |  |   | 18,000 |  |  |           | 301,000   | 
|                         |                   |  |      |           |       |  |            |        |       |  |   |        |  |  |           |           | 
|                         | Total investments |  | $    | 1,272,000 |       |  | $          | 77,000 |       |  | $ | 18,000 |  |  | $         | 1,331,000 | 
|                         |                   |  |      |           |       |  |            |        |       |  |   |        |  |  |           |           | 

27



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The following is a summary of the Companys investments at June 29, 2002:

|                             |                   |  |      |           |       |  |            |        |       |  |   |   |  |  |           |           | 
|---------------------------- | ----------------- |  | ---- | --------- | ----- |  | ---------- | ------ | ----- |  | - | - |  |  | --------- | --------- | 
|                             |                   |  |      |           |       |  |            |        |       |  |   |   |  |  | ESTIMATED
|                             |                   |  |      |           |       |  | UNREALIZED |        | FAIR 
|                             |                   |  | COST |           | GAINS |  | LOSSES     |        | VALUE
|                             |                   |  |      |           |       |  |            |        |      
|U.S. Government and agencies |                   |  |      |           |       |  |            |        |       |  |   |   |  |  |           |          
|                             | Current           |  | $    |          |       |  | $          |       |       |  | $ |  |  |  | $         |          | 
|                             | Non-current       |  |      | 1,324,000 |       |  |            | 10,000 |       |  |   |  |  |  |           | 1,334,000 | 
|Corporate debt               |                   |  |      |           |       |  |            |        |       |  |   |   |  |  |           |          
|                             | Current           |  |      |          |       |  |            |       |       |  |   |  |  |  |           |          | 
|                             | Non-current       |  |      | 1,274,000 |       |  |            |       |       |  |   |  |  |  |           | 1,274,000 | 
|                             |                   |  |      |           |       |  |            |        |       |  |   |   |  |  |           |           | 
|                             | Total investments |  | $    | 2,598,000 |       |  | $          | 10,000 |       |  | $ |  |  |  | $         | 2,608,000 | 
|                             |                   |  |      |           |       |  |            |        |       |  |   |   |  |  |           |           | 

NOTE 5  INCOME TAXES

The composition of the provision for income taxes attributable to operations
was:

|          |         |   |          |        |          |   |          |        |  |   |       |       | 
|--------- | ------- | - | -------- | ------ | -------- | - | -------- | ------ |  | - | ----- | ----- | 
|          |         |   | June 28, |        | June 29, |   | June 30,
|          |         |   | 2003     |        | 2002     |   | 2001    
|          |         |   |          |        |          |   |         
|Current:  |         |   |          |        |          |   |          |        |  |   |       |      
|          | Federal |   | $        |       |          |   | $        |       |  |   | $     |      | 
|          | Foreign |   |          | 16,000 |          |   |          | 14,000 |  |   |       | 3,000 | 
|          | State   |   |          |       |          |   |          |       |  |   |       |      | 
|          |         |   |          |        |          |   |          |        |  |   |       |       | 
|          |         |   | 16,000   |        |          |   | 14,000   |        |  |   | 3,000 |      
|          |         |   |          |        |          |   |          |        |  |   |       |       | 
|Deferred: |         |   |          |        |          |   |          |        |  |   |       |      
|          |         |   |          |        |          |   |          |        |  |   |       |       | 
|          | Federal |   |          |       |          |   |          |       |  |   |       |      | 
|          | Foreign |   |          |       |          |   |          |       |  |   |       |      | 
|          | State   |   |          |       |          |   |          |       |  |   |       |      | 
|          |         | $ |         |        |          | $ |         |        |  | $ |      |      
|          |         |   |          |        |          |   |          |        |  |   |       |       | 

The differences between amounts computed by applying the statutory federal
income tax rates to income from operations and the total income tax benefit
applicable to operations were as follows:

|                                               |  |            |            |          |  |          |            |   |  |   |          |  
|---------------------------------------------- |  | ---------- | ---------- | -------- |  | -------- | ---------- | - |  | - | -------- | -
|                                               |  | Year Ended
|                                               |  |           
|                                               |  | June 28,   |            | June 29, |  | June 30,
|                                               |  | 2003       |            | 2002     |  | 2001    
|                                               |  |            |            |          |  |         
|Federal tax benefit at statutory rates         |  | $          | (1,209,000 | )        |  | $        | (2,072,000 | ) |  | $ | (480,000 | )
|Income (Loss) from foreign operations          |  |            | (202,000   | )        |  |          | 22,000     |   |  |   | 188,000  |  
|France minimum taxes                           |  |            | 16,000     |          |  |          | 14,000     |   |  |   | 3,000    |  
|Period effect of change in valuation allowance |  |            | 1,764,000  |          |  |          | 2,267,000  |   |  |   | 162,000  |  
|State income taxes                             |  |            | (249,000   | )        |  |          | (362,000   | ) |  |   | (52,000  | )
|Period effect of Foreign valuation allowance   |  |            |           |          |  |          |           |   |  |   |         |  
|Permanent differences                          |  |            | (104,000   | )        |  |          | 8,000      |   |  |   | 69,000   |  
|Affect of capital loss carry-forward           |  |            |           |          |  |          |           |   |  |   | 78,000   |  
|Other, net                                     |  |            |           |          |  |          | 137,000    |   |  |   | 35,000   |  
|                                               |  |            |            |          |  |          |            |   |  |   |          |  
|Total                                          |  | $          | 16,000     |          |  | $        | 14,000     |   |  | $ | 3,000    |  
|                                               |  |            |            |          |  |          |            |   |  |   |          |  

28



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Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes.

The significant components of deferred tax assets are as follows:

|                         |                                         |  |            |           |          |  |            |           | 
|------------------------ | --------------------------------------- |  | ---------- | --------- | -------- |  | ---------- | --------- | 
|                         |                                         |  | June 28,   |           | June 29,
|                         |                                         |  | 2003       |           | 2002    
|                         |                                         |  |            |           |         
|Deferred Tax Assets      |                                         |  |            |           |          |  |            |          
|                         | Net operating loss carryforward: Norway |  | $          | 955,000   |          |  | $          | 664,000   | 
|                         | Net operating loss carryforward: France |  |            | 961,000   |          |  |            | 1,015,000 | 
|                         | Net operating loss carryforward: USA    |  |            | 5,502,000 |          |  |            | 4,064,000 | 
|                         | Inventory adjustment                    |  |            | 220,000   |          |  |            | 269,000   | 
|                         | Other                                   |  |            | 1,319,000 |          |  |            | 1,181,000 | 
|                         |                                         |  |            |           |          |  |            |           | 
|                         | Total deferred tax assets               |  |            | 8,957,000 |          |  |            | 7,193,000 | 
|Less valuation allowance |                                         |  | (8,957,000 | )         |          |  | (7,193,000 | )        
|                         | Net deferred tax assets                 |  |            |          |          |  |            |          | 
|                         |                                         |  |            |           |          |  |            |           | 
|Deferred Tax Liabilities |                                         |  |            |           |          |  |            |          
|                         | Property and equipment                  |  |            |          |          |  |            |          | 
|                         |                                         |  |            |           |          |  |            |           | 
|                         | Net deferred tax liabilities            |  |            |          |          |  |            |          | 
|                         |                                         |  |            |           |          |  |            |           | 
|                         | Net deferred income tax                 |  | $          |          |          |  | $          |          | 
|                         |                                         |  |            |           |          |  |            |           | 

The net changes in total valuation allowance for the years ended June 28, 2003
and June 29, 2002 were an increase of $1,764,000 and $2,267,000, respectively.

The net foreign operating loss carry-forward can only be used to offset taxable
income in the country where the carry-forward was generated. These operating
loss carry-forwards are available to offset future foreign income, if any,
through 2013.

At June 28, 2003, the Company has net operating loss carry-forwards for US
federal and state income tax purposes of $13,754,000 which are available to
offset future federal and state taxable income, if any, through 2023.

NOTE 6  DEBT

Debt, at June 28, 2003 and June 29, 2002 was as follows:

|                   |  |                    |  |                       |  |             |           |             |  |   |           | 
|------------------ |  | ------------------ |  | --------------------- |  | ----------- | --------- | ----------- |  | - | --------- | 
|                   |  |                    |  |                       |  | 2003        |           | 2002       
|                   |  |                    |  |                       |  | PRINCIPAL   |           | PRINCIPAL  
|LENDER             |  | DESCRIPTION        |  | MATURITY              |  | OUTSTANDING |           | OUTSTANDING
|                   |  |                    |  |                       |  |             |           |            
|Den norske bank    |  | Overdraft Facility |  | Six months, renewable |  | $           | 1,534,000 |             |  | $ | 1,185,000 | 
|SND                |  | Term Loan          |  | February 1, 2006      |  |             | 108,000   |             |  |   | 140,000   | 
|Hjelmeland Kommune |  | Capital Lease      |  | June 1, 2014          |  |             | 1,221,000 |             |  |   | 1,153,000 | 
|CDN                |  | Term Loan          |  | September 25, 2003    |  |             | 33,000    |             |  |   | 138,000   | 
|NORBAIL            |  | Capital Lease      |  | November 20, 2005     |  |             | 238,000   |             |  |   | 308,000   | 
|CDN                |  | Term Loan          |  | October 22, 2012      |  |             | 207,000   |             |  |   |          | 
|BNP Paribas        |  | Term Loan          |  | March 6, 2008         |  |             | 320,000   |             |  |   |          | 
|                   |  |                    |  |                       |  |             |           |             |  |   |           | 
|                   |  |                    |  | Total                 |  |             | 3,661,000 |             |  |   | 2,924,000 | 
|                   |  |                    |  | Less current portion  |  |             | 1,970,000 |             |  |   | 1,585,000 | 
|                   |  |                    |  |                       |  |             |           |             |  |   |           | 
|                   |  |                    |  | Non-current portion   |  | $           | 1,691,000 |             |  | $ | 1,339,000 | 
|                   |  |                    |  |                       |  |             |           |             |  |   |           | 

The Company believes that the carrying values of the amounts outstanding under
the above debt instruments approximate fair value.

The Companys Norwegian subsidiary has secured a working capital commitment for
its liquidity needs in Norway in the form of an overdraft facility from Den
norske Bank (DnB). Borrowings under the overdraft facility are limited to a
maximum of $1,047,000, with a floating interest rate equal to the prevailing
Norwegian overnight funds rate plus two percentage points. The Den norske Bank

29



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overdraft facility interest rate at June 28, 2003 and June 29, 2002 was 6.6%
and 8.75%, respectively. The overdraft facility is secured by a letter of
credit posted by the U.S. operations banking institution that is renewed
annually. The letter of credit is secured by $1,165,000 in long-term
investments at June 28, 2003. At June 28, 2003, approximately $487,000 in
outstanding checks not yet cleared has been reclassified against the overdraft
facility. Borrowings of $37,000 were available at June 28, 2003.

Statens Narings-OgDistriktutvikiingsfond (SND), a governmental development
agency in Norway, issued to CSI Norway, an eight-year term loan that requires
the Company to continue to operate its plant facility. The loan has a variable
interest rate which at June 28, 2003 and June 29, 2002 was 6.5% and 9.5%,
respectively, and is required to be repaid through sixteen semi-annual payments
of principal and interest beginning August 1, 1996 and ending February 1, 2006.

The Norwegian subsidiary entered into a twenty-year capital lease obligation
with an initial principal amount of $1,205,000 and with quarterly payments of
$36,000, including principal and interest. At the end of the lease term,
ownership of the facility will transfer to the Norwegian subsidiary. The
Company has issued no guarantees with respect to this lease.

In December 2000, Cuisine Solutions France entered into a five-year capital
lease obligation with an initial principal amount of $435,000 and with monthly
payments of $10,400 for the first year, $9,565 for the second year and $8,321
for the third and fourth year with 6% p.a. interest on the outstanding balance
of the loan. The lease is related to a cooking machine which can be purchased
at a bargain price at the end of the lease term. The current portion of this
loan is $116,000 and the total outstanding principal amounts to $238,000 at
June 28, 2003.

In October 2002, Cuisine Solutions France entered into a ten year term loan
with Credit du Nord (CDN) to finance the acquisition of land and a building
for a distribution plant in the amount of EURO190,000. This loan bears interest
of 5.7% and is due in October 2012. The current portion of this loan is $17,000
and the total outstanding principal amounts to $207,000 at June 28, 2003.

In March 2003, Cuisine Solutions France entered into a five year term loan with
BNP Paribas to further expand the facility in the amount of EURO280,000. This
loan bears interest of 3.3% and the total outstanding principal amounts to
$320,000 at June 28, 2003.

Debt maturities during the next five fiscal years on an aggregate basis at June
28, 2003 were as follows:

|     |  |   |           | 
|---- |  | - | --------- | 
|2004 |  | $ | 1,970,000 | 
|2005 |  |   | 356,000   | 
|2006 |  |   | 280,000   | 
|2007 |  |   | 230,000   | 
|2008 |  |   | 232,000   | 

The total debt balance thereafter is $593,000.

NOTE 7  STOCKHOLDERS EQUITY

The Companys capital stock is comprised of two classes: Common Stock and Class
B Stock. The Class B Stock, which is reserved for issuance to employees under
stock option plans, is identical in all respects to the Common Stock except
that the holders thereof have no voting rights unless otherwise required by
law. There are no shares of Class B Stock outstanding.

NOTE 8  EMPLOYEE BENEFITS

The Company sponsors a qualified employee savings plan under which employees
who meet certain minimum age and service requirements are eligible to
participate. The Company matches one-third of the first 6% of eligible
employees voluntary contributions to the plan. The Company expensed $26,230,
$29,726 and $24,631 in fiscal years 2003, 2002 and 2001, respectively, for
contributions to the savings and profit sharing plan.

In fiscal year 1994, the Company implemented a non-qualified employee savings
plan under which senior management employees are eligible to participate. The
Company matches one-third of the first 6% of eligible employees voluntary
contributions to the plan. The Companys matching contribution is limited to 6%
of the combined contributions into both the qualified and the non-qualified
plan. The Company expensed $3,352, $7,562, and $26,559 for fiscal year 2003,
2002 and 2001 respectively.

The Company expensed $216,000, $78,400 and $53,000 for a separate health and
retirement plan for the President of the Company and two other non-Officer but
key employees in fiscal year 2003, 2002 and 2001 respectively. The amount
expensed in fiscal year 2003 included coverage for previous years benefits
after all related costs were identified during fiscal year 2003. We refer to
Transactions with related Parties for further disclosure of these benefits.

During fiscal year 1993, the Company established, upon stockholder approval,
the 1992 Stock Option Plan which provides for up to 300,000 shares of the
Companys Common Stock to be made available to employees at various prices as
established by the Board of Directors at the date of grant. During fiscal year
1997 the Company amended its 1992 Stock Option Plan to increase the number of
shares in its plan from 300,000 to 1,300,000. During fiscal year 1997, the
Company granted to employees 951,460 options under the

30



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##### 



1992 Stock Option Plan. During fiscal year 1998 the Company amended its 1992
Stock Option Plan to increase the number of shares in its plan from 1,300,000
to 1,753,000 upon majority shareholder approval.

During fiscal year 2000, the Company adopted the 1999 stock option plan that
which provides for up to 2,600,000 shares of the Companys Common Stock to be
made available to employees and directors at various prices as established by
the Board of Directors of the Company.

The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option pricing model with the following weighted-average
assumptions used for grants in 2003, 2002 and 2001 as follows:

|                         |  |          |     |          |  |          |     |   |  |  |     |  
|------------------------ |  | -------- | --- | -------- |  | -------- | --- | - |  |  | --- | -
|                         |  | June 28, |     | June 29, |  | June 30,
|                         |  | 2003     |     | 2002     |  | 2001    
|                         |  |          |     |          |  |         
|Expected dividend yield  |  |          |    |          |  |          |    |   |  |  |    |  
|Risk-free interest rate  |  |          | 4.3 | %        |  |          | 4.6 | % |  |  | 5.7 | %
|Expected life (in years) |  |          | 6   |          |  |          | 6   |   |  |  | 6   |  
|Expected volatility      |  |          | 116 | %        |  |          | 108 | % |  |  | 72  | %

The Company applies APB Opinion 25 and related Interpretations in accounting
for its plans. Accordingly, no compensation cost has been recognized for its
fixed stock option plan in the financial statements as options contained
exercise prices equal to market value of the stock at date of grant. Had
compensation cost for the Companys stock-based compensation plan been
determined based on the fair value at the grant date for awards under those
plans consistent with the method of FASB Statement 123, the Companys Loss and
Loss per share would have been increased to the pro forma amounts indicated
below:

|                    |  |             |  |   |            |          |  |          |            |          |  |   |            |   |  | 
|------------------- |  | ----------- |  | - | ---------- | -------- |  | -------- | ---------- | -------- |  | - | ---------- | - |  | 
|                    |  |             |  |   |            | June 28, |  | June 29, |            | June 30,
|                    |  |             |  |   |            | 2003     |  | 2002     |            | 2001    
|                    |  |             |  |   |            |          |  |          |            |         
|Net loss:           |  |             |  |   |            |          |  |          |            |          |  |   |            |   |  | 
|                    |  | As reported |  | $ | (4,092,000 | )        |  | $        | (6,027,000 | )        |  | $ | (861,000   | )
|                    |  | Pro forma   |  | $ | (4,263,000 | )        |  | $        | (6,220,000 | )        |  | $ | (1,047,000 | )
|Net loss per share: |  |             |  |   |            |          |  |          |            |          |  |   |            |   |  | 
|                    |  | As reported |  | $ | (0.26      | )        |  | $        | (0.38      | )        |  | $ | (0.06      | )
|                    |  | Pro forma   |  | $ | (0.27      | )        |  | $        | (0.39      | )        |  | $ | (0.07      | )

|                                                               |  |        |           |                |  |                  |      |                |  |        |           |                  |  |  |      |  |  |                  |           |   |  |  |      | 
|-------------------------------------------------------------- |  | ------ | --------- | -------------- |  | ---------------- | ---- | -------------- |  | ------ | --------- | ---------------- |  |  | ---- |  |  | ---------------- | --------- | - |  |  | ---- | 
|                                                               |  | 2003   |           | 2002           |  | 2001            
|                                                               |  |        |           |                |  |                 
|                                                               |  |        |           |                |  | WEIGHTED-AVERAGE |      |                |  |        |           | WEIGHTED-AVERAGE |  |  |      |  |  | WEIGHTED-AVERAGE
|FIXED OPTIONS                                                  |  | SHARES |           | EXERCISE PRICE |  | SHARES           |      | EXERCISE PRICE |  | SHARES |           | EXERCISE PRICE  
|                                                               |  |        |           |                |  |                  |      |                |  |        |           |                 
|OUTSTANDING AT BEGINNING OF YEAR                               |  |        | 2,348,500 |                |  |                  | 1.17 |                |  |        | 1,836,000 |                  |  |  | 1.26 |  |  |                  | 2,397,500 |   |  |  | 1.27 | 
|GRANTED                                                        |  |        | 232,500   |                |  |                  | 0.25 |                |  |        | 670,000   |                  |  |  | 0.85 |  |  |                  | 102,500   |   |  |  | 1.13 | 
|CANCELED                                                       |  |        | (82,500   | )              |  |                  | 0.58 |                |  |        |          |                  |  |  |     |  |  |                  | (147,500  | ) |  |  | 1.13 | 
|EXERCISED                                                      |  |        |          |                |  |                  |     |                |  |        |          |                  |  |  |     |  |  |                  | (68,750   | ) |  |  | 0.84 | 
|FORFEITED                                                      |  |        | (584,000  | )              |  |                  | 1.09 |                |  |        | (157,500  | )                |  |  | 1.14 |  |  |                  | (447,750  | ) |  |  | 1.37 | 
|                                                               |  |        |           |                |  |                  |      |                |  |        |           |                  |  |  |      |  |  |                  |           |   |  |  |      | 
|OUTSTANDING AT END OF YEAR                                     |  |        | 1,914,500 |                |  |                  | 1.11 |                |  |        | 2,348,500 |                  |  |  | 1.17 |  |  |                  | 1,836,000 |   |  |  | 1.26 | 
|                                                               |  |        |           |                |  |                  |      |                |  |        |           |                  |  |  |      |  |  |                  |           |   |  |  |      | 
|OPTIONS EXERCISABLE AT YEAR-END                                |  |        | 1,539,500 |                |  |                  |      |                |  |        | 1,680,375 |                  |  |  |      |  |  |                  | 1,374,125 |   |  |  |      | 
|WEIGHTED-AVERAGE FAIR VALUE OF
OPTIONS GRANTED DURING THE YEAR |  | $      | 0.22      |                |  |                  |      |                |  | $      | 0.71      |                  |  |  |      |  |  | $                | 0.88      |   |  |  |      | 
|TOTAL OPTION LIFE                                              |  |        | 10        |                |  |                  |      |                |  |        | 10        |                  |  |  |      |  |  |                  | 10        |   |  |  |      | 
|% EXERCISABLE                                                  |  |        | 80        | %              |  |                  |      |                |  |        | 72        | %                |  |  |      |  |  |                  | 75        | % |  |  |      | 
|AVERAGE YEARS EXERCISABLE                                      |  |        | 3         |                |  |                  |      |                |  |        | 3         |                  |  |  |      |  |  |                  | 3         |   |  |  |      | 
|AVERAGE REMAINING CONTRACTUAL LIFE                             |  |        | 7         |                |  |                  |      |                |  |        | 7         |                  |  |  |      |  |  |                  | 7         |   |  |  |      | 

31



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THE FOLLOWING TABLE SUMMARIZES INFORMATION ABOUT FIXED STOCK OPTIONS OUTSTANDING AT JUNE 28, 2003:

|                         |  |                           |         |                           |  |                |      |             |  |                |      |  |  |  |         |  |  |   |      | 
|------------------------ |  | ------------------------- | ------- | ------------------------- |  | -------------- | ---- | ----------- |  | -------------- | ---- |  |  |  | ------- |  |  | - | ---- | 
|                         |  | Stock Options Outstanding |         | Stock Options Exercisable
|                         |  |                           |         |                          
|                         |  | Number                    |         | Weighted-Average          |  |                |      |             |  | Number         |      |  |  | 
|                         |  | Outstanding               |         | Remaining                 |  | Weighted-Avg   |      | Exercisable |  | Weighted-Avg  
|RANGE OF EXERCISE PRICES |  | at 6/28/03                |         | Contractual Life          |  | Exercise Price |      | at 6/28/03  |  | Exercise Price
|                         |  |                           |         |                           |  |                |      |             |  |               
|$0.25 TO $0.6561         |  |                           | 190,000 |                           |  |                | 9.33 |             |  | $              | 0.25 |  |  |  | 47,500  |  |  | $ | 0.25 | 
|$0.6562 TO $1.03         |  |                           | 645,000 |                           |  |                | 7.12 |             |  | $              | 0.77 |  |  |  | 456,250 |  |  | $ | 0.74 | 
|$1.031 TO $1.37          |  |                           | 530,000 |                           |  |                | 6.35 |             |  | $              | 1.14 |  |  |  | 498,750 |  |  | $ | 1.14 | 
|$1.38 TO $1.50           |  |                           | 438,000 |                           |  |                | 4.14 |             |  | $              | 1.38 |  |  |  | 425,500 |  |  | $ | 1.38 | 
|$1.51 TO $2.00           |  |                           |        |                           |  |                |     |             |  |                |     |  |  |  |        |  |  |   |     | 
|$2.01 TO $2.50           |  |                           | 25,000  |                           |  |                | 3.75 |             |  | $              | 2.38 |  |  |  | 25,000  |  |  | $ | 2.38 | 
|$3.01 TO $3.50           |  |                           | 56,000  |                           |  |                | 1.83 |             |  | $              | 3.40 |  |  |  | 56,000  |  |  | $ | 3.40 | 
|$3.51 TO $4.00           |  |                           | 30,500  |                           |  |                | 0.52 |             |  | $              | 3.94 |  |  |  | 30,500  |  |  | $ | 3.94 | 

THE FOLLOWING TABLE SUMMARIZES INFORMATION ABOUT FIXED STOCK OPTIONS OUTSTANDING AT JUNE 29, 2002:

|                         |  |                           |         |                           |  |                |      |             |  |                |      |  |  |  |         |  |  |   |      | 
|------------------------ |  | ------------------------- | ------- | ------------------------- |  | -------------- | ---- | ----------- |  | -------------- | ---- |  |  |  | ------- |  |  | - | ---- | 
|                         |  | Stock Options Outstanding |         | Stock Options Exercisable
|                         |  |                           |         |                          
|                         |  | Number                    |         | Weighted-Average          |  |                |      |             |  | Number         |      |  |  | 
|                         |  | Outstanding               |         | Remaining                 |  | Weighted-Avg   |      | Exercisable |  | Weighted-Avg  
|RANGE OF EXERCISE PRICES |  | at 6/29/02                |         | Contractual Life          |  | Exercise Price |      | at 6/29/02  |  | Exercise Price
|                         |  |                           |         |                           |  |                |      |             |  |               
|$0.6562 TO $1.030        |  |                           | 932,500 |                           |  |                | 8.19 |             |  | $              | 0.77 |  |  |  | 505,000 |  |  | $ | 0.71 | 
|$1.031 TO $1.37          |  |                           | 817,500 |                           |  |                | 7.29 |             |  | $              | 1.13 |  |  |  | 601,875 |  |  | $ | 1.12 | 
|$1.38 TO $1.50           |  |                           | 449,000 |                           |  |                | 5.13 |             |  | $              | 1.38 |  |  |  | 424,500 |  |  | $ | 1.38 | 
|$1.51 TO $2.00           |  |                           |        |                           |  |                |     |             |  | $              |     |  |  |  |        |  |  | $ |     | 
|$2.01 TO $2.50           |  |                           | 41,500  |                           |  |                | 0.96 |             |  | $              | 2.38 |  |  |  | 41,500  |  |  | $ | 2.38 | 
|$3.01 TO $3.50           |  |                           | 66,000  |                           |  |                | 2.83 |             |  | $              | 3.38 |  |  |  | 66,000  |  |  | $ | 3.38 | 
|$3.51 TO $4.00           |  |                           | 42,000  |                           |  |                | 1.51 |             |  | $              | 3.94 |  |  |  | 42,000  |  |  | $ | 3.94 | 

THE FOLLOWING TABLE SUMMARIZES INFORMATION ABOUT FIXED STOCK OPTIONS OUTSTANDING AT JUNE 30, 2001:

|                         |  |                           |         |                           |  |                |      |             |  |                |      |  |  |  |         |  |  |   |      | 
|------------------------ |  | ------------------------- | ------- | ------------------------- |  | -------------- | ---- | ----------- |  | -------------- | ---- |  |  |  | ------- |  |  | - | ---- | 
|                         |  | Stock Options Outstanding |         | Stock Options Exercisable
|                         |  |                           |         |                          
|                         |  | Number                    |         | Weighted-Average          |  |                |      |             |  | Number         |      |  |  | 
|                         |  | Outstanding               |         | Remaining                 |  | Weighted-Avg   |      | Exercisable |  | Weighted-Avg  
|RANGE OF EXERCISE PRICES |  | at 6/30/01                |         | Contractual Life          |  | Exercise Price |      | at 6/30/01  |  | Exercise Price
|                         |  |                           |         |                           |  |                |      |             |  |               
|$0.6562 TO $1.030        |  |                           | 412,500 |                           |  |                | 7.33 |             |  | $              | 0.66 |  |  |  | 309,375 |  |  | $ | 0.66 | 
|$1.031 TO $1.37          |  |                           | 822,500 |                           |  |                | 8.22 |             |  | $              | 1.12 |  |  |  | 463,750 |  |  | $ | 1.11 | 
|$1.38 TO $1.50           |  |                           | 404,500 |                           |  |                | 5.95 |             |  | $              | 1.38 |  |  |  | 404,500 |  |  | $ | 1.38 | 
|$1.51 TO $2.00           |  |                           | 47,000  |                           |  |                | 0.19 |             |  | $              | 1.63 |  |  |  | 47,000  |  |  | $ | 1.63 | 
|$2.01 TO $2.50           |  |                           | 41,500  |                           |  |                | 1.96 |             |  | $              | 2.38 |  |  |  | 41,500  |  |  | $ | 2.38 | 
|$3.01 TO $3.50           |  |                           | 66,000  |                           |  |                | 3.83 |             |  | $              | 3.38 |  |  |  | 66,000  |  |  | $ | 3.38 | 
|$3.51 TO $4.00           |  |                           | 42,000  |                           |  |                | 2.51 |             |  | $              | 3.94 |  |  |  | 42,000  |  |  | $ | 3.94 | 

NOTE 9  COMMITMENTS

The Company leases office and plant space under operating leases, which expire
on various dates through 2008. Certain leases provide for escalations in rent
based upon increases in the lessors annual operating costs or the consumer
price index. Future minimum lease payments under these agreements at June 28,
2003 were as follows:

|            |      |   |           |         | 
|----------- | ---- | - | --------- | ------- | 
|Fiscal Year |      |   |           |        
|            | 2004 |   | $         | 435,000 | 
|            | 2005 |   |           | 376,000 | 
|            | 2006 |   |           | 331,000 | 
|            | 2007 |   |           | 343,000 | 
|            | 2008 |   |           | 294,000 | 
|            |      |   |           |        
|            |      | $ | 1,779,000 |        
|            |      |   |           |        

Rent expense for operations approximated $428,000, $457,000 and $380,000 for
fiscal years 2003, 2002 and 2001, respectively.

32



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NOTE 10  TRANSACTIONS WITH RELATED PARTIES

The Company receives consulting services under an agreement with Food Investors
Corporation (FIC). Pursuant to the consulting agreement, FIC provides
services related to management, planning, strategy development and pursing
worldwide interests of the Company. This agreement is renewable annually.
During fiscal year 2003, the Company suspended the consulting agreement with
Food Investors Corporation as a cost saving measure. This resulted in a $36,000
saving during the fourth quarter of fiscal 2003 since the quarterly payment was
withheld. The suspended agreement is subject to future evaluation by the Board
of Directors of the Company. The amount paid by the Company to FIC for fiscal
year 2003 was $108,000, and for the fiscal years 2002 and 2001 $144,000 per
year.

The Company recorded receivables of $7,000 at June 28, 2003 from Classic
European Bakers, LLC (CEB). CEB is owned by Food Research Corporation
(FRC), the majority owner of Cuisine Solutions common shares. The receivables
were primarily associated to unpaid rent related to a rental agreement for
office space used by CEB at the Companys premises in Alexandria. Payment on
the open balance was received from FRC subsequent to fiscal year 2003.

The Company recorded receivables of $13,000 at June 28, 2003 from its President
who sponsored a marketing event with the Young Presidents Organization in
France. The amount is non-interest bearing and expected to be paid during
fiscal year 2004.

The Company recorded an accrual in the amount of $268,000 to SOMDIAA at June
28, 2003. SOMDIAA is a holding company which is majority owned by Secria, S.A.
and Secria Europe, S.A. Both enterprises are owned by the Jean-Louis Vilgrain
family (JLV) and FRC is owned by Secria Europe, S.A. SOMDIAA provides the
administration of French Social Security healthcare and retirement plans for
individuals who work within the JLV Group. The primary portion of the recorded
accrual is related to amounts billed from SOMDIAA for separate health and
retirement plans for the President of the Company and two other non-officer but
key employees. The total accrual at June 28, 2003 includes coverage for
previous years benefits after all related costs were identified during fiscal
year 2003.

The wholly owned subsidiary, Vie de France Trademarks Ltd., was dissolved in
2002. The liquidation of final assets and cancellation of the Vie de France
Trademarks Ltd. shares was confirmed subsequent to the end of fiscal year 2003.
Cuisine Solutions USA has $54,000 in Accounts Receivables and $5,000 in stock
investment already written off during fiscal year 2003. The write off was
eliminated during the Consolidation process.

On June 12, 2001, the Company signed an agreement to create a partnership to
build a sous-vide processing facility in Chile. The purpose of the facility
would be to produce high quality, value priced whitefish, shellfish and salmon
products in Chile for the Global Retail and Foodservice markets. Cuisine
Solutions, Inc. would sell the Norwegian facility to the Chilean Group for
approximately $3,900,000, the sole investment required to own 48% of the new
joint venture, Cuisine Solutions Chile. The agreement was terminated without
any prejudice between the partners during fiscal year 2003 due to
administrative difficulties. However, the partners continue to develop the
facility in Chile and agreed that the Company hold 10% of the total shares of
Cuisine Solutions Chile S.A. A new marketing agreement to market certain
sous-vide products has been signed between the partners in June 2003 and a
commercial agreement to commit to the purchase of certain raw materials from
Cuisine Solutions Chile has been signed subsequent to the end of fiscal year
2003.

NOTE 11  SALES TO MAJOR CUSTOMERS

Due to the decentralized purchase decision process of customers within the
Foodservice channel, management does not believe any single customer creates a
dependency relationship.

The On Board Services channel has sales to two airline distribution companies
that represent 16.7% of total Company sales in fiscal 2003, the same two
distributors accounted for 17.9% of total Company sales during fiscal 2002. One
of the two distributors accounted for 12.7% of total Company sales in fiscal
2003 and 11.4% in fiscal 2002.

Foreign sales accounted for approximately 43.6%, 36.8%, and 29.6% of total
sales in fiscal years 2003, 2002 and 2001, respectively.

NOTE 12  LITIGATION

At the end of fiscal year 2002, the Company has filed a civil lawsuit in the
Federal District Court of Brasilia against the controlling partner in the joint
venture, Cuisine Solutions do Brasil Ltda, as a result of the Brazilian
partners failure to disclose financial information and operating results of
Cuisine Solutions do Brasil Ltda to Cuisine Solutions Inc. according to both
the joint venture agreement and Brazilian law. We refer to Legal Proceedings
in Part I of this Form 10-K.

Cuisine Solutions, Inc. has been named as a Co-Defendant in a civil garnishment
action in the amount of $625,000 styled Caisse Regionale du Morbihan et de
Loire Atlantique du Credit Maritime v. Food Research Corporation at law No.
210370, currently pending in the Circuit Court of Fairfax County, Virginia. In
this case, Plaintiff alleges that it obtained a judgment against Food Research
Corp. in France, which it now seeks to enforce upon assets of the entity and
Cuisine Solutions, Inc. in the Commonwealth of Virginia.

33



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##### 



Earlier this month (September 2003), Cuisine Solutions filed its answer to
Plaintiffs garnishment summons, denying that it possesses or controls any
funds, assets or any other property belonging to Food Research Corp.
Accordingly, Cuisine Solutions denies any liability in this case.

There are no other material pending legal proceedings, other than ordinary,
routine litigation incidental to the Companys business, to which the Company
is a party or to which any of its property is subject. Management does not
believe that any amounts it may be required to pay by reason thereof will have
a material effect on the Companys financial position or results of operations.

NOTE 13  QUARTERLY CONSOLIDATED FINANCIAL DATA (UNAUDITED)

(IN THOUSANDS, EXCEPT PER SHARE DATA)
In managements opinion, the interim financial data below reflects all
adjustments necessary to fairly state the results of the interim period
presented. All adjustments are of a normal recurring nature necessary for a
fair presentation of the information for the periods presented. Results of any
one or more quarters are not necessarily indicative of annual results or
continuing trends.

|                                       |  |                                          |       |              |  |          |       |          |  |   |        |   |  |   |       |  
|-------------------------------------- |  | ---------------------------------------- | ----- | ------------ |  | -------- | ----- | -------- |  | - | ------ | - |  | - | ----- | -
|                                       |  | (in thousands, except per share amounts)
|                                       |  | FISCAL YEAR 2003 QUARTERS ENDED         
|                                       |  |                                         
|                                       |  | September 21,                            |       | December 14, |  | April 5, |       | June 28,
|                                       |  | 2002                                     |       | 2002         |  | 2003     |       | 2003    
|                                       |  |                                          |       |              |  |          |       |         
|Total revenue                          |  | $                                        | 6,423 |              |  | $        | 6,598 |          |  | $ | 7,593  |   |  | $ | 7,198 |  
|Gross margin                           |  |                                          | 1,096 |              |  |          | 1,151 |          |  |   | 1,213  |   |  |   | 1,477 |  
|Net loss                               |  |                                          | (774  | )            |  |          | (847  | )        |  |   | (1,477 | ) |  |   | (994  | )
|Net loss per share (basic and diluted) |  | $                                        | (0.05 | )            |  | $        | (0.05 | )        |  | $ | (0.10  | ) |  | $ | (0.06 | )

|                                       |  |                                 |       |              |  |          |        |          |  |   |        |   |  |   |        |  
|-------------------------------------- |  | ------------------------------- | ----- | ------------ |  | -------- | ------ | -------- |  | - | ------ | - |  | - | ------ | -
|                                       |  | FISCAL YEAR 2002 QUARTERS ENDED
|                                       |  |                                
|                                       |  | September 22,                   |       | December 15, |  | April 6, |        | June 29,
|                                       |  | 2001                            |       | 2001         |  | 2002     |        | 2002    
|                                       |  |                                 |       |              |  |          |        |         
|Total revenue                          |  | $                               | 7,335 |              |  | $        | 6,235  |          |  | $ | 7,654  |   |  | $ | 7,392  |  
|Gross margin                           |  |                                 | 1,537 |              |  |          | 632    |          |  |   | 949    |   |  |   | 1,570  |  
|Net loss                               |  |                                 | (881  | )            |  |          | (1,477 | )        |  |   | (1,779 | ) |  |   | (1,890 | )
|Net loss per share (basic and diluted) |  | $                               | (0.06 | )            |  | $        | (0.09  | )        |  | $ | (0.11  | ) |  | $ | (0.12  | )

|                                   |  |                                 |       |             |  |           |       |          |  |   |       |   |  |   |       |  
|---------------------------------- |  | ------------------------------- | ----- | ----------- |  | --------- | ----- | -------- |  | - | ----- | - |  | - | ----- | -
|                                   |  | FISCAL YEAR 2001 QUARTERS ENDED
|                                   |  |                                
|                                   |  | September 16,                   |       | December 9, |  | March 31, |       | June 30,
|                                   |  | 2000                            |       | 2000        |  | 2001      |       | 2001    
|                                   |  |                                 |       |             |  |           |       |         
|Total revenue                      |  | $                               | 8,343 |             |  | $         | 9,463 |          |  | $ | 9,305 |   |  | $ | 9,027 |  
|Gross margin                       |  |                                 | 1,980 |             |  |           | 2,595 |          |  |   | 1,679 |   |  |   | 2,672 |  
|Net income (loss)                  |  |                                 | (171  | )           |  |           | 411   |          |  |   | (795  | ) |  |   | (306  | )
|Net income (loss) per share (basic |  | $                               | (0.01 | )           |  | $         | 0.03  |          |  | $ | (0.05 | ) |  | $ | (0.03 | )
|and diluted)                       |  |                                 |       |             |  |           |       |          |  |   |       |   |  |   |       |  

34



---



##### 



SCHEDULE II

CUISINE SOLUTIONS, INC.VALUATION AND QUALIFYING ACCOUNTS AND RESERVES

|                                                         |                                                   |   |            |         |            |   |              |         |            |   |         |        |        |   |            |         |  |   |         |         | 
|-------------------------------------------------------- | ------------------------------------------------- | - | ---------- | ------- | ---------- | - | ------------ | ------- | ---------- | - | ------- | ------ | ------ | - | ---------- | ------- |  | - | ------- | ------- | 
|                                                         |                                                   |   | Balance at |         | Additions  |   |              |         |            |   |         |        |        |   | Balance at
|                                                         |                                                   |   | Beginning  |         | charged to |   | Reduction of |         |            |   |         |        | End of
|                                                         |                                                   |   | of Period  |         | operations |   | allowance    |         | write-offs |   | Period 
|                                                         |                                                   |   |            |         |            |   |              |         |            |   |        
|Year ended June 30, 2001
Allowance for doubtful accounts |                                                   | $ | 89,000     |         |            | $ | 55,000       |         |            | $ |        |        |        | $ | 36,000     |         |  | $ | 108,000 |        
|                                                         |                                                   |   |            |         |            |   |              |         |            |   |         |        |        |   |            |         |  |   |         |        
|                                                         | Allowance for sales rebates earned,
not yet taken |   | $          |        |            |   | $            | 198,000 |            |   | $       |       |        |   | $          |        |  |   | $       | 198,000 | 
|                                                         |                                                   |   |            |         |            |   |              |         |            |   |         |        |        |   |            |         |  |   |         |        
|                                                         | Allowance for obsolete inventory                  |   | $          | 188,000 |            |   | $            |        |            |   | $       | 41,000 |        |   | $          | 44,000  |  |   | $       | 103,000 | 
|                                                         |                                                   |   |            |         |            |   |              |         |            |   |         |        |        |   |            |         |  |   |         |        
|Year ended June 29, 2002
Allowance for doubtful accounts |                                                   | $ | 108,000    |         |            | $ | 112,000      | (2)     |            | $ |        |        |        | $ | 52,000     |         |  | $ | 168,000 |        
|                                                         |                                                   |   |            |         |            |   |              |         |            |   |         |        |        |   |            |         |  |   |         |        
|                                                         | Allowance for sales rebates earned,
not yet taken |   | $          | 198,000 |            |   | $            | 61,000  |            |   | $       | 10,000 |        |   | $          | 249,000 |  |   | $       |        | 
|                                                         |                                                   |   |            |         |            |   |              |         |            |   |         |        |        |   |            |         |  |   |         |        
|                                                         | Allowance for obsolete inventory                  |   | $          | 103,000 |            |   | $            | 475,000 | (1)        |   | $       |       |        |   | $          | 74,000  |  |   | $       | 504,000 | 
|                                                         |                                                   |   |            |         |            |   |              |         |            |   |         |        |        |   |            |         |  |   |         |        
|Year ended June 28, 2003
Allowance for doubtful accounts |                                                   | $ | 168,000    |         |            | $ | 118,000      |         |            | $ | 216,000 | (3)    |        | $ | 8,000      |         |  | $ | 62,000  |        
|                                                         |                                                   |   |            |         |            |   |              |         |            |   |         |        |        |   |            |         |  |   |         |        
|                                                         | Allowance for obsolete inventory                  |   | $          | 504,000 |            |   | $            | 215,000 | (1)        |   | $       | 41,000 |        |   | $          | 253,000 |  |   | $       | 425,000 | 
|                                                         |                                                   |   |            |         |            |   |              |         |            |   |         |        |        |   |            |         |  |   |         |        



---

|(1) |  | Additional reserves for obsolete inventory
|--- |  | ------------------------------------------
|   
|(2) |  | Additional allowance for doubtful accounts
|   
|(3) |  | Reclassification to Other Current Assets  

35