<PAGE>   1

                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                    FORM 10-K

(MARK ONE)


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

                    FOR THE FISCAL YEAR ENDED: June 26, 1999
                                               -------------

--   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)

<TABLE>
<S>                                                 <C>
                 Delaware                           52-0948383
                 --------                           ----------
             (STATE OR OTHER JURISDICTION OF          (I.R.S. EMPLOYER
              INCORPORATION OR ORGANIZATION)          IDENTIFICATION NO.)
</TABLE>

             85 South Bragg Street, Suite 600, Alexandria, VA 22312
             ------------------------------------------------------
               (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)(ZIP CODE)

       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (703) 750-9600

           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. [ ]

     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 13, 1999 as reported on the NASDAQ/OTC Bulletin Board Market Quotation
System, was approximately $4,351,875. 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 13, 1999, there were 13,255,838 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 1998 Annual Meeting of Stockholders to be filed
- Items 10, 11, 12 and 13.

                        Exhibit Index is located on page.


<PAGE>   2

                                     PART I

ITEM 1. BUSINESS

FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS

       The Company services the Food Service Industry by providing pre-prepared
meals to replace meals previously prepared from "scratch". The Company develops,
produces and markets chef-created, fully cooked, fully prepared entrees and
sauces. The Company has targeted certain customer groups that require superior
quality while serving meals in large volumes and has categorized the customer
groups into three types, Lodging, On Board Services and New Business
Development. The Company also provides management services and consulting to
business partners as the Company expands global capabilities through
partnerships with limited liability companies.

GENERAL

       The Company develops produces and markets chef-created, fully cooked,
fully prepared entrees and sauces for the banquet, on board services, restaurant
and home meal replacement industries. The Company's entrees and sauces are
slow-cooked and pasteurized in its final packaging for guaranteed safety and
award-winning flavor. The Company markets these products to upscale users that
demand superior quality and use our product in place of product that was
previously prepared by their own chefs. This ability to use pre-prepared product
reduces the customers cost in product waste and labor, adds flexibility for last
minutes changes and provides a consistent portion size. The Cuisine Solutions
key to success is the ability to provide all of these benefits and deliver the
level of quality our customers expect.

Cuisine Solutions currently serves product through three major sales channels,
On Board Services, Lodging and New Business Development.

The On Board Services channel, formerly referred to as the Transportation Sales,
has a customer base that serves meals while providing transportation services to
the general public. The customer base includes airline and rail transportation
service companies. Cuisine Solutions has the unique ability to service these
companies globally through its multi-national production and distribution
facilities providing these carriers with same meal service from two continents.
Initial reception of our product into these channels has been favorable due to
the quality, cost, and flexibility benefits realized by our customers. Cuisine
Solutions has experienced a global sales growth of 73.3% versus fiscal 1998 in
this sales channel during fiscal 1999, and currently expects this sales trend to
continue through fiscal 2000.

The Lodging sales channel serves product to hotels, banquet centers, event
caterers and hotel restaurants. The Company saw this market as an untapped
opportunity since the competition in this market is "make from scratch" rather
than other prepared meal suppliers. Cuisine Solutions is confident that this
market will realize the benefits of pre-prepared product as these customer face
an growing problem with a tight labor market and increased demand for
flexibility. Since the purchasing decision in this market is decentralized, the
Company must demonstrate the ability to deliver the level of quality expected to
many purchasing decision levels. A process that requires more effort but will
deliver a new market and deep, stable customer base for prepared foods. The
Company also sees opportunities in event caterers and contract food service
suppliers as a potential accelerated growth market. Event caterers are those
that supply meals for events such as the Super Bowl, Masters Tournament, World
Cup and other major entertainment events. Contract food service companies
provide meal solutions to company cafeteria's, hospitals and retirement
communities. During fiscal 1999, the Company experienced a 32.7% global sales
growth in the Lodging channel versus fiscal 1998, and expects this trend to
continue through fiscal 2000.

The New Business sales channel currently includes sales to retail in-store deli,
military and restaurant distributors. Cuisine Solutions has experienced a
growing interest in product demand from supermarkets for use in their in-store
deli during fiscal 1999. The Company plans to re-position some sales efforts to
explore this opportunity with the existing sales force without loss of service
to our existing customer base. During fiscal 1999, the Company



1
<PAGE>   3

experienced a global sales growth of 7.4% in the New Business channel versus
fiscal 1998, and expects single digit sales growth in this category during
fiscal 2000.

The Company maintains manufacturing facilities in the United States and Norway,
and sells its product in North America and Europe. The company is a partner in a
limited liability company with a Brazilian partner, Sanoli Indsutria E Commercio
Alimentacao Ltda, which will build a manufacturing facility and market product
in the Mercusor market. The partnership includes management services to assist
with the design and construction of a manufacturing facility as well as ongoing
management service for operations, research and development, marketing and
administrative support.

The Company opened the USDA-approved food processing plant in Alexandria,
Virginia in May 1990, the Hjemeland, Norway plant in August 1994 and expects the
Brazilian plant to be operational by August 2000.

The Company has signed a letter if intent to acquire a manufacturing facility in
France to provide Cuisine Solutions "same meal solution" on both sides of the
Atlantic. Nouvelle Carte currently serves some airline and banquet customers but
the majority of the business is supplying home meal replacement products, fresh
and frozen, to retail customers. The Company expects to complete the transaction
by late fall, 1999.

The production process uses a method of food preparation, developed in France,
which cooks meats, seafood, poultry, sauces and vegetables over longer periods
of time using low heat. Before the cooking process begins, the product is
vacuum-sealed in special plastic pouches that better maintain the food's flavor
and moisture as compared to other methods of cooking. The cooking temperature as
well as the cooling temperature are strictly controlled via computerized process
control systems that are key to consistent high quality products. Following the
completion of the cooking process, the product can be either frozen or
refrigerated for distribution. Currently, all of the Company's products are
frozen.

       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) 750-9600.



2
<PAGE>   4

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 1999 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.

       The Company began development of the Culinary division business in 1987,
in conjunction with research performed previously 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 50,000 square feet building.

       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. The Company restructured its sales organization
and refocused its strategy on sales to the banquet industry (hotels, convention
centers, casinos, airlines and other banquet providers) during fiscal year 1997.
Because of sales and marketing disruptions related to this transition, sales
declined during fiscal year 1997 to about $14 million. During fiscal year 1998
the Company continued its reorganization while sales remained steady at $14
million. The focused sales and marketing efforts began to show results as sales
revenue increased to $21 million during fiscal 1999.

       The Company initially depended upon a national direct sales operation,
which was formally organized in 1992. In fiscal year 1997 the emphasis shifted
to a more focused sales organization that included an internal sales group,
segmented by customer type, and additional sales support from a network of
brokers and distribution organizations located in key markets nationwide. A
sales program that includes trade advertising, promotions and far more frequent
contact with a broader range of existing and potential high-volume customers was
put into effect late in fiscal year 1997 and continued through fiscal year 1998.
Those efforts have been duplicated during fiscal 1999 resulting in deeper
penetration into key accounts as well as the addition of new customers.

       During the second quarter of fiscal year 1998, the Company purchased a
parcel of land through bank financing for approximately $700,000 plus applicable
fees. During the fourth quarter of fiscal year 1998, the Company re-negotiated
the lease on the current facility, received significant cost reductions, and
decided to expand capacity on the existing plant through capital investment and
additional shifts. During fiscal 1999 the Company sold the property at a gain of
$132,000.

       The Company intends to reap the benefits of its existing plant via high
production volume while minimizing overhead costs. Management plans to initiate
detailed analysis on production capabilities and location planning during fiscal
2000 to determine maximum capacity capabilities and long term production
planning to meet future customer demand forecasts.



3
<PAGE>   5

PRODUCTS

       The Company develops produces and markets chef-created fully cooked
prepared entrees and sauces for the banquet, transportation, restaurant and home
meal replacement industries. The Company's entrees and sauces are slow-cooked
and pasteurized in its final packaging for guaranteed safety and award-winning
flavor. The Company offers a wide range of high quality frozen entrees, side
dishes, and sauces. The entree items consist of a variety of seafood, pork, beef
and poultry items. Side dishes and sauces range from vegetables and rice to
cream or tomato-based sauces, which allow the Company to plate thousands of
signature combinations.

       The Company packages its products in two ways. Most 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 banquets. Both
individual and multiple-serving vacuum packages seal the product prior to the
cooking process and remain sealed until they are ready to be heated for serving.
This maximizes the food quality and safety factor since the product is not
exposed to elements or handled after the cooking process until opened by the
chef. The sous vide preparation process also provides for long shelf lives
minimizing the risk of product obsolescence and providing additional flexibility
in production panning. A second packaging method, for customers wishing to use
single serving portions, is Individually Quick Frozen packaging. In this method,
individual servings of products are cooked, frozen, removed from vacuum package
and sealed inside a plastic lined corrugated box for easy customer access to
single servings.

The Company invested in an enrobed pasta line during fiscal 1998 and initiated
product development during fiscal 1999. The enrobed pasta process production
coats the pasta using special technology to provide uniform coverage and prevent
the sauce from running off the product. Cooked pasta/sauce products with
combinations of protein and/or vegetables are very appealing to our customer
base due to the popularity of pasta among the general public. The flexibility in
preparation of products to meet specific customer needs, and the cost to our
customer to serve a meal versus the cost of a meals with poultry, meat or
seafood, makes pasta an attractive alternative meal. This new product accounted
for 2.4% of total Company revenue during fiscal 1999 and management believes it
has tremendous sales and profit potential during fiscal 2000.

DISTRIBUTION

       The USA manufacturing facility distributes its products frozen to U.S.
customers. The Company's wholly-owned Norwegian subsidiary produces product for
sales in Europe and the USA.

       During fiscal year 1999, the Company continued to establish important new
relationships with third party distribution warehouses to increase distribution
capabilities throughout the United States. The Company currently manages
fourteen outside warehouses strategically located throughout the USA. Internal
MIS control systems monitor inventory levels at all warehouses with real-time
information and provide DRP and MRP information for production and distribution
planning

       The Company expanded distribution into the European markets in fiscal
year 1995 in conjunction with the opening of the Norwegian production facility
in 1994. Its products are stored in a number of regional frozen warehouses as
well as at the Alexandria, Virginia plant. In fiscal year 1996 the Company
improved its distribution of Norwegian Salmon to US customers by offering
"direct ship" capabilities from the Norwegian plant directly to the customer.
The Company intends to adopt alternative distribution means, as their customers
need them. Export products are transported in frozen containers via ship.

RAW MATERIAL STATUS

       The Company buys its raw materials from a number of suppliers at market
prices. While these prices may fluctuate during the year, the Company does not
believe that availability poses a material risk to its business. The majority of
product sales are subject to price revision to reflect shifts in the price of
raw materials.



4
<PAGE>   6

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 changing the name on 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
fiscal year 1996 the Company was in the process of securing a new packaging
trademark called MicroRoast(TM) and MicroRoti(TM) to be used in the U.S. and
European market, respectively. However, it was during fiscal year 1997 the
Company secured the use of these two trademarks. This new packaging is designed
for use in microwave ovens and imparts a roasted quality to our value-added
entrees.

CUSTOMER DEPENDENCY

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

The On Board Services channel has sales to two airline catering companies that
represent 32.6% of total Company sales in fiscal 1999 and the same two caterers
accounted for 37% of total Company sales during fiscal 1998. One of the two
caterers account for 22.9% of total Company sales in fiscal 1999 and 23.3% in
fiscal 1998.

SEASONALLY

       Due to the increase in sales across in the On Board Services and Lodging
sales channels, seasonality has been diluted. Currently sales trends do not
reflect any significant seasonal trend.

COMPETITION

       The Company primarily competes for sales by replacing product prepared by
Cuisine Solutions versus "in-house prepared from scratch". Cuisine Solutions is
attempting to create new global markets for its products and currently
experiences little direct competition.

RESEARCH & DEVELOPMENT

       For continuing operations, the Company invested $266,000, $269,000 and
$169,000 in research and development activities in fiscal years 1999, 1998 and
1997, respectively. The Company invests in development on an ongoing basis in
order to maintain the vitality of its product lines and to build sales.

REGULATION

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

       The Company's Norwegian plant meets European Community standards and
regulations. The Norwegian products, along with certain raw materials, are
subject to import regulations.

EMPLOYEES

       The Company employs approximately 130 people including full-time and
part-time workers and corporate staff.

GEOGRAPHIC SALES



5
<PAGE>   7

       The Company's sales are primarily focused in the United States, with
sales representing 82%, 89.8% and 91.2% of total sales for fiscal years 1999,
1998 and 1997, respectively.

ITEM 2. PROPERTIES

       The Company leases its offices and its two manufacturing facilities. The
U.S. plant, located in Alexandria, Virginia, is approximately 50,000 square
feet. The Norway plant, located in Hjelmeland, Norway, is approximately 20,000
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.

       The Company owns substantially all of the equipment used in its
facilities.

       Lease commitments and future minimum lease payments are shown in Notes 5
and 8 to the Consolidated Financial Statements, which is included in this Form
10-K.


ITEM 3. LEGAL PROCEEDINGS

       The Company is engaged in ordinary and routine litigation incidental to
its business, but 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.



6
<PAGE>   8

                                     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 NASDQ/OTC Bulletin Board 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:

<TABLE>
<CAPTION>
Year ended June 26, 1999                                    High                  Low
<S>                                                         <C>                  <C>
First Quarter.....................................          $ .938               $ .638
Second Quarter....................................            1.00                .3750
Third Quarter.....................................           1.500                 .500
Fourth Quarter....................................           1.562                1.000

<CAPTION>
Year ended June 27, 1998                                    High                  Low
<S>                                                        <C>                   <C>
First Quarter.....................................         $ 1.438               $ .938
Second Quarter....................................           1.688                1.000
Third Quarter.....................................           1.063                1.000
Fourth Quarter....................................           1.125                 .875

<CAPTION>
Year ended June 28, 1997                                    High                  Low
<S>                                                        <C>                  <C>
First Quarter.....................................         $ 2.688              $ 1.938
Second Quarter....................................           2.563                1.375
Third Quarter.....................................           2.000                1.063
Fourth Quarter....................................           1.500                1.063
</TABLE>


AS OF SEPTEMBER 13, 1999 THERE WERE APPROXIMATELY 686 HOLDERS OF RECORD OF THE
COMPANY'S COMMON STOCK.

No dividends were paid during fiscal year 1999, 1998 and 1997.

       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.



7
<PAGE>   9

ITEM 6. SELECTED FINANCIAL DATA

<TABLE>
<CAPTION>
                                                                     FIVE YEAR SUMMARY
                                                                       (in thousands, except per share amounts)

                                                       1999          1998          1997             1996             1995
---------------------------------------------------------------------------------------------------------------------------------
<S>                                                    <C>           <C>           <C>              <C>              <C>
Net Sales                                              $ 20,722      $ 14,007      $    13,987      $    16,078      $    15,707

Loss from continuing operations (3)                       (733)       (3,121)            (934)          (2,224)            (706)

Net income (loss) (1); (2); (3); (3)                      (733)       (3,121)            (466)          (1,714)               24

Loss from continuing operations per share                 (.05)        (0.23)           (0.07)           (0.16)           (0.05)

Net income (loss) per share                               (.05)        (0.23)           (0.04)           (0.13)                -

Total assets                                             22,818        24,959           22,712           27,035           29,911

Long term debt, including current portion                 2,081         3,024            2,575            2,300            2,981

Stockholders' equity                                     17,607        19,503           18,125           22,782           24,481

Dividends per share                                           -             -                -                -                -
</TABLE>


(1)    Includes benefit from cumulative effect of change in accounting principle
       of $197 in 1996.


(2)    Includes gains from sale on discontinued operations of $468, $313, $730,
       in 1997, 1996, and 1995 respectively.

(3)    Includes loss on equity method investment of $1,500 in 1996.


ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

RESULTS OF OPERATIONS

       Fiscal 1999 revenue reflects a consolidated sales increase of 47.9% to
$20,722,000 from fiscal year 1998 revenue of $14,007,000 and an increase of
48.2% versus fiscal 1997 revenue of $13,987,000. The consolidated fiscal 1999
increase in sales was driven by a 31.4% increase in US sales and a 159.2%
increase in sales to Europe and revenue from management services versus fiscal
1998 revenue.

       Loss from continuing operations for fiscal 1999 was $733,000 versus
$3,121,000 for fiscal 1998 and $466,000 for fiscal 1997. The loss reduction for
fiscal 1999 was due to the increased sales volume and related volume
efficiencies in manufacturing production costs.



8
<PAGE>   10

SALE AND GROSS MARGINS

       The Company's sales of high-quality frozen foods have been to lodging,
airlines and other food service providers who order direct and/or through their
distributor networks. In fiscal year 1999 total Lodging sales represented 30.8%,
On Board Services 50.2%, New Business customers 16.6%, and 2.4% in management
services.

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

<TABLE>
<CAPTION>
                                                                         Year Ended
                                                       June 26,                June 27,               June 28,
                                                           1999                    1998                   1997
                                                           ----                    ----                   ----
<S>                                               <C>                     <C>                    <C>
Net Sales                                         $  20,722,000           $  14,007,000          $  13,987,000
Gross margin percentage                                     24%                     17%                    14%
Loss from operations                             $  (1,620,000)          $  (4,269,000)         $  (2,366,000)
</TABLE>

Execution of strategic sales planning led to revenue of $20,722,000 in fiscal
1999, up 47.9% from fiscal 1998 revenue of $14,007,000 and up 48.1% from fiscal
1997 revenue of $13,987,000.

The Company experienced an explosive growth in the On Board services channel
during fiscal 1999, accounting for 65.6% of the total Company increase in sales
revenue. This growth is attributed to the second year results of a focused
strategy by the On Board Services Sales Group to penetrate the passenger airline
and rail transportation services market that was initiated in 1997. The Company
anticipates fiscal 2000 sales growth in this channel to meet or exceed fiscal
1999 levels.

Lodging sales increase accounted for 23.4% of the total company
sales growth. This increase was also the impact of a vision to create a new
market by replacing items prepared "in house" with pre-prepared frozen entrees.
The Company anticipates marginally increasing sales each year as the marketing
efforts begin produce results. The Company anticipates fiscal 2000 sales growth
to meet or exceed fiscal 1999 levels in this channel.


New Business revenue increases accounted for 3.5% of the total increase through
improvements in the retail channel and management services to Brazil accounted
for 7.5% of the increase.

Total sales to Europe from the Norwegian facility were $3,717,000 during fiscal
1999, $1,429,000 in fiscal 1998 and $1,231,000 in fiscal 1997. The sales growth
rates were 160% in fiscal 1999 versus 16% in fiscal 1998. The increase in
Norway's European activity is a direct result of increased efforts at
penetrating strategic customer accounts.

       Gross margins as a percent of sales increased to 24% for fiscal 1999
compared to 17% in fiscal 1998 and 14% in fiscal 1997. The increase is
attributed to manufacturing efficiencies related to volume versus overhead costs
and strategic contract purchasing of raw materials. Management service fees
created 1.6% of the improvement via revenue without cost of goods, 1.4% was due
to depreciation reductions due to equipment reaching its expected life and 4% of
the improvement was created by volume efficiencies and strategic purchasing.

SELLING AND ADMINISTRATION EXPENSES:

       A comparison of selling and general administrative costs follows:

<TABLE>
<CAPTION>
                                             Year Ended

                                         June 26,             June 27,              June 28,
                                             1999                 1998                  1997
<S>                                    <C>                  <C>                   <C>
Selling costs                          $4,181,000           $4,377,000            $2,441,000
General administrative costs            2,476,000            2,220,000             1,816,000
                                       ----------           ----------            ----------
                                       $6,657,000           $6,597,000            $4,257,000
</TABLE>

       Selling and administration costs as a percentage of sales were 32% in
fiscal 1999, 47% in fiscal 1998 and 30.4% in fiscal 1997. The fiscal 1999
decrease reflects the impact of increased sales while minimizing additional



9
<PAGE>   11

expenditures. The increase in fiscal 1998 versus 1997 reflects the initial
investment in sales personnel and marketing programs required to support the
long term sales and marketing strategy .The fiscal 1999 increase in general
administrative costs were driven by depreciation on new information systems,
additional legal expenditures related to the NASDAQ delisting and trademark
maintenance for Cuisine Solutions worldwide and travel related to Norway
activity and investigation into potential acquisitions. The fiscal 1998 general
and administration expenses reflect an increase in travel and depreciation costs
associated with new information systems

DEPRECIATION AND AMORTIZATION

       The fiscal year 1999 depreciation and amortization costs decreased by
$126,000 over fiscal year 1998 to $879,000 as a result of equipment and
leasehold improvements nearing the end of its useful life, netted against
investments in capital assets for its operations. Actual fiscal year 1998
depreciation and amortization costs decreased by $191,000 over fiscal year 1997
to $1,058,000. Actual fiscal year 1997 depreciation and amortization costs
increased by $55,000 over fiscal year 1996 to $1,249,000 as a result of
investments in capital assets for its operations.

NON-OPERATING INCOME AND EXPENSE

       Interest expense relates to the borrowings relating to the Company's U.S.
and Norwegian subsidiary, including the Norwegian capital lease. At June 26,
1999, the Company had borrowings of $1,457,000, bearing interest at rates
ranging from 6.9% to 8.5%. The majority of these borrowings of $1,428,00 were
through its Norwegian facility. It is anticipated that these borrowings will
remain outstanding during the upcoming fiscal year. The Company's U.S.
operations represent $18,000 of these borrowings.

       Non-operating income for fiscal 1999 of $1,084,000 related to interest
income and capital gains earned on the investments held by the Company.

DISCONTINUED OPERATIONS

       The gain from sale of discontinued operations for fiscal year 1997
relates to reversal of certain accruals related to the former Bakery and
Restaurant Divisions of $154,000 due to the settlement of certain leases
relating to the former restaurants and bakeries, of which $60,000 was recorded
in the fourth quarter of 1997, and income tax benefits applied of $314,000, of
which $110,000 was recorded in the fourth quarter of 1997. During fiscal year
1999, the Company reversed the $72,000 accrual related to a lease.

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. Customer sensitivity to price
changes can influence the overall sales of individual products. The Company
performs price reviews and publishes changes each calendar quarter.

LIQUIDITY AND CAPITAL RESOURCES

       In fiscal year 1999, the Company experienced an increase in its liquidity
through the sale of securities for capital gains, the collection of the federal
income tax receivable and the sale of the real estate. Inventory and receivables
increased due to the higher sales volume and requirements to have adequate
inventory on hand to meet customer demand resulting in an increase in cash tied
up in inventory and receivables. The combined total of the cash and short-term
investment balances was $2,211,000 and $1,610,000 at June 26, 1999 and June 27,
1998, respectively. Additionally, the Company held investments of $7,950,000 and
$10,600,000 at June 26, 1999 and June 27, 1998, respectively, with maturities
greater than one year.



10
<PAGE>   12

       In fiscal year 1998, the Company experienced an increase in its liquidity
due to the payment in full all notes receivables from Food Research Corporation
(FRC) its majority shareholder. The combined total of the cash and short-term
investment balances was $1,610,000 (of which $645,000 is restricted) and
$1,451,000 at June 27, 1998 and June 28, 1997, respectively. Additionally, the
Company held investments of $10,600,000 and $10,217,000 at June 27, 1998 and
June 28, 1997, respectively, with maturities greater than one year.

       In fiscal year 1997, the Company experienced a decline in its liquidity.
The combined total cash and short-term investment balances was $1,451,000 and
$9,520,000 at June 28, 1997 and June 29, 1996, respectively. Additionally, the
Company held investments of $10,217,000 and $5,598,000 at June 28, 1997 and June
29, 1996, respectively, with maturities greater than one year.

       Cash used by operations in fiscal year 1999 amounted to $560,000 compared
to cash used in fiscal 1998 of $3,040,000, and cash used in fiscal year 1997 of
$1,308,000. The cash used in fiscal year 1999 relates to the funds needed to
finance the Company's operations and increase inventory. The cash used in fiscal
year 1998 relates to the funds needed to finance the Company's operations, along
with increases in trade and income tax receivable. The cash used in fiscal year
1997 relates to the funds needed to finance the Company's operations along with
increases in trade, income tax and notes receivable.

       Cash in the amount of $2,048,000 was provided by investing activities in
fiscal year 1999. During fiscal year 1999 the company sold securities for
capital gains and the property purchased for the plant relocation. Cash in the
amount of 3,564,000 was provided by investing activities in fiscal year 1998.
During fiscal year 1998 the Company received payment in full of $4,399,000 of
notes receivable and accrued interest from it majority shareholder, FRC. Cash in
the amount of $5,791,000 was used by investing activities in fiscal year 1997.
During 1997, the Company funded a loan to its majority shareholder, FRC in the
amount of $2,441,000. In addition to these loans, three loans from FRC totaling
$1,966,000 were outstanding as of June 29, 1997 and June 29, 1996, with maturity
dates ranging from July 1, 1997 through October 1, 1997. The three loans that
were outstanding as of June 29, 1996 are secured by assets of FRC. All of the
notes due from FRC were paid in full during fiscal year 1998.

       During fiscal year 1999 the Company made capital expenditures of
$220,000. These investments involved small equipment purchases, personal
computers and software upgrades. The Company had net purchases totaling $716,000
in fiscal year 1998 related to manufacturing and systems upgrades. During fiscal
year 1997, the Company made capital expenditures of $413,000.

       In fiscal year 1999, cash used by financing activities totaled $943,000.
The majority of these funds we applied against the bank note of $645,000 which
was used to finance the purchase of land with and the remaining cash were
applied to the Norwegian debt. Fiscal year 1998,cash in the amount of $196,000
was used by financing activities, which is attributable to the debt acquired by
the Norwegian facility in the amount of $115,000, offset by payments of
$311,000. In fiscal year 1997, cash in the amount of $590,000 was provided by
financing activities, which is attributable to the debt acquired by the
Norwegian and U.S. facilities in the amount of $713,000 and $31,000,
respectively, offset by payments of $154,000.

       During the second quarter of fiscal year 1998, the Company purchased a
parcel of land using bank financing for approximately $700,000 plus applicable
fees. The purchase, initiated as part of an expansion plan, included financing
through an approved $8.2 million industrial revenue bond. During the fourth
quarter of fiscal year 1998, the Company re-negotiated the lease on the current
facility, received significant cost reductions, and decided to expand capacity
at the existing plant through capital investment and additional shifts. During
fiscal 1999, the land was sold.

       The Company's Norwegian subsidiary has secured a working capital
commitment for its liquidity needs in Norway in the form of an overdraft
facility. As of June 26, 1999 $623,000 was outstanding under this overdraft
facility. During fiscal year 1996, CSI Norway increased its overdraft facility
balance, and can borrow up to $800,000 under this commitment. The overdraft
facility is protected by a letter of credit posted by the U.S. operations
banking institution and renewed annually.



11
<PAGE>   13

FUTURE PROSPECTS

       In fiscal year 2000, the Company intends to remain focused on the
objective of becoming the preferred global supplier to the Lodging and On Board
Services channel. The continued investment in sales and marketing awareness
spending, initiated during fiscal 1998, is expected to continue to produce the
double digit sales growth through fiscal year 2000. Armed with a full line of
products and expanded capabilities due to the proposed acquisition of Nouvelle
Carte, the Company will continue to pursue sales growth in the European markets.
The additional production capabilities obtained through the acquisition of
Nouvelle Carte will provide the Company with the ability to offer airlines
expanded same meal service on both sides of the Atlantic, as well as flights to
countries other than the USA. Nouvelle Carte's successful retail channel and
solid relationship with major retailers such as Carrefour will provide the
company with the contacts and capabilities to expand this success to the South
American retail market. Fiscal 2000 will also produce an additional
manufacturing facility in Brazil to service the Mercusor markets for Airline,
Lodging and other foods service channels in additional to retail and export
opportunities. Brazil is currently scheduled to begin producing product by June
2000.

Customers have expressed a strong interest in the Cuisine Solutions enrobed
pasta line. The company has prepared initial orders and allocated the required
production resources to plan on substantial demand for this product line. The
current production facility has planned adequate resources to produce up to $17
million in annual sales of this product line.

Cuisine Solutions has expanded it current facility to operate two shifts to meet
current and future sous vide production demands. Management has initiated a
project to evaluate the current facility to determine revised maximum
capabilities and begin the planning process to determine the size and equipment
lines to meet long term demand.

The Company plans to have these plans completed by the close of fiscal 2000.

       The Company has undertaken a comprehensive Year 2000 compliance program.
This program addresses the Company's products they sell as well as the Customer
Service and Technical support functions. The Company is aware of the issues
associated with the programming code in existing computer systems as the
millennium (year 2000) approaches. During fiscal year 1998 the Company made
investments in capital expenditures of $716,000. These expenditures represent
$360,000 of manufacturing equipment, and $345,000 of hardware and software
programs. The equipment, hardware and software purchased have been tested for
year 2000 compliance. The Company is currently utilizing both internal and
external resources to identify, correct or reprogram, and test any other systems
it has for the year 2000 compliance. The Company has completed testing of its
internal systems and all systems, except a package labeling system are year 2000
compliant. The package labeling system will be replaced by new equipment by late
October 1999. The Company has establish procedures to inventory all of its
automated computer based systems, developed a team to implement a plan for year
2000 conversion, confirmed with the manufacturers of equipment, computer and
software that its systems will function properly in the year 2000 and contacted
vendors and customers to request an update of their Year 2000 preparations. The
Company has already received assurance from its banking institution of its
initiatives in place for year 2000 compliance. Management does not expect the
year 2000 conversion to have a material effect on its financial position or
results of operations.

            .

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,and

       Foreign exchange rates.

Interest Rates:



12
<PAGE>   14

       The Company's exposure to market risk for changes in interest rates
relate 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 1
of Item 14(a) of the Form 10-k.

Foreign Currency Risk

       International operations constitute 18% of fiscal year 1999 Company
sales. The majority of the Company's sales are denominated in 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. As currency
exchange rates change, translation of the income statements of the Norway
operations into U.S. dollars affects year-over-year comparability of operating
results. Sales, which are subject to these foreign currency fluctuations, are
approximately 18% of the Company's sales. The net assets of the subsidiary are
approximately 3.7% of the Company's net assets. The Company does not enter into
hedges to minimize volatility of reported earnings because it does not believe
the exposure or the cost justifies it. 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.

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

Effective on October 28, 1998, the Registrant's Board of Directors elected to
retain Grant Thornton LLP as its independent auditor and to dismiss KPMG LLP
("KPMG"). Heretofore KPMG had acted as the Registrant's independent auditor. The
decision to change auditors was approved by the Registrant's Audit Committee and
Board of Directors.

       The audit reports of KPMG on the consolidated financial statements of the
Registrant and its subsidiaries as of and for the years ended June 27, 1998 and
June 28, 1997, did not contain any adverse opinion or disclaimer of opinion, nor
were they qualified or modified as to uncertainty, audit scope or accounting
principles. However, the audit reports of KPMG on the consolidated financial
statements of the Registrant and its subsidiaries as of and for the years ended
June 27, 1998 and June 28, 1997 referred to a change in accounting method for
certain inventory costs.

       During the Registrant's two most recent fiscal years ended June 27, 1998
and June 28, 1997, and through the subsequent interim period through October 28,
1998, there were no disagreements with KPMG on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedures, which disagreements if not resolved to the satisfaction of the
former accountant, would have caused them to make a reference to the subject
matter of the disagreements in connection with its report; nor has KPMG ever
presented a written report, or otherwise communicated in writing to the
Registrant or its Board of Directors the existence of any "disagreement" or
"reportable event" within the meaning of Item 304 of Regulation S-K.

       KPMG has provided the Registrant with a letter addressed to the SEC, as
required by Item 304(a)(3) of Regulations S-K, so that the Registrant can file
such letter with the SEC.



13
<PAGE>   15

                                    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 since 1988.

<TABLE>
<CAPTION>
NAME                                AGE  OFFICE HELD WITH COMPANY                             SINCE
----                                ---  ------------------------                             -----
<S>                                 <C>  <C>                                                  <C>
Stanislas Vilgrain                   40  President and Chief Executive Officer                 1994

Carl M. Youngman                     57  Treasurer                                             1996

Michael McCloud                      36  Executive Vice President                              1997

Robert Murphy                        36  Vice President and Chief Financial Officer            1998
</TABLE>


       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. Youngman was appointed Acting Chief Financial Officer in February
1996 and Treasurer in October 1996. Mr. Youngman has over twenty five years of
experience in executive-level positions. During this period he has been an
executive in over twenty companies and an advisor to over fifty other companies.
From 1993 to the present, Mr. Youngman has been senior partner of Youngman and
Charm, a professional firm which specializes in corporate renewal and corporate
finance. Mr. Youngman hold a BS degree in Electrical Engineering from Worcester
Polytechnic Institute and a Master's Degree from Harvard Business School. He is
a member of the Audit, Stock Option and Compensation Committees. Mr. Youngman
was replaced by Mr. Murphy as Chief Financial Officer in November 1997.

       Mr. McCloud came to the Company in October 1996. Prior to joining the
Company, Mr. McCloud was Vice President of Sales for Edwards Baking Company
since July 1994. He previously served as Edwards' Vice President of Marketing,
and as that Company's Director of Marketing. Before joining Edwards, Mr. McCloud
was Director of Marketing for Borden, Inc.'s snacks and international consumer
products division. He has also held sales and marketing positions with units of
Coca-Cola, USA and Proctor & Gamble. Mr. McCloud holds a BS degree in
Management.

       Mr. Murphy joined the Company in November 1997 and was appointed Vice
President and Chief Financial Officer. Mr Murphy has 20 years of food
experience, 14 of which are in the manufacturing sector. Prior to joining the
Company, Mr. Murphy was the Senior Director of Acquisitions and Integration for
Edwards Baking Company.



14
<PAGE>   16

He also held the positions of Operations Controller and Manager of Financial
Systems and Development. Prior to Edwards, Mr. Murphy was a Controller with
Bunge Foods working in the Bakery and Dairy Industrial Ingredient Divisions.

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

(a) Index to Financial Statements

<TABLE>
<CAPTION>
                                                                                                   Page
                                                                                                   ----
<S>                                                                                                <C>
    (1)     Financial Statements:

            Report of Independent Accountants................................................
                 Grant Thornton LLP.as of and for the year ended June 26, 1999...............      F-1
                 KPMG LLP as of June 27, 1998 and for the years ended June
                 27, 1998 and June 28, 1997

            Consolidated Balance Sheets - June 26, 1999 and June 27, 1998....................      F-2

            Consolidated Statements of Operations - Fiscal Years Ended
                 June 26, 1999, June 27, 1998, and June 28, 1997.............................      F-3

            Consolidated Statements of Changes in Stockholders' Equity - Fiscal
                 Years Ended June 26, 1999, June 27, 1998, and June 28, 1997.................      F-4

            Consolidated Statements of Cash Flows - Fiscal Years Ended
                 June 26, 1999, June 27, 1998 and June 28, 1997..............................      F-5

            Notes to Consolidated Financial Statements - June 26, 1999.......................      F-6


    (2)     Financial Statement Schedule:....................................................

            Schedule II--Valuation and Qualifying Accounts...................................      F-7
</TABLE>



15
<PAGE>   17

       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.

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

              23.2   Consent of Independent Accountants- KPMG LLP

              27     Financial Data Schedule

(b)    Reports on Form 8-K:



16
<PAGE>   18

                     None

(c)    Exhibits:

                     Exhibits required to be filed in response to this paragraph
                     of Item 14 are listed above in subparagraph (a)(3).

(d)    Financial Statement Schedule:

                     Schedules and reports thereon by independent accountants
                     required to be filed in response to this paragraph of Item
                     14 are listed in Item 14(a)(2).



17
<PAGE>   19

                                   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.

<TABLE>
<CAPTION>
                   Signature                                     Title                                              Date
------------------------------------------------      --------------------------------                        ------------------
<S>                                                   <C>                                                     <C>
      /s/ Jean-Louis Vilgrain                         Chairman of the Board                                   September 17, 1999
------------------------------------------------                                                              ------------------
      Jean-Louis Vilgrain

      /s/ Stanislas Vilgrain                          President,                                              September 17, 1999
------------------------------------------------      Chief Executive Officer                                 ------------------
      Stanislas Vilgrain

      /s/ Carl Youngman                               Director                                                September 17, 1999
------------------------------------------------      Treasurer                                               ------------------
      Carl M. Youngman

      /s/ Bruno Goussault                             Director                                                September 17, 1999
------------------------------------------------                                                              ------------------
      Bruno Goussault

      /s/ Alexandre Vilgrain                          Director                                                September 17, 1999
------------------------------------------------                                                              ------------------
      Alexandre Vilgrain

      /s/ Charles McGettigan                          Director                                                September 17, 1999
------------------------------------------------                                                              ------------------
      Charles McGettigan

      /s/ David Jordan                                Director                                                September 17, 1999
------------------------------------------------                                                              ------------------
      David Jordan

      /s/ Nancy Schaefer                              Director                                                September 17, 1999
------------------------------------------------                                                              ------------------
      Nancy Schaefer

      /s/ Michael McCloud                             Executive Vice President                                September 17, 1999
------------------------------------------------                                                              ------------------
      Michael McCloud

      /s/ Robert Murphy                               Vice President &                                        September 17, 1999
------------------------------------------------      Chief Financial Officer                                 ------------------
      Robert Murphy                                   (Principal Financial and Accounting Official)


</TABLE>



18
<PAGE>   20
\
Independent Auditors' Report

The Board of Directors and Stockholders

CUISINE SOLUTIONS, INC.:

We have audited the accompanying consolidated balance sheet of Cuisine
Solutions, Inc. and subsidiaries as of June 26, 1999, and the related
consolidated statements of operations, changes in stockholders' equity and cash
flows for the year then ended. In connection with our audit of the consolidated
financial statements we also have audited the financial statement schedule for
the year ended June 26, 1999, 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 audit.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Cuisine Solutions,
Inc., and subsidiaries as of June 26, 1999, and the results of their operations
and their cash flows for the year then ended, in conformity with generally
accepted accounting principles. Also, in our opinion, the related financial
statement schedule for the year ended June 26, 1999, 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 10, 1999



19
<PAGE>   21

The Board of Directors and Stockholders

CUISINE SOLUTIONS, INC.:

       We have audited the accompanying consolidated balance sheet of Cuisine
Solutions, Inc. and subsidiaries as of June 27, 1998, and the related
consolidated statements of operations, changes in stockholders' equity and cash
flows for years then ended June 27, 1998 and June 28, 1997. In connection with
our audits of the consolidated financial statements we also have audited the
financial statement schedule for the years ended June 27, 1998 and June 28,
1997, as listed in the accompanying index. These consolidated financial
statements and financial statement schedules 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 generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

       In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Cuisine
Solutions, Inc., and subsidiaries as of June 27, 1998, and the results of their
operations and their cash flows for the years ended June 27, 1998 and June 28,
1997, in conformity with generally accepted accounting principles. Also, in our
opinion, the related financial statement schedule for the years ended June 27,
1998 and June 28, 1997, 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.

            .




                                        KPMG LLP

                                        Washington, D.C.
                                        September 29, 1998



20
<PAGE>   22

                            CUISINE SOLUTIONS, INC.
                          CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                  -----------------------------------------------
                                                                                        June 26,                  June 27,
                                                                                          1999                      1998
                                                                                  ---------------------     ---------------------
<S>                                                                               <C>                       <C>
ASSETS
Current Assets
  Cash and cash equivalents                                                                $ 1,225,000                 $ 681,000
  Investments, current (including restricted investments of $0
      and $645,000, respectively)                                                              986,000                   929,000
  Accounts receivable, trade                                                                 3,469,000                 2,986,000
 Inventory                                                                                   4,132,000                 2,385,000
 Prepaid expenses                                                                              242,000                   560,000
 Current portion of notes receivable, related party                                             34,000                    41,000
 Income tax receivable                                                                               -                 1,062,000
 Other current assets                                                                          682,000                   365,000
                                                                                  ---------------------     ---------------------
   TOTAL CURRENT ASSETS                                                                     10,770,000                 9,009,000

Investments, noncurrent                                                                      7,950,000                10,600,000
Land held for sale                                                                                   -                   730,000
Fixed assets, net                                                                            3,238,000                 3,902,000
Note receivable, officer and related party, including accrued interest,
   less current portion                                                                        479,000                   462,000
Other assets                                                                                   381,000                   256,000
                                                                                  ---------------------     ---------------------
   TOTAL ASSETS                                                                           $ 22,818,000              $ 24,959,000
                                                                                  =====================     =====================

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
  Current portion of long-term debt                                                          $ 623,000               $ 1,399,000
  Accounts payable and accrued expenses                                                      2,129,000                 1,549,000
  Accrued payroll and related liabilities                                                      993,000                   788,000
  Accrued store closings                                                                             -                    72,000
  Other accrued taxes                                                                            9,000                    23,000
                                                                                  ---------------------     ---------------------
     Total current liabilities                                                               3,754,000                 3,831,000

Long-term debt, less current portion                                                         1,457,000                 1,625,000
                                                                                  ---------------------     ---------------------
    Total liabilities                                                                        5,211,000                 5,456,000
                                                                                  ---------------------     ---------------------

Commitments and Contingencies                                                               -                         -

Stockholders' equity
 Common stock - $.01 par value, 20,000,000 shares
    authorized, 14,078,620  shares issued and
    13,285,838 and 13,822,543 shares outstanding at June 26,                                   141,000                   141,000
    1999 and June 27, 1998 respectively
 Class B Stock - $.01 par value, 175,000 shares authorized,
    none issued                                                                                      -                         -
 Additional paid-in capital                                                                 21,352,000                21,352,000
 Retained earnings (accumulated deficit)                                                    (1,407,000)                 (674,000)
Accumulated Other Comprehensive Income
   Unrealized (losses) gains on debt and equity investments                                   (513,000)                  106,000
   Cumulative translation adjustment                                                            51,000                    18,000
 Treasury stock, at cost (792,782 and 256,077shares                                         (2,017,000)               (1,440,000)
    at June 26, 1999 and June 27, 1998 respectively)
                                                                                  ---------------------     ---------------------
    Total stockholders' equity                                                              17,607,000                19,503,000
                                                                                  ---------------------     ---------------------


                                                                                  ---------------------     ---------------------
  Total liabilities and stockholders' equity                                              $ 22,818,000              $ 24,959,000
                                                                                  =====================     =====================
</TABLE>


See accompanying notes to consolidated financial statements.


F-2
<PAGE>   23

                            CUISINE SOLUTIONS, INC.
                     CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                                   Year Ended
                                                                ------------------------------------------------------------
                                                                    June 26,           June 27,              June 28,
                                                                      1999               1998                  1997
                                                                -----------------  ------------------  ---------------------
<S>                                                             <C>                <C>                 <C>
NET SALES                                                            $20,722,000         $14,007,000            $13,987,000

COST OF GOODS SOLD                                                    15,670,000          11,558,000             12,015,000
                                                                -----------------  ------------------  ---------------------
    GROSS MARGIN                                                       5,052,000           2,449,000              1,972,000

SELLING AND ADMINISTRATION                                             6,657,000           6,597,000              4,257,000
DEPRECIATION AND AMORTIZATION                                            226,000             136,000                110,000
OTHER OPERATING INCOME                                                  (211,000)            (15,000)               (29,000)
                                                                -----------------  ------------------  ---------------------
    LOSS FROM OPERATIONS                                              (1,620,000)         (4,269,000)            (2,366,000)
                                                                -----------------  ------------------  ---------------------

NONOPERATING INCOME (EXPENSE)
    INVESTMENT INCOME                                                  1,084,000             955,000              1,093,000
    INTEREST EXPENSE                                                    (208,000)           (110,000)              (105,000)
    OTHER INCOME (EXPENSE)                                                17,000              (7,000)                 5,000
                                                                -----------------  ------------------  ---------------------
        TOTAL  NONOPERATING INCOME                                       893,000             838,000                993,000
                                                                -----------------  ------------------  ---------------------

LOSS FROM CONTINUING OPERATIONS BEFORE INCOME
  TAXES, DISCONTINUED OPERATIONS,                                       (727,000)         (3,431,000)            (1,373,000)
PROVISION FOR INCOME TAX BENEFIT (EXPENSE)                                (6,000)            310,000                439,000
                                                                -----------------  ------------------  ---------------------

LOSS FROM CONTINUING OPERATIONS BEFORE DISCONTINUED
  OPERATIONS NET OF TAXES                                               (733,000)         (3,121,000)              (934,000)


GAIN FROM SALE OF DISCONTINUED OPERATIONS, NET OF TAXES                        -                   0                468,000

                                                                -----------------  ------------------  ---------------------
NET LOSS                                                         $      (733,000)   $     (3,121,000)   $          (466,000)
                                                                =================  ==================  =====================

BASIC AND DILUTED NET INCOME (LOSS) PER COMMON SHARE:
  CONTINUING OPERATIONS,  BEFORE DISCONTINUED OPERATIONS,
   NET OF TAXES                                                  $         (0.05)   $          (0.23)   $             (0.07)
  DISCONTINUED OPERATIONS                                                      -                   -                   0.03
                                                                -----------------  ------------------  ---------------------
NET LOSS PER COMMON SHARE                                        $         (0.05)   $          (0.23)   $             (0.04)
                                                                =================  ==================  =====================

WEIGHTED AVERAGE SHARES OUTSTANDING                                   13,625,430          13,822,543             13,822,543
                                                                =================  ==================  =====================
</TABLE>


See accompanying notes to consolidated financial statements.


F-3
<PAGE>   24

                            CUISINE SOLUTIONS, INC.
           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>

                                                                                      Retained
                                                                 Additional           Earnings          Cumulative
                                              Common              Paid-In           (Accumulated        Translation
                                              Stock               Capital             Deficit)          Adjustment
                                       ------------------   ------------------  -----------------     ---------------

                                       ------------------   ------------------  -----------------     ---------------
<S>                                    <C>                  <C>                 <C>                   <C>
 BALANCE, JUNE 29,1996                           141,000           21,352,000          2,789,000              50,000
COMPREHENSIVE INCOME/(LOSS)
   1997 NET LOSS                                     -                    -             (466,000)                -
 OTHER COMPREHENSIVE INCOME
   UNREALIZED GAINS ON DEBT AND
   EQUITY INVESTMENTS                                -                    -                  -                   -
   TRANSLATION ADJUSTMENT                            -                    -                  -               (37,000)

   OTHER COMPREHENSIVE INCOME/(LOSS)

COMPREHENSIVE INCOME/(LOSS)
   LOAN TO MAJORITY SHAREHOLDER,
    INCLUDING ACCRUED INTEREST,NET                   -                    -                  -                   -
                                       ------------------   ------------------  -----------------     ---------------
BALANCE, JUNE 28,1997                   $        141,000     $     21,352,000    $     2,323,000       $      13,000
COMPREHENSIVE INCOME/(LOSS)
   1998 NET LOSS                                     -                    -           (3,121,000)                -
 OTHER COMPREHENSIVE INCOME
   UNREALIZED GAINS ON DEBT AND
   EQUITY INVESTMENTS                                -                    -                  -                   -
   TRANSLATION ADJUSTMENT                            -                    -                  -                 5,000

   OTHER COMPREHENSIVE INCOME/(LOSS)

COMPREHENSIVE INCOME/(LOSS)
    REPAYMENT OF LOAN TO MAJORITY
       SHAREHOLDER  INCLUDING
        ACCRUED INTEREST, NET                        -                    -              124,000                 -
                                       ------------------   ------------------  -----------------     ---------------
BALANCE, JUNE 27,1998                   $        141,000     $     21,352,000    $      (674,000)      $      18,000
                                       ==================   ==================  =================     ===============
COMPREHENSIVE INCOME/(LOSS)
   1999 NET LOSS                                                                        (733,000)
 OTHER COMPREHENSIVE INCOME
   UNREALIZED LOSSES ON DEBT AND
   EQUITY INVESTMENTS
   TRANSLATION ADJUSTMENT                                                                                     33,000

   OTHER COMPREHENSIVE INCOME/(LOSS)

COMPREHENSIVE INCOME/(LOSS)

 TREASURY SHARES PURCHASES
                                       ------------------   ------------------  -----------------     ---------------
BALANCE, JUNE 26,1999                   $        141,000     $     21,352,000    $    (1,407,000)      $      51,000
                                       ==================   ==================  =================     ===============

<CAPTION>
                                                                                  Note Receivable
                                       Unrealized Gains                            From Majority
                                       (Losses) on Debt                             Shareholder,           Total
                                         and Equity             Treasury             Including          Stockholders'
                                         Investments             Stock            Accrued Interest         Equity
                                       -----------------   ------------------   --------------------  ------------------

                                       -----------------   ------------------   --------------------  ------------------
<S>                                    <C>                 <C>                  <C>                   <C>
 BALANCE, JUNE 29,1996                         (110,000)          (1,440,000)                   -            22,782,000
COMPREHENSIVE INCOME/(LOSS)
   1997 NET LOSS                                    -                    -                      -              (466,000)
 OTHER COMPREHENSIVE INCOME
   UNREALIZED GAINS ON DEBT AND
   EQUITY INVESTMENTS                           121,000                  -                      -               121,000
   TRANSLATION ADJUSTMENT                           -                    -                      -               (37,000)
                                                                                                      ------------------
   OTHER COMPREHENSIVE INCOME/(LOSS)                                                                             84,000

COMPREHENSIVE INCOME/(LOSS)                                                                                    (382,000)
   LOAN TO MAJORITY SHAREHOLDER,
    INCLUDING ACCRUED INTEREST,NET                  -                    -               (4,275,000)         (4,275,000)
                                       -----------------   ------------------   --------------------  ------------------
BALANCE, JUNE 28,1997                   $        11,000     $     (1,440,000)    $     $ (4,275,000)   $     18,125,000
COMPREHENSIVE INCOME/(LOSS)
   1998 NET LOSS                                    -                    -                      -            (3,121,000)
 OTHER COMPREHENSIVE INCOME
   UNREALIZED GAINS ON DEBT AND
   EQUITY INVESTMENTS                            95,000                  -                      -                95,000
   TRANSLATION ADJUSTMENT                           -                    -                      -                 5,000
                                                                                                      ------------------
   OTHER COMPREHENSIVE INCOME/(LOSS)                                                                            100,000

COMPREHENSIVE INCOME/(LOSS)                                                                                  (3,021,000)
    REPAYMENT OF LOAN TO MAJORITY
       SHAREHOLDER  INCLUDING
        ACCRUED INTEREST, NET                       -                    -                4,275,000           4,399,000
                                       -----------------   ------------------   --------------------  ------------------
BALANCE, JUNE 27,1998                   $       106,000     $     (1,440,000)    $              -      $     19,503,000
                                       =================   ==================   ====================  ==================
COMPREHENSIVE INCOME/(LOSS)
   1999 NET LOSS                                                                                               (733,000)
 OTHER COMPREHENSIVE INCOME
   UNREALIZED LOSSES ON DEBT AND                                         -                                          -
   EQUITY INVESTMENTS                          (619,000)                                                       (619,000)
   TRANSLATION ADJUSTMENT                                                                                        33,000
                                                                                                      ------------------
   OTHER COMPREHENSIVE INCOME/(LOSS)                                                                           (586,000)

COMPREHENSIVE INCOME/(LOSS)                                                                                  (1,319,000)
                                                                                                                    -
 TREASURY SHARES PURCHASES                                          (577,000)                                  (577,000)
                                       -----------------   ------------------   --------------------  ------------------
BALANCE, JUNE 26,1999                   $      (513,000)    $     (2,017,000)    $              -      $     17,607,000
                                       =================   ==================   ====================  ==================
</TABLE>


See accompanying notes to consolidated financial statements.


F-4

<PAGE>   25

                            CUISINE SOLUTIONS, INC.
                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                         Year Ended
                                                                  -----------------------------------------------------
                                                                       June 26,            June 27,        June 28,
                                                                         1999                1998            1997
                                                                  ----------------   ----------------  ----------------
<S>                                                               <C>                <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss                                                           $     (733,000)    $   (3,121,000)   $     (466,000)
Adjustments to reconcile net loss to
  net cash (used in) provided by operating activities
   Gain from sale of discontinued operations                                  -                  -            (161,000)
   Depreciation and amortization                                          879,000          1,058,000         1,249,000
   Gain on disposal of fixed assets                                           -                  -              10,000
   Change in cumulative translation adjustment                             33,000              5,000           (37,000)
   Gain on sale of land held for resale                                  (136,000)               -                 -
   Income tax benefit                                                         -             (310,000)              -
   Changes in assets and liabilities, net of
   effects of non-cash transactions:
    Increase  in accounts receivable trade, net                          (483,000)          (629,000)         (981,000)
    (Increase) decrease in inventory                                   (1,747,000)          (386,000)           91,000
    Decrease (Increase) in prepaid expenses                               318,000           (230,000)         (193,000)
    (Increase)  decrease in notes receivable, related party               (10,000)           156,000          (305,000)
    Decrease (Increase)  in income tax receivable                       1,062,000              1,000          (753,000)
    (Increase) decrease in other assets                                  (443,000)            (4,000)          (41,000)
    Increase in accounts payable and accrued expenses                     580,000            354,000           273,000
    Increase in accrued payroll and related liabilities                   205,000            157,000            87,000
    Decrease in accrued store closing costs                               (72,000)               -             (64,000)
    Decrease in other accrued taxes                                       (13,000)           (91,000)          (17,000)
                                                                  ----------------   ----------------  ----------------
  Net cash (used in) provided by operating activities                    (560,000)        (3,040,000)       (1,308,000)
                                                                  ----------------   ----------------  ----------------

CASH FLOWS FROM INVESTING ACTIVITIES
  Sale of investments                                                   2,031,000          9,305,000        10,660,000
  Purchase of investments                                                 (57,000)        (9,424,000)      (13,598,000)
  Purchase of Treasury Stock                                             (577,000)               -                 -
  Notes receivable paid by (issued to) majority shareholder                   -            4,399,000        (2,441,000)
  Proceeds on disposal of land                                            871,000                -                 -
  Proceeds on disposal of fixed assets                                        -                  -               1,000
  Capital expenditures                                                   (220,000)          (716,000)         (413,000)
                                                                  ----------------   ----------------  ----------------
    Net cash provided by (used in)  investing activities                2,048,000          3,564,000        (5,791,000)
                                                                  ----------------   ----------------  ----------------

CASH FLOWS FROM FINANCING ACTIVITIES
  Additions to debt                                                           -              115,000    $      744,000
  Reductions of debt                                                     (944,000)          (311,000)         (154,000)
                                                                  ----------------   ----------------  ----------------
      Net cash (used in) provided by financing activities                (944,000)          (196,000)          590,000
                                                                  ----------------   ----------------  ----------------

      Net increase (decrease) in cash and cash equivalents                544,000            328,000        (6,509,000)
      Cash and cash equivalents, beginning of period                      681,000            353,000         6,862,000
                                                                  ----------------   ----------------  ----------------

CASH AND CASH EQUIVALENTS, END OF PERIOD                           $    1,225,000     $      681,000    $      353,000
                                                                  ================   ================  ================

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for:
      Interest                                                     $      206,000     $      123,000    $      131,000
      Income taxes                                                 $          -       $          -      $          -
                                                                  ================   ================  ================

Non Cash Activities
      Land purchased under short term note                         $          -       $      645,000    $          -
      Unrealized gains (losses) on debt and equity investments     $     (619,000)    $       95,000    $      121,000
                                                                  ================   ================  ================
</TABLE>

See accompanying notes to consolidated financial statements


F-5

<PAGE>   26


                            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, transportation, restaurant
and home meal replacement industries.

       The Company targets the Lodging and On Board Services industries. Lodging
target customers include hotels, event caterers, food service contractors and
other large banquet facilities.
On Board Services customers include airline and rail transportation service
companies. The Company services the airlines in both the USA and Europe. The
Norwegian facility distributes product throughout Europe servicing the Lodging
customers through distributors and Nouvelle Carte, a French manufacturer and
distributor of sous vide products. Norway production supplies all salmon sales
in the USA.

The Company manages developing opportunities through a sales channel called New
Business Development. This channel currently includes retail, restaurants,
military and catalog sales.

PRINCIPLES OF CONSOLIDATION

       The financial statements include the consolidated accounts of Cuisine
Solutions, Inc. and its subsidiaries (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 that ends on the last
Saturday in June. Fiscal years 1999, 1998 and 1997 contain 52 weeks .


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.

CASH AND CASH EQUIVALENTS

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



21
<PAGE>   27

INVESTMENTS

       Investment securities consist of U.S. Treasury, corporate debt and equity
securities. The Company has classified its investments as "available-for-sale."
Securities classified as available for sale include securities that 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.

       Investments in affiliates in which the Company has an ownership position
providing it with significant influence over the investee, are accounted for by
the equity method. Equity method investments are recorded at original cost and
are adjusted to recognize the Company's proportionate share of the investees'
income or losses after date of investment, and additional contributions made.

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.

       Inventory consisted of:

<TABLE>
<CAPTION>
                                                                     JUNE 26,                            JUNE 27,
                                                                      1999                                 1998
                                                            --------------------------          ---------------------------
<S>                                                                  <C>                                  <C>
Raw material                                                         $      1,016,000                     $        637,000
Frozen product & other finished goods                                       2,948,000                            1,742,000
Packaging                                                                     236,000                              267,000
                                                            --------------------------          ---------------------------
                                                                            4,200,000                            2,646,000
Less obsolescence reserve                                                    (68,000)                            (261,000)
                                                            --------------------------          ---------------------------

                                                                      $     4,132,000                      $     2,385,000
                                                            ==========================          ===========================
</TABLE>


FIXED ASSETS

       Machinery, equipment, computer software, furniture and fixtures are
depreciated using the straight-line method over estimated useful lives that
range from two to eight years. Leasehold improvements are amortized using the
straight-line method over the shorter of terms of the leases that range from
four to twenty years, or the estimated useful life of the improvement. Computer
software, classified as other assets in fiscal 1998 was reclassed to fixed
assets during fiscal 1999.

       Expenditures for maintenance and repairs are charged to expense, and
significant improvements are capitalized. For continuing operations, maintenance
and repairs charged to expense approximated $205,000 in 1999, $217,000 in 1998
and $352,000 in 1997.

       The components of fixed assets were as follows:

<TABLE>
<CAPTION>
                                                                             JUNE 26,                       JUNE 27,
                                                                              1999                            1998
                                                                    --------------------------        ---------------------
<S>                                                                           <C>                               <C>
Machinery & equipment                                                         $     6,493,000                   $6,319,000
Furniture & fixtures                                                                  170,000                      170,000
Computer Software                                                                     763,000                      730,000
Leasehold improvements                                                              2,203,000                    2,215,000
Building under capital lease                                                        1,470,000                    1,518,000
Construction in progress                                                               55,000                       30,000
                                                                    --------------------------        ---------------------
                                                                                   11,154,000                   10,982,000
Less accumulated depreciation and amortization                                    (7,916,000)                  (7,080,000)
                                                                    ==========================        =====================
                                                                              $     3,238,000                  $ 3,902,000
                                                                    ==========================        =====================
</TABLE>



22
<PAGE>   28

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. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of
("Statement 121"), on June 30, 1996 (fiscal year 1997). Statement 121 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 cost to sell. Adoption of this Statement did not have
a material impact on the Company's financial position, results of operations, or
liquidity.

ACCOUNTING  FOR  STOCK-BASED COMPENSATION

       Prior to June 30, 1996, the Company accounted for is stock option plan in
accordance with the provisions of Accounting Principles Board Opinion No. 25
("APB Opinion 25"), Accounting for Stock Issued to Employees, and related
interpretations. As such, compensation expense would be recorded on the date of
grant only if the current market price of the underlying stock exceeded the
exercise price. On June 30, 1996 the Company adopted Statement of Financial
Accounting Standards No. 123, Accounting for Stock-Based Compensation
("Statement 123"), which permits entities to recognize as expense over the
vesting period the fair value of all stock-based awards on the date of grant.
Alternatively, Statement 123 also allows entities to continue to apply the
provisions of APB Opinion 25 and provide pro forma net income and pro forma
earnings per share disclosures for employee stock option grants made in 1996 and
future years as if the fair-value based method defined in Statement 123 had been
applied. The Company has elected to continue to apply the provisions of APB
Opinion 25 and provide the pro forma disclosure of the provisions of Statement
123 (see note 7). In addition, in accordance with Statement 123, the Company
applies fair value as the measurement basis for transactions in which equity
instruments are issued to non-employees.

EARNINGS PER SHARE

       Statement of Financial Accounting Standards No. 128, Earnings Per Share
("Statement 128") became effective for the year ended June 27, 1998, and
required restatement of previously reported earnings per share data. Statement
128 provides for the calculation of basic and diluted 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 exclude common
equivalent shares outstanding during the period as the impact would be
antidilutive. The Company's common equivalent shares consist of stock options.



23
<PAGE>   29

FOREIGN CURRENCY TRANSLATION

       The statements of operations of the Company's Norwegian subsidiary (the
"Subsidiary") have been translated to U.S. dollars using the average currency
exchange rates in effect during the year. The Subsidiary's 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 charged directly to stockholders' equity.

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.

RECLASSIFICATIONS

Certain amounts in the 1998 financial statements have been reclassified to
conform to the 1999 presentation.

NOTE 2 - 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.

       The following is a summary of the Company's investments at June 26, 1999:

<TABLE>
<CAPTION>
                                                                                                            ESTIMATED
                                                                                UNREALIZED                     FAIR
                                                           COST           GAINS            LOSSES             VALUE
                                                           ----           -----            ------             -----
<S>                                                   <C>                <C>           <C>               <C>
U.S. Government and agencies

                      Current                                965,000        21,000      $          -          986,000
                      Non-current                          6,019,000                        (427,000)       5,592,000
Corporate debt
                      Current                                      -             -                 -                -
                      Non-current                          2,465,000             -          (107,000)       2,358,000
                                                      ----------------------------------------------------------------
                      Total investments                  $ 9,449,000     $  21,000     $    (534,000)    $  8,936,000
                                                      ================================================================
</TABLE>



24
<PAGE>   30

       The following is a summary of the Company's investments at June 27, 1998:

<TABLE>
<CAPTION>
                                                                                                            ESTIMATED
                                                                               UNREALIZED                      FAIR
                                                           COST           GAINS            LOSSES             VALUE
                                                           ----           -----            ------             -----
<S>                                                   <C>                <C>           <C>               <C>
U.S. Government and agencies

                      Current                            $    500,000    $       -     $          -      $    500,000
                      Non-current                           7,020,000       86,000                -         7,106,000
Corporate debt
                      Current                                 448,000            -          (19,000)          429,000
                      Non-current                           3,455,000       39,000                -         3,494,000
                                                      ----------------------------------------------------------------
                      Total investments                  $ 11,423,000    $ 125,000     $    (19,000)     $ 11,529,000
                                                      ================================================================
</TABLE>



NOTE 3 - INCOME TAXES

The composition of the provision for income tax expense(benefit) attributable to
continuing operations was:

<TABLE>
<CAPTION>
                                                                  June 26,             June 27,         June 28,
Current:                                                              1999                 1998             1997
                                                                      ----                 ----             ----
<S>                                                                <C>              <C>              <C>
      Federal                                                        6,000          $ (310,000)      $ (439,000)
      State                                                              -                    -                -
                                                                    --------------------------------------------
                                                                     6,000            (310,000)        (439,000)
                                                                    --------------------------------------------
      Federal                                                            -                    -                -
      State                                                              -                    -                -
                                                                    --------------------------------------------
                                                                         -                    -                -
                                                                    --------------------------------------------
Total current provision for income tax expense (benefit)
      continuing operations                                        $ 6,000           $ (310,000)      $ (439,000)
                                                                    ============================================
</TABLE>



25
<PAGE>   31

       The benefit for income taxes for fiscal years 1999, 1998 and 1997 has
been presented in the consolidated statements of income as continuing operations
and discontinued operations as follows:

<TABLE>
<CAPTION>
                                                                                     June 26,        June 27,         June 28,
Tax provision allocated to:                                                              1999            1998             1997
                                                                                         ----            ----             ----
<S>                                                                                  <C>          <C>              <C>
Continuing operations                                                                 $ 6,000     $ (310,000)      $ (439,000)
Discontinued operations                                                                     -               -        (314,000)

                                                                                -----------------------------------------------

Total provision for income tax (benefit) expense                                      $ 6,000     $ (310,000)      $ (753,000)
                                                                                ===============================================
</TABLE>

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

<TABLE>
<CAPTION>
                                                                                        YEAR ENDED
                                                            -----------------------------------------------------------------
                                                                         JUNE 26,                JUNE 27,           JUNE 28,
                                                                             1999                    1998               1997
                                                            ----------------------   ---------------------   ----------------
<S>                                                         <C>                      <C>                     <C>
Federal tax benefit at statutory rates                                  $(247,000)            $(1,167,000)         $(467,000)
(Income) Loss from foreign operations                                     (28,000)                 55,000             84,000
Period effect of  change in valuation allowance                           305,000                 985,000             (8,000)
State income taxes, net                                                   (49,000)               (196,000)           (54,000)
Other, net                                                                 25,000                  13,000              6,000
                                                            -----------------------------------------------------------------
      Total                                                                $6,000               $(310,000)         $(439,000)
                                                            ======================   =====================   ================
</TABLE>

       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:

<TABLE>
<CAPTION>
                                                                          JUNE 26,            JUNE 27,
Deferred tax assets:                                                          1999                1998
                                                                              ----                ----
<S>                                                                    <C>                <C>
    Net foreign operating loss carryforwards                           $   594,000        $    614,000
    Net operating loss carryforwards                                     1,481,000             872,000
    Accrued losses on discontinued operations                                    -              29,000
    Inventory adjustment                                                   108,000             151,000
    Other                                                                  499,000             735,000
                                                              -----------------------------------------
    Total deferred tax assets                                            2,682,000           2,401,000
Less valuation allowance                                               (2,660,000)         (2,355,000)
    Net deferred tax assets                                                 22,000              46,000
                                                              -----------------------------------------
Deferred tax liabilities:
    Property and equipment                                                  22,000              38,000
    Inventory                                                                    -               8,000
                                                              -----------------------------------------
    Net deferred tax liabilities                                            22,000              46,000
                                                              -----------------------------------------

    Net deferred income tax                                            $         -        $          -
                                                              -----------------------------------------
</TABLE>



26
<PAGE>   32

       The net changes in total valuation allowance for the years ended June 26,
1999 and June 27, 1998 were an increase of $305,000 and an increase of $985,000,
respectively.

       The net foreign operating loss carryforward can only be used to offset
taxable income in the country where the carryforward was generated. These
operating loss carryforwards expire in varying amounts through 2008.

       At June 26, 1999 the Company has net operating loss carryforwards for
federal and state income tax purposes of $3,037,000 which are available to
offset future federal and state taxable income, if any, through 2013.

       During fiscal 1999, the Company received federal income tax refunds
relating to carryback of losses from fiscal years 1997, 1996 and 1995 to fiscal
year 1994 in the amount of $1,050,000. Such amount is reflected as income tax
receivable in the accompanying consolidated balance sheet at June 27, 1998.

NOTE 4 - DISCONTINUED OPERATIONS

       The gain from sale of discontinued operations for fiscal year 1997
relates to reversal of certain accruals related to the former Bakery and
Restaurant Divisions of $154,000 due to the settlement of certain leases
relating to the former restaurants and bakeries, of which $60,000 was recorded
in the fourth quarter of 1997, and income tax benefits applied of $314,000, of
which $110,000 was recorded in the fourth quarter of 1997. This amount was
received by the Company subsequent to June 27,1998. During fiscal 1999, the
remaining accrual of $72,000 was reversed and is included in other operating
income.




27
<PAGE>   33

NOTE 5 - DEBT

       Debt, at June 26, 1999 and June 27, 1998 was as follows:

<TABLE>
<CAPTION>
                                                                                    1999                  1998
                                                                               PRINCIPAL             PRINCIPAL
LENDER                  DESCRIPTION                MATURITY                  OUTSTANDING           OUTSTANDING
------                  -----------                --------                  ------------          -----------
<S>                                                                        <C>                   <C>
Den Norske bank        Overdraft Facility    Six months, renewable         $       623,000       $      652,000
Den Norske bank        Term Loan             August 30, 2000                             0              146,000
SND                    Term Loan             February 1, 2006                      234,000              225,000
NationsBank            Term Loan             June 2, 2002                           18,000               25,000
NationsBank            Term Loan             March 31, 1999                              0              645,000
Hjelmeland Kommune     Capital Lease         June 1, 2014                        1,205,000            1,331,000
                                                                       -------------------      ---------------
                                             Total                          $    2,081,000       $    3,024,000
                                             Less current portion                  623,000            1,399,000
                                                                       -------------------      ---------------
                                             Non-current portion            $    1,457,000       $    1,625,000
                                                                       ===================       ==============
</TABLE>


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

Borrowings under the Den Norske Bank ("DnB") Overdraft Facility are limited to a
percentage of Cuisine Solutions Norway AS ("CSI Norway"), inventories and
receivables, up to a maximum of $1,000,000 with a floating interest rate equal
to the prevailing Norwegian overnight funds rate plus two percentage points. The
Den Norske Bank Overdraft Facility interest rate at June 26, 1999 and June 27,
1998 was 8.1 % and 6.90%, respectively. Borrowings of $176,000 were available at
June 26, 1999.

       During fiscal year 1995, CSI Norway was not in compliance with certain of
the covenants set forth by DnB. In 1996, DnB agreed to temporarily waive such
covenants in exchange for certain guarantees on the part of the Company. These
included a guaranty in the form of a renewable six-month stand-by letter of
credit issued by the Company in the amount of $600,000, along with the
subordination of a $300,000 loan from the Company to CSI Norway. During fiscal
year 1997, the stand-by letter of credit was increased to $800,000. Accordingly,
DnB has agreed to maintain the overdraft facility and waive its covenant
requirements for as long as the stand-by letter of credit is in effect, but it
has limited borrowings up to the amount of the guaranty of $800,000.

       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 was 6.9% and 7.9% at June 26, 1999 and June 27,
1998 respectively. The loan is required to be repaid through sixteen semi-annual
payments of principal and interest beginning August 1, 1996 and ending February
1, 2006.

       CSI Norway 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 CSI Norway. The Company has issued no guarantees with
respect to this lease.

       During fiscal year 1997 the Company entered into a five-year term loan
with Nations Bank to finance the purchase of a new refrigerated truck for its US
operations. The Nations Bank term loan has a stated interest rate of 8.85% and
is required to be repaid through monthly payments of principal and interest
beginning June 2, 1997 to June 2, 2002.

       During fiscal year 1998 the Company entered into a short-term renewable
loan with Nations Bank to finance the purchase of the land of $645,000 in
Loudoun County, Virginia. During fiscal 1999, the land was sold and the loan was
paid.

       Debt maturities during the next five fiscal years on an aggregate basis
at June 26, 1999 were as follows: 2000 - $786,000; 2001 - $161,000; 2002 -
$155,000; 2003 - $116,000; 2004 - $115,000; 2005 - $118,000




                                       28
<PAGE>   34

and $856,000 thereafter. The maturities for 2000 of $786,000 includes the
balance of the $623,000 borrowed under the overdraft facility, $41,000 of short
term portion of the DNB, $61,000 of the capital lease obligations and $54,000 of
the SND term loan and $6,000 of the Nations Bank vehicle loan.

NOTE 6 - 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 7 - STOCK OPTION AND EMPLOYEE BENEFIT PLANS

       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, as a
component of continuing operations, $ 17,566, $20,000 and $12,000 in fiscal
years 1999, 1998 and 1997, 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, as a component of
continuing operations, $17,558, $34,000 and $12,000 for fiscal year 1999, 1998
and 1997, respectively.

       The Company expensed $ 69,350 and $42,000 for a separate health and
retirement plan for the president of the Company and two other key employees in
fiscal year 1999 and 1998, respectively.

       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 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 1998 the Company granted to
employees 110,000 options under the 1992 Stock Option Plan. During fiscal year
1999 the Company granted to employees 530,000 options under the 1992 Stock
Option Plan. The exercise price of options granted was equal to the market price
at the date of grant. The outstanding options expire through fiscal year 2009.



29
<PAGE>   35

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 1999, 1998 and 1997 as follows:

<TABLE>
<CAPTION>
                                   --------------------------------------------------------
                                              June 26,            June 27,         June 28,
                                                  1999                1998             1997
                                              --------            --------         --------
<S>                                           <C>                  <C>             <C>
Expected dividend yield                              -                   -                -
Risk-free interest rate                           4.7%                5.1%             6.4%
Expected life (in years)                             6                   6                6
Expected volatility                                66%                 33%              71%
</TABLE>

       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. 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 net loss and loss per share
would have been adjusted to the pro forma amounts indicated below:

<TABLE>
<CAPTION>
                                                                     June 26,                June 27,             June 28,
                                                                         1999                    1998                 1997
                                                                         ----                    ----                 ----
<S>                                              <C>           <C>                   <C>                  <C>
Net loss:
                                                 As reported   $   ( 733,000)        $    (3,121,000)      $     (466,000)
                                                   Pro forma   $   ( 884,000)        $   ( 3,276,000)      $    ( 653,000)

Basic and diluted net loss per share:
                                                 As reported   $       (0.05)        $         (0.23)      $        (0.04)
                                                   Pro forma   $       (0.06)        $         (0.24)      $        (0.05)
</TABLE>



30
<PAGE>   36

       Changes in outstanding options were as follows:

<TABLE>
<CAPTION>
                                                                               Number of      Weighted-Average
                                                           Price Range          Options        Exercise Price
<S>                                                       <C>               <C>               <C>
Outstanding at June 29, 1996                               $1.63-$4.00          370,750            $2.76
Options granted                                                1.38             951,460             1.38
Options exercised                                               -                  -                 -
Options canceled                                            1.63-4.00           (39,500)            2.80
                                                                            ------------------------------------


Outstanding at June 28, 1997                                1.63-4.00          1,282,710            1.73
Options granted                                            1.03 - 1.13          110,000             1.06
Options exercised                                               -                  -                 -
Options canceled                                            1.38-4.00           (57,500)            2.98
                                                                            ------------------------------------

Outstanding at June 27, 1998                                1.03-4.00          1,335,210            1.63
Options granted                                                .66              530,000             .66
Options exercised                                               -                  -                 -
Options canceled                                             .66-4.00          (280,210)            1.48
                                                                            ------------------------------------

Outstanding at June 26, 1999                                $.66-$4.00         1,585,000           $1.33
                                                                            ====================================
</TABLE>

       The Board of Directors unanimously approved to revalue all stock options
issued during fiscal year 1997 to the lower of the market price of $1.38 on June
26, 1997, or the value of the original issue on the date of grant. The original
stock grant prices during fiscal year 1997 ranged from $1.38 to $2.13. The date
of grant and vesting period was not affected by this revaluation.

       At June 26, 1999, June 27, 1998 and June 28, 1997, the number of options
exercisable was 894,750, 662,970 and 471,802, respectively, and the
weighted-average grant date fair value per option for the options granted in
fiscal 1999, 1998 and 1997 was $0.50, $0.44 and $2.17, respectively. The
weighted-average remaining contractual life is 8 years.

THE FOLLOWING TABLE SUMMARIZES INFORMATION ABOUT FIXED STOCK OPTIONS OUTSTANDING
AT JUNE 26, 1999:

<TABLE>
<CAPTION>
                                       Stock Options Outstanding                  Stock Options Exercisable
                                       -------------------------                  -------------------------
                             Number                 Weighted-Average                   Number
                             Outstanding       Remaining         Weighted-Avg.      Exercisable          Weighted-Avg.
RANGE OF EXERCISE PRICES     at 6/26/99      Contractual Yrs.    Exercise Price      at 6/26/99          Exercise Price
------------------------     ----------      ----------------    --------------      ----------          --------------
<S>                          <C>             <C>                 <C>              <C>                    <C>
       $.66 TO $1.02         480,000                    9.33      $      .66               120,000        $        .66

      $1.03 TO $1.37         107,500                    8.36      $     1.06                53,750        $       1.06


      $1.38 TO $1.50         770,000                    7.91      $     1.38               493,500        $       1.38


      $1.51 TO $2.00          77,000                    1.92      $     1.75                77,000        $       1.75


      $2.01 TO $2.50          41,500                    3.82      $     2.38                41,500        $       2.38
</TABLE>



31
<PAGE>   37

<TABLE>
<S>                          <C>             <C>                 <C>              <C>                    <C>

      $3.01 TO $3.50          67,000                    5.86      $     3.38                67,000        $       3.38


      $3.51 TO $4.00          42,000                    4.51      $     3.94                42,000        $       3.94
</TABLE>



32
<PAGE>   38
THE FOLLOWING TABLE SUMMARIZES INFORMATION ABOUT FIXED STOCK OPTIONS OUTSTANDING
AT JUNE 27, 1998:

<TABLE>
<CAPTION>
                                              Stock Options Outstanding                  Stock Options Exercisable
                                              -------------------------                  -------------------------
                                    Number                 Weighted-Average                   Number
                                    Outstanding       Remaining          Weighted-Avg      Exercisable           Weighted-Avg
RANGE OF EXERCISE PRICES            at 6/27/98      Contractual Yrs.    Exercise Price      at 6/27/98          Exercise Price
------------------------            ----------      ----------------    --------------      ----------          --------------
<S>                                <C>                      <C>        <C>                       <C>            <C>
         $1.03 TO $1.37               110,000                  9.35     $      1.06                27,500         $        1.06

         $1.38 TO $1.50               950,960                  8.91     $      1.38               375,282         $        1.38

         $1.51 TO $2.00                92,000                  2.82     $      1.75                92,000         $        1.75

         $2.01 TO $2.50                50,250                  5.08     $      2.38                43,063         $        2.38

         $3.01 TO $3.50                78,000                  6.88     $      3.37                71,125         $        3.39

         $3.51 TO $4.00                54,000                  5.54     $      3.95                54,000         $        3.95
</TABLE>


NOTE 8 - COMMITMENTS

       The Company leases office and plant space under operating leases, which
expire on various dates through 1999. 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 26, 1999 were as follows:

<TABLE>
<CAPTION>
Fiscal Year
<S>                               <C>
            2000                               335,000
            2001                               335,000
            2002                               286,000
            2003                               245,000
            2004                                     -
                                  ---------------------
                                            $1,201,000
                                  =====================
</TABLE>

       Rent expense for continuing operations approximated$325,000, $424,000
and $414,000 for fiscal years 1999, 1998 and 1997, respectively. Lease on the
office expires during fiscal year 2001 with option to renew and lease on
manufacturing facilities expires during fiscal year 2003. The Company is
investigating options for a new manufacturing facility and does not have plans
to renew the lease beyond 2003.

NOTE 9 - TRANSACTIONS WITH RELATED PARTIES

       During fiscal year 1998 the Company issued an officer loan in the amount
of $375,000. The loan of $375,000 was combined with the loan this officer had
outstanding in the amount of $45,000 at the end of fiscal year 1997. The revised
loan amount of $420,000 bears interest of at 6.5% per annum and is payable on
October 1, 2002 and is collateralized by the officer's home. Payments on the
loan will be derived from the equity proceeds from the sale of the officer first
residence, a portion of future annual bonuses to be paid to the officer by the
Company as negotiated. All outstanding balances of the note, including principal
and interest accrued thereon, shall become payable in full on October 1, 2002.
At the end of fiscal year 1998 the officer sold his first residence and applied
the net proceeds of $26,000 from the sale of the residence as payment towards
the loan. $394,000 of the loan was outstanding at June 26, 1999.

       During fiscal year 1999 the Company issued an officer a loan in the
amount of $55,000. The loan of $55,000 was collateralized by the officer's
primary residence and bears interest of 6.5% per annum. The note was



33
<PAGE>   39

established as part of a relocation agreement and payment of the note is payable
from the net equity proceeds on the sale of the collateralized property and
shall be deemed payable in full within two years from the date of the note.
During fiscal 1999, the property was sold and $23,000 received leaving a balance
of $32,000 at June 26, 1999. Subsequent to fiscal 1999, an additional $20,000
was received and the remaining balance is expected to be paid during fiscal
2000.

During fiscal 1999 a loan of $85,000 was issued to a key employee and is
collateralized by the employee's home. The note bears interest at 6.6% per
annum and payment of the note is due and payable in full five years from the
date of the loan, or six months after the employee's termination whichever
comes first.

       The Board of Directors agreed to pay one of its Directors a $15,000
annual fee less the amount of consulting fees paid to the member during the
fiscal year for services provided on behalf of the Company's Technology
Committee. The board member provides engineering consulting services to the
Company through the member's own company at his normal billing rates.

       The Company receives consulting services under an agreement with Food
Investors Corporation ("FIC"), which is majority owned by the Secria Europe,
S.A. Food Research Corporation ("FRC"), the majority owner of Cuisine Solutions
common shares, is also owned by Secria Europe, S.A. 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 by the Company annually. The amount paid by the Company to FIC in
fiscal years 1999, 1998 and 1997 was $144,000 per year.

       During fiscal years 1999, 1998 and 1997, the Company had sales to related
parties in the amount of $662,000, $605,000 and $281,000, respectively. During
fiscal year 1998 Nouvelle Carte France a majority owned subsidiary of FRC, began
purchasing all its salmon product needs from the Norwegian facility. These
purchases reflect these salmon sales from Norway.

       Effective April 1998 the position of Vice President, Culinary Sales was
eliminated. The Vice President was employed with the Company for over twenty
years in senior positions, was given a three year guaranteed severance package
in the amount of $322,000. The remaining liability for this severance package at
June 26, 1999 is $218,000.

       During fiscal 1999, the Company became a partner in a limited liability
company with a Brazilian partner, Sanoli Indsutria E Commercio Alimentacao Ltda,
which will build a manufacturing facility and market product in the Mercusor
market. The Company contributed technology to the partnership in lieu of a cash
contribution. The partnership performs 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 recognized $500,000 in revenue related to
these services. Accounts receivable related to this partnership totaling
$320,000 at June 26, 1999 is recorded in other assets.

NOTE 10 - SALES TO MAJOR CUSTOMERS

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

       The On Board Services channel has sales to two airline catering companies
that represent 32.6% of total Company sales in fiscal 1999 and the same two
caterers accounted for 37% of total Company sales during fiscal 1998.One of the
two caterers account for 22.9% of total Company sales in fiscal 1999 and 23.3%
in fiscal 1998.



34
<PAGE>   40

       Foreign sales accounted for approximately 17.9%, 10.2%, and 8.8% of total
sales in fiscal years 1999, 1998 and 1997, respectively. Following is the detail
of total sales by geographic region.

<TABLE>
<CAPTION>
Region                                                                 1999                    1998                    1997
---------------------------------------------------------------------------------------------------------------------------
<S>                                                                     <C>                     <C>                     <C>
Domestic                                                                $17,005                 $12,578                 $12,756
Europe                                                                  $ 3,717                 $ 1,429                 $ 1,231
                                                                       --------                --------                --------
Total                                                                   $20,722                 $14,007                 $13,987
</TABLE>

NOTE 11 - LITIGATION

       The Company is engaged in ordinary and routine litigation incidental to
its business. Management does not anticipate that any amounts, which 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 12 - SUBSEQUENT EVENT

       The Company has signed a letter of intent to acquire Nouvelle Carte, a
French manufacturer of sous vide products located in Northern France. Nouvelle
Carte is currently owned by Conetrage, a French company owned by the Cuisine
Solutions majority shareholder group. A committee of independent board members
has been established to evaluate the purchase. Cuisine Solutions plans to issue
unregistered stock to acquire Nouvelle Carte. Nouvelle Carte will provide
Cuisine Solutions with a European presence, and European Community manufacturing
facility and additional technical personnel for future product development and
production engineering. Nouvelle Carte had calendar 1998 sales of approximately
seven million dollars and a net book value of approximately $2,500,000.



35
<PAGE>   41

                                                                     SCHEDULE II

                             CUISINE SOLUTIONS, INC.
                 VALUATION AND QUALIFYING ACCOUNTS AND RESERVES

<TABLE>
<CAPTION>
                                                                              Additions
                                                                   -----------------------------
                                                 Balance at          Charged to   Charged to                            Balance
                                                  Beginning          Costs and    Other                                 at End
                                                  of Period           Expenses    Accounts          Deductions          of Period
                                                  ---------           --------    --------          ----------          ---------
<S>                                   <C>                       <C>                            <C>                    <C>
Year ended June 28, 1997
 Allowance for doubtful accounts           $              -     $            -                 $              -       $            -
                                             ==============       ============                   ==============        =============

 Provision for losses on unit closings              287,000                  -                        (215,000) (1,2)         72,000
                                             ==============       ============                        ========              ========

 Allowance for obsolete inventory                    51,000             47,000                                -               98,000
                                             ==============       ============                   ==============            =========

Year ended June 27, 1998
 Allowance for doubtful accounts           $              -     $            -                 $              -       $            -
                                             ==============       ============                   ==============        =============

 Provision for losses on unit closings               72,000                  -                                -               72,000
                                             ==============       ============                   ==============        =============

 Allowance for obsolete inventory                    98,000            163,000                                -              261,000
                                             ==============       ============                   ==============           ==========


Year ended June 26, 1999
 Allowance for doubtful accounts        $                -           $ 61,000                 $              -        $       61,000
                                            ==============     ==============                   ==============         =============

 Provision for losses on unit closings             72,000                  -                             72,000-(3)
                                            ==============       ============                   ===============

 Allowance for obsolete inventory                  261,000                                             192,000-  (4)          69,000
                                            ==============       ============                   ===============             ========
</TABLE>

(1) Lease termination costs associated with the former Restaurant Division.

(2) Recovery of reserves associated with the former Bakery Division.

(3) Recovery of reserves associated with the former Restaurant Division

(4) Adjust reserve from fiscal 1998.



36