Form 10-Q

SECURITIES AND EXCHANGE COMMISSION

(Mark One)

For the quarterly period ended April 3, 2004

OR

For the transition period from                     to

Commission File Number  0-12800

CUISINE SOLUTIONS, INC.

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

(Registrant’s telephone number, including area code) (703) 270-2900

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 the number of shares outstanding of each of the issuer’s classes of common stock as of May 18, 2004.

CUISINE SOLUTIONS, INC.

PART I: FINANCIAL INFORMATION

Item 1. Financial Statements

The accompanying unaudited consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the United States Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of the Company, all adjustments necessary for the fair presentation of the Company’s results of operations, financial position and changes therein for the periods presented have been included.

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CUISINE SOLUTIONS, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)

See accompanying notes to consolidated financial statements.

F-3

CUISINE SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

See accompanying notes to consolidated financial statements.

F-4

CUISINE SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

See accompanying notes to consolidated financial statements

F-5

Cuisine Solutions, Inc.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(Unaudited)

F-6

Cuisine Solutions, Inc.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1) Financial Statements

     The accompanying unaudited consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the United States Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of the Company, all adjustments necessary for the fair presentation of the Company’s results of operations, financial position and changes therein for the periods presented have been included.

2) Fiscal Periods

     The Company utilizes a 52/53 week fiscal year which ends on the last Saturday in June. The first, second and fourth quarters, of fiscal years 2004 and 2003 contain 12 weeks, and the third quarter contains 16 weeks.

3) Inventory

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

     Inventory consists of:

4) Dividends - None.

5) Commitments and Contingencies

     From time to time, the Company is engaged in ordinary and routine litigation incidental to its business. Management does not anticipate that any amounts that it may be required to pay by reason thereof will have a material effect on the Company’s financial position or results of operations.

6) Transaction with Related Parties

     As of April 3, 2004, the Company accrued a liability in the amount of $267,000 to Food Research Corporation. The liability was previously with SOMDIAA. SOMDIAA is a holding company which is majority owned by Secria, S.A. and Secria Europe, S.A. Both enterprises are owned by the Jean-Louis Vilgrain family (“JLV”); and Food Research Corporation (“FRC”) is owned by Secria Europe, S.A. SOMDIAA provides the administration of French Social Security healthcare and retirement plans for individuals who work within the JLV group. The primary portion of the accrual is related to amounts billed from SOMDIAA for separate health and retirement plans for the President of the Company and two other non-officer key employees. The accrual at April 3, 2004 includes coverage for previous year’s benefits.

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     On June 12, 2001, the Company signed an agreement with Farmers Market Landhandel GMBH, Inversiones Continex Limitada, and Iso Tech Holding Limitada to create a joint venture to build a sous-vide processing facility in Chile. The purpose of the facility would be to produce high quality, value priced whitefish, shellfish and salmon products in Chile for the Global Retail and Foodservice markets. That agreement was terminated, however, the parties continued to develop the facility in Chile and have agreed that Cuisine Solutions, Inc. will continue to hold 10% of the total outstanding shares of Cuisine Solutions Chile S.A. A marketing agreement to market certain sous-vide products was signed between the parties in June 2003 and a commercial agreement to commit to the purchase of certain raw materials from Cuisine Solutions Chile was signed in August 2003. The facility is scheduled to open in June 2004.

     On October 22, 2003, the Company entered into a six month term loan in the amount of $500,000 with Food Investors Corporation (“FIC”) to provide short term working capital necessary to expand operations for fiscal year 2004. The loan accrues interest of 5% per annum and is payable upon maturity. In April 2004, FIC agreed to extend the loan to October 22, 2004. Total outstanding borrowings on the loan at April 3, 2004 were $455,000.

     On November 10, 2003, the Company entered into a three-year term loan in the amount of $500,000 with FRC to provide short term working capital necessary to expand operations. The loan, which bears interest of 5% per annum, requires payment of interest on a quarterly basis beginning in April 2004, and provides for a balloon payment for the total amount due three years from the origination of the loan. FIC and FRC are 100 percent owned by Cuisine Solutions majority shareholder, the JLV group.

7) Income (Loss) Per Share

     Basic net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of common shares outstanding during the period. Diluted net income (loss) per common share also includes common equivalent shares outstanding during the period if dilutive. The Company’s common stock equivalents consist of stock options. The weighted average number of shares outstanding related to stock options was 2,252,730 and 1,680,375 for the 40 weeks ended April 3, 2004, and April 5, 2003, respectively, and 2,760,074 and 1,680,375 for the 16 weeks ended April 3, 2004, and April 5, 2003, respectively. The assumed exercise of the Company’s outstanding stock options are not included in the calculation as the effect would be anti-dilutive.

8) Accounting for stock-based compensation

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

Had compensation cost been recognized based on the fair values of options at the grant dates consistent with the provisions of SFAS No. 123, the Company’s net loss and basic and diluted net loss per common share would have been as follows:

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

     This filing contains forward-looking statements within the meaning of Section 27A of The Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. Those statements reflect the intent, belief or current expectations of the Company and members of the management team. Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risk and uncertainties and that actual results may differ materially from those contemplated by such forward-looking statements reflecting changed assumptions, the occurrence of unanticipated events or changes to future operating results over time.

CRITICAL ACCOUNTING ESTIMATES

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities and the reported amounts of revenue and expenses. Judgments and assessments of uncertainties are required in applying the Company’s accounting policies in many areas. Actual results may differ from such estimates.

The Company recognizes revenue at the time products are shipped to the customers. Reserves against customer receivables are established as necessary, based upon an evaluation of the customer’s current financial condition and past experience and relationship.

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

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

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

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RESULTS OF OPERATIONS

     Revenue in the third quarter of fiscal 2004 increased from $7,593,000 to $11,169,000, a 47.1% increase compared to the same quarter of the previous fiscal year primarily due to stronger sales in all sales channels in the USA. Retail sales in the USA increased 267.1%, the national restaurant chain (New Business) channel in the USA grew 186.5%, while Foodservice gained 55.4%, compared to the third quarter of Fiscal 2003.

     Cuisine Solutions, Inc. reported a decrease in net loss of $915,000 or 62% from $1,477,000 to $562,000 for the third quarter Fiscal 2004 compared to the same quarter the previous fiscal year. The decrease in net loss was primarily due to a 47.1% increase in sales and a 74.4% increase in gross margin while selling and administration expenses remained comparable.

NET SALES

     Third quarter 2004 revenue of $11,169,000 increased as described above by 47.1% compared to the previous fiscal years’ third quarter revenue of $7,593,000. USA sales grew 71.8% compared to the same quarter Fiscal 2003. Information as to Cuisine Solution sales by geographical locations are as follows (Norway inter-company sales are eliminated):

USA SALES

     Fiscal year 2004 third quarter sales in the USA increased $2,890,000 to $6,916,000, a 71.8% increase from the previous fiscal year third quarter sales of $4,026,000.

     Cuisine Solutions USA Fiscal Years 2004 and 2003 third quarter sales by sales channel are as follows:

     Third quarter fiscal 2004 sales to the USA Foodservice channel increased 55.4% in the USA to $1,786,000 from the previous year third quarter sales of $1,149,000. The increase was driven by increased sales of low carb menu items to hotels and convention centers. Also, occupancy rates were higher and businesses held more banquet events compared to the previous year. The Foodservice channel focuses sales efforts on key accounts and large events, and uses distributors to manage lower volume opportunities.

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Management has and will continue to employ further cost reduction programs and product line changes to meet the changing needs of this channel.

     Fiscal 2004 third quarter sales to the On Board services channel totaled $2,579,000 versus previous year third quarter sales of $2,050,000, an increase of $529,000 or 25.8%. Sales to the On Board Services channel increased in third quarter as US airlines and passenger rails continued their recovery from the last two years. The on board services channel continued to increase the numbers of passengers, and food products are returning with some carriers who discontinued them in late 2001.

     Retail sales for the third quarter of fiscal 2004 increased $1,282000 to $1,762,000 from $480,000 an increase of 267.1% compared to the same period of the previous fiscal year due to the additional product roll-out of premium branded and private label frozen food products to North-American retailers.

     Military sales for the third quarter 2004 increased 46.9% to $216,000 from $147,000 compared to the same period in fiscal 2003 primarily due to slightly increased demand from the US Navy carriers. Navy sales are conducted through an arrangement with a broker. The Company is further supporting the growing opportunity for this sales channel has dedicated a direct sales person to focus on the US Army, Air Force and Marine Corps.

     New Business (National Restaurant Chain) sales for the third quarter of fiscal year 2004 totaled $573,000, up from $200,000 from fiscal 2003. The sales increase of $373,000 is attributed to increased sales to national restaurant chains. The Company will further pursue its role as a supplier for national restaurant chains that have determined that the Company’s product quality and ease of use makes an attractive alternative for providing promotional menu items.

NORWAY SALES

     During the third quarter of fiscal 2004, total Norwegian sales volume decreased 11.7% to 6,761,000 Norwegian Kroner from 7,657,000 Norwegian Kroner for the third quarter of fiscal 2003. The sales amount converted to US Dollars amounted to $996,000 in the third quarter of fiscal 2004 and $1,089,000 during the third quarter of fiscal 2003 before the elimination of inter-company balances. Also, Cuisine Solutions started using salmon from its new partners in Chile. Inter-company sales from Cuisine Solutions Norway are eliminated and reported as sales from either Cuisine Solutions France or Cuisine Solutions USA. Inter-company sales to the USA and France account for 74.4% compared to 88.9% for the same period in the previous fiscal year. Total production and inter-company sales measured in US Dollars were down 8.5% during the third quarter of fiscal 2004 versus the same period in the previous year.

Total Norwegian sales before inter-company eliminations in both US dollars and Norwegian Kroners were as follows:

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FRANCE SALES

     The total fiscal year 2004 third quarter sales in US Dollars were $3,997,000 versus previous year sales of $3,437,000, an increase of $560,000 or 16.3%. Sales in EURO during the same period were €3,207,000 versus €3,243,000 respectively, a decrease of 1.1%. The differences are due to the US dollar-EURO fluctuations in the exchange rate for the respective periods and slower sales in the retail private label packaged products.

     Cuisine Solutions France’s fiscal year 2004 third quarter sales compared to prior year third quarter and respective exchange rates are as follows:

     Cuisine Solutions France Fiscal Year 2004 third quarter sales by sales channel were as follows:

     The Food Service and On Board Services channels in France grew over 25% compared to the same quarter of Fiscal 2003 is largely due to positive currency exchange rates, stronger sales to restaurants and airlines, and improved product mix in those channels.

GROSS MARGINS

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

     Gross margins increased 74.4% compared to the third quarter fiscal year 2003 due primarily to lower cost of goods sold because of manpower efficiencies and lower raw material cost associated with a higher volume in sales.

     Gross margin in the USA increased from 18.2% to 23.5% as a percentage of sales due to the Company’s ability to maintain a higher production volume during the period. The gross margin in France

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remained approximately 18% as expected and Norway gross margin decreased from - -12.8% to -25.9%. Cuisine Solutions management is confident that continued larger sales volume and continued cost management will result in higher gross margins.

Selling and Administrative Expenses

A comparison of selling and general administrative costs follows:

A comparison of selling and general administrative costs by plant was as follows:

     Selling and administrative expenses increased $39,000 or 1.6% in the third quarter of fiscal 2004 compared to the third quarter of fiscal 2003. Expenses as a percent of sales were reduced to 22% in the third quarter of fiscal 2004 versus 32.5% in fiscal 2003. The decrease as a percent of sales was due to the continuous cost management and reduction of personnel in our Alexandria, VA., headquarters, as well as tying incentive compensation plans to performance.

Depreciation and Amortization

     Depreciation and amortization decreased $31,000 to $224,000 for the third quarter of fiscal year 2003, compared with $255,000 for the same period a year ago. This decrease is related to equipment reaching its useful life and correspondingly has been fully depreciated.

Non-operating Income and Expense

     Investment income consists of returns earned on funds invested in corporate bonds and treasury bills. Management maintains these funds in a trust account with the majority of the funds invested in government securities.

     Interest expense relates to the borrowings of the Company’s Norwegian and French subsidiaries, including the Norwegian capital lease, as well as USA operations’ short-term borrowings.

     Also included in the Non-operation Income and Expense is foreign exchange losses of $30,000 for the sixteen weeks ended April 3, 2004.

Provision for Taxes

     No provision for income taxes was made during the third quarter of fiscal 2004 given the Company’s history of losses.

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Forty Weeks Ended April 3, 2004 compared to Forty Weeks Ended April 5, 2003

RESULTS OF OPERATIONS

     Revenue for the first three quarters of fiscal 2004 increased from $20,614,000 to $27,357,000, a 32.7% increase compared to the same three quarters of the previous fiscal year primarily due to stronger sales in all sales channels in the USA. Retail sales in the USA increased 197.6%, the national restaurant chain (New Business) channel, grew 115%, while Foodservice gained 27.7%, compared to the first three quarters of Fiscal 2003.

     Cuisine Solutions, Inc. reported a decrease in net loss of $2,418,000 or 78.1% from $3,098,000 to $680,000 for the first three quarters of Fiscal 2004 compared to the same quarters the previous fiscal year. The decrease in net loss was primarily due to a 32.7% increase in sales and a 5.6% increase in gross margin while achieving a 7.0% decrease in selling and administration expenses.

NET SALES

     Revenue for the first three quarters fiscal year to date 2004 increased from $20,614,000 to $27,357,000, a 32.7% increase compared to same period the previous year primarily due to a significant increase in sales in all three Cuisine Solutions regions as compared to the same fiscal 2003 YTD sales. The strongest growth was in the US with a 38.6% growth largely due to increases in sales in the Retail and National Restaurant Chain channels. A summary of the Company’s operations by region and by business channel is shown below.

     Fiscal quarter YTD sales by region are as follows (Norway inter-company sales are eliminated):

USA SALES

Fiscal YTD USA sales by business channel are as follows:

Fiscal 2004 YTD Foodservice sales increased $920,000 to $4,242,000 from the previous fiscal YTD sales of $3,322,000. The increase is attributed to increased sales to hotels and convention centers as the economy continues to recover further from the last two years.

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Fiscal 2004 YTD On Board Service sales increased $646,000 to $6,826,000 from the previous fiscal YTD sales of $6,180,000. The increase is attributed to the recovery of sales to the US airlines and passenger rails, primarily in the second and third quarters.

Fiscal 2004 YTD retail sales increased $2,181,000 to $3,285,000 from the previous fiscal YTD sales of $1,104,000. The increase was attributable to the continued product roll-out of premium branded and private label frozen food products to North-American retailers.

Fiscal 2004 YTD Military sales increased $176,000 to $867,000 from the previous fiscal YTD sales of $691,000. The increase is attributed to the increase in sales to US Navy carriers during the first quarter.

Fiscal 2004 YTD New Business sales increased $659,000 to $1,232,000 from the previous fiscal YTD sales of $573,000. The increase is attributed to growth in sales to national restaurant chains.

NORWAY SALES

Total fiscal year 2004 YTD Norwegian sales before inter-company eliminations in both US dollars and Norwegian Kroners were as follows:

The fiscal YTD sales from Norway in US Dollars increased 11.6% due to the greater demand for salmon primarily in France during the first two quarters. The sales in Norwegian Knoner increased by 7.8%. The higher US Dollars sales value resulted from the increase in the value of the Norwegian Kroner to the US Dollar during the reporting period.

FRANCE SALES

Fiscal year 2004 YTD Sales from France in US dollar and Euro are as follows:

The fiscal YTD sales in US dollars from Cuisine Solutions France increased $1,991,000 to $9,959,000 from the previous fiscal YTD sales of $7,968,000. The fiscal YTD sales in EURO increased €571,000 to €8,399,000 from the previous fiscal YTD sales of €7,828,000. The increase in sales was primarily driven by higher food service and retail sales of private label packaged products to a French retailer. Sales in US dollars increased from the increase in the value of the EURO to the US Dollar during the reporting period.

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     Fiscal Year 2004 year to date sales from France by sales channel were as follows:

The Food Service, On Board Service, and Retail channels continue to grow as compared to the first three quarters of Fiscal 2003. This is largely due to an improved economy in France as well as the growing acceptance of an innovative product mix in all three channels.

GROSS MARGINS

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

     Total consolidated gross margins increased to 19.8% for fiscal 2004 third quarter compared with 16.8% a year ago due to the Company’s ability to maintain a higher production volume during the period. Management is confident that the absorption of fixed cost due to continued larger sales volume and continued cost management will result in higher gross margins.

Selling and Administrative Expenses

     Selling and administrative expenses decreased $421,000 or 7.0% during fiscal YTD 2004 compared to the fiscal 2003. Expenses as a percent of sales were 20.5% for fiscal YTD 2004 versus 29.3% in fiscal YTD 2003. The decrease was due to aggressive cost management, which resulted in reduction of sales and administrative staffs. Additionally, changes were made to compensation plans to ensure that payments to be made under such plans based upon overall company performance. Selling and administrative expenses included a $295,000 bad debt charge in the second quarter of fiscal year 2004 due to the insolvency of one of its On Board Services distributors in the USA.

Depreciation and Amortization

     Depreciation and amortization decreased $112,000 to $632,000 for fiscal YTD 2004, compared with $744,000 for the same period a year ago. The decrease is related to equipment becoming fully depreciated.

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Non-operating Income and Expense

     Investment income consists of returns earned on funds invested in corporate bonds and treasury bills. Management maintains these funds in a trust account with the majority of the funds invested in government securities. For YTD fiscal year 2004, the Company realized a gain of $1,000 on the sale of investments.

     Also included in the Non-operation Income and Expense is foreign exchange losses of $62,000 for the forty weeks ended April 3, 2004.

     At April 3, 2004 the Company had borrowings of $4,046,000, bearing interest at rates ranging from 3.3% to 6.6%. These borrowings include $2,410,000 in debt from the Company’s Norwegian subsidiary. Currently Norway has outstanding principal of $1,232,000 for the capital lease on a building and $1,178,000 outstanding under the working capital line of credit with Den norske Bank. In December 2000, Cuisine Solutions France entered into a five-year capital lease obligation for a cooking machine with an initial principal amount of $435,000 and 6% interest on the outstanding balance of the loan. The current portion of this loan is $110,000 and the total outstanding principal amounts to $162,000 at April 3, 2004. In October 2002, Cuisine Solutions France entered into a ten year term loan to finance the acquisition of land and a building to be used as a distribution plant in the amount of EURO 190,000 or $234,000 US dollars. This loan bears interest of 5.7% and is due in October 2012. The current portion of this loan is $18,000 and the total outstanding principal amounts to $206,000 at April 3, 2004. In March 2003, Cuisine Solutions France entered into a five year term loan to further expand the facility in the amount of EURO 280,000 or $344,000. This loan bears interest of 3.3% and is due in June 2008. The current portion of this loan is $64,000 and the total outstanding principal amounts to $292,000 at April 3, 2004. On October 22, 2003, the Company entered into a six month term loan in the amount of $500,000 with Food Investors Corporation (“FIC”) to provide short term working capital necessary to expand operations for fiscal year 2004. The loan bears interest of 5% per annum and was payable upon maturity. In April 2004, the loan was extended to October 22, 2004. Total outstanding principal was $455,000 at April 3, 2004. In addition, on November 10, 2003, the Company entered into a three-year term loan in the amount of $500,000 with Food Research Corporation (“FRC”) to provide short term working capital necessary to expand operations. The loan bears interest of 5% per annum and is payable upon maturity. Under this loan, Cuisine Solutions pays interest on a quarterly basis beginning in April 2004, with a balloon payment for the total amount due three years from the origination of the loan. FIC and FRC are 100 percent owned by Cuisine Solutions majority shareholder, the JLV group.

Provision for Taxes

     No provision for income taxes was made during the third quarter of fiscal 2004 given the Company’s history of losses.

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Impact of Inflation and the Economy

     Variations 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. In the event of accelerated commodity price increases, the Company may suffer a short-term loss since customers cannot accept multiple price changes in short periods of time. The Company will continue to investigate larger purchase contracts for key raw materials where pricing to the customer can also be contracted.

     The Company’s costs of its Norwegian subsidiary are denominated in Norwegian Kroner. Sales of products from its Norwegian subsidiary are made in the currency of the purchasing jurisdiction and are subsequently recorded in Norwegian Kroner. The Company does engage in forward contracts for Norway shipments to the USA where these shipments are predictable with the objective of protecting planned profit margins. The USA subsidiary does not purchase product from France and therefore, does not have any exposure to foreign exchange other than translation adjustments during consolidations.

     In an effort to increase diversification to lower the impact of various economic events, management has re-focused its efforts to diversify sales for a more even mix between sales channels. During fiscal year 2004, the sales to the On Board Services channel, primarily airline and railroad accounts, were 33.6% of total revenues. Sales to the Foodservice Industry was 29.9%, primarily to hotel, restaurants and banquets, and 29.9% of sales was to the Retail channel. Management has also placed increased focus on the National Restaurants Chain and military channels in the USA.

Liquidity and Capital Resources

     At April 3, 2004, the Company’s combined total of cash and short-term investment balances was $1,093,000, compared with $1,357,000 at June 28 2003. This decrease is the result of the year-to-date operating loss, and payments on debt obligations. Additionally, the Company held long term investments of $1,149,000 and $1,331,000 at April 3, 2004 and June 28, 2003, respectively. Long term investments are used as collateral for the Standby Letter of Credit to secure the overdraft facility of the Norwegian subsidiary. There is no other restriction on cash balances at the end of the fiscal 2004 second quarter.

     Net cash used by operations amounted to $400,000 for 2004, compared to cash used of $1,320,000 for 2003. Cash in the amount of $438,000 was used by investment in new production equipment while the sale of investments provided $182,000. Financing activities provided net cash of $392,000 from new borrowings.

     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 April 3, 2004, the Company used the maximum amount available under line of credit which is currently $1,092,000.

Future Prospects

     During the remainder of fiscal year 2004, the Company’s strategy will involve efforts to grow each channel with the highest priority on building the Cuisine Solutions brand and growing the existing retail customer base for pre-prepared frozen entrees and deli items.

Foodservice

     The Foodservice channel will continue to manage the hotel restaurant menu program while

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working to reduce distribution costs of shipping direct to hotels. The fiscal 2004 strategy involves the continued penetration into large key national accounts, banquet centers and casinos. Demand has been growing in the US for Low Carbohydrate items, and the Foodservice channel will be focusing on these accounts. Demand for foodservice products in France increased significantly during the past two years and we expect further growth for fiscal 2004 due to continued customer satisfaction with the quality and variety of products offered by the Company. Customers in the Foodservice sales channel place high value on the labor savings, quality, consistency, and food safety associated with Cuisine Solutions products. Management will work to find new growth strategies for this channel including adding sales personnel where appropriate.

On Board Services

     On Board Services was highly affected by the slowdown of the travel industry over the past two years. However, close customer focus has started to show positive results during the last two quarters. Cuisine Solutions will pursue growth by increasing the number of items sold to each of its customers working directly and indirectly with the airlines and railways in the USA and in Europe. As the airline and related support industries consolidate their workforces, management is exploring every opportunity to provide the airlines with high quality first class and business class meals, greater potential flexibility and less labor. The Company is developing the ‘Buy-on-Board’ meal program with several airlines and anticipates the launch of the program towards the end of fiscal year 2004. There is still instability and risk associated with this market and management is taking a cautious approach with its business partners. Cuisine Solutions has had stronger sales in the commuter rail industry over the last quarter.

Retail

     Management initiated a strategic effort into retail sales in order to diversify the sales channels of the Company and to provide the opportunity for large volume sales that would increase the efficiency of the total Company product line. Retail objectives for fiscal year 2004 include the further penetration into the USA in-store deli of targeted retailers as well as the further product rollout of premium frozen retail products into the USA and French market. The benefit of retail sales includes high volume potential, economies of scale from production and lower distribution and administrative cost per sales order. Cuisine Solutions also sees great value in the creation of Cuisine Solutions as a brand for the upscale frozen food market.

Military

     Cuisine Solutions has been actively marketing the military beyond the US Navy carrier market. During the second quarter of fiscal 2004, it was announced by the Army that two of the Cuisine Solutions products (frozen) will be on the Unitized Group Rations-A (UGR-A) menu and Concept of Operations (CONOPS) menu for feeding troops in field kitchens. Although the Cuisine Solutions products were chosen as two of the 14 menu items for the UGRA program and the two items have been added to the CONOPS menu, there is no guarantee that the military will ultimately buy the products from Cuisine Solutions. The Army estimates that it will begin ordering from Cuisine Solutions during the fourth quarter of fiscal 2004 or first quarter of fiscal 2005.

National Restaurant Chains (New Business)

     Cuisine Solutions has been working with restaurant chains to provide the chain’s current recipes in a fully cooked, frozen “sous-vide” format. Cuisine Solutions believes there may be benefits in highlighting our protein offerings for the growing “low Carbohydrate” market, and our sauces and pasta lines. Management is adding sales personnel to the channel to further exploit the growing opportunities.

France

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     Cuisine Solutions France has experienced sales growth during the last three years, contributing to the Company’s cash flow since its acquisition in 1999. Management will continue with its strategic sales plan to expand the selling efforts not only in France but in other European countries, especially in Germany and the United Kingdom. Cuisine Solutions France will continue to pursue additional product line expansion into the On Board Services and retail markets and attempt to increase its market share and product awareness.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

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

     Interest rate exposure:

     The Company’s exposure to market risk for changes in interest rates relates primarily to the Company’s investment and debt portfolio. The Company has not used derivative financial instruments in its investment portfolio. The Company places its investments with high quality issuers. A portion of the debt portfolio has fluctuating interest rates, which change with changes in the market.

     Foreign Currency Risk:

     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 while the French subsidiary reports in EURO. As currency exchange rates, translation of the income statements of the Norway and French operations into U.S. dollars affects year-over-year comparability of operating results. Sales, which are subject to these foreign currency fluctuations, are currently 41% of the Company’s sales. The net assets of the subsidiaries are approximately 47% of the Company’s net assets. The Company does not enter into hedges to minimize volatility of reported earnings because it does not believe it is justified by the exposure or the cost.

     Sales and Marketing Risks:

     Cuisine Solution is introducing and rolling-out new product lines into the Retail sector. Cuisine Solutions Management has put significant focus on the opportunities available in the retail sector and the success rate will be contingent upon market acceptance of the product line, price points and execution of its marketing strategy. Another risk includes few customers in retail totaling larger percentages of the overall Cuisine Solutions revenue. The company is also focusing on the US military and National Restaurant Chains coupled with Retail as a hedge against further disruption to the travel industry which may or may not be successful for Cuisine Solutions in the long-run

     The travel industry, and specifically the airlines, has been a major source of Cuisine Solutions revenue and formal business strategy. Although the economic situation with the airlines and travel industry is believed to be improving, Management cannot forecast the continuing stability of the industries. Cuisine Solutions will position itself to provide maximum value to our airline and travel related partners during these turbulent times.

Item 4. Controls and Procedures

     Within 90 days prior to the date of this report, Management carried out an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures, pursuant to Exchange Act Rule 13a-14 and 15d-14. Based on the foregoing, the Principal Executive Officer, the Chief Operating Officer and Principal Financial Officer concluded that the Company’s disclosure controls and procedures are effective to timely alert them to any material information relating to the Company that must be included in the Company’s periodic SEC filings. In addition, there have been no significant changes in the Company’s internal controls or in other factors that could significantly affect internal controls subsequent to the date of the most recent evaluation.

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CUISINE SOLUTIONS, INC.

PART II: OTHER INFORMATION

Item 1. Legal Proceedings.

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

     On November 7, 2002, AquaCuisine, Inc, a California company, with principal place of business in the State of Idaho, signed a promissory note to pay Cuisine Solutions $196,952 plus interest for payment on returned items. AquaCuisine has stopped making payments on the promissory note and on December 18, 2003, Cuisine Solutions filed suit in the United States District Court for the Eastern District of Virginia to demand judgment against AquaCuisine for approximately $106,000 plus attorney fees. AquaCuisine also owes Cuisine Solutions approximately $16,000 on another account. The judge ruled against AcquaCuisine and ordered payment in full plus legal fees. Cuisine Solutions is vigorously pursuing collection on the judgment in the State of Idaho. Cuisine Solutions has already established a reserve for the entire Note in the past, and believes the ultimate outcome of this matter will not have a material adverse affect on the Company or its current operations.

     In November 2003, Sage Enterprises announced to its suppliers that it was liquidating the assets of its airline distribution business and freezing all of its assets until after the liquidation and payments to secured creditors. The obligations of Sage included $295,000 in payables to Cuisine Solutions. Cuisine Solutions has explored legal options to recover the money including the filing of a demand letter for the return of all items Sage had received with the 10 days prior to the liquidation. Cuisine Solutions is a member of an unofficial committee of unsecured creditors being represented by the legal firm Holland & Knight LLP. On February 13, 2004, four of the unsecured creditors filed a petition in the United States Bankruptcy Court forcing SAGE into involuntary Chapter 7 bankruptcy. Cuisine Solutions will try to recover all that it is due, but the Company is not currently optimistic about the chances for any recovery. The Company reserved the entire account due from Sage during the quarter ended December 13, 2003.

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

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

     The Company’s 20th annual meeting of shareholders was held on October 22, 2003 in Alexandria, Virginia at the Hilton Alexandria Mark Center. The following individuals were re-elected to serve as Directors for a period of one year and until their successors are elected and qualify: Jean-Louis Vilgrain (Chairman), Stanislas Vilgrain (President & CEO), Sebastien Vilgrain, Mr. Charles McGettigan and Mr. Robert van Roijen.

Item 5. Other Events and Regulation FD Disclosure

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     Cuisine Solutions recently appointed Mr. Hugues Prince, age 48, to the Board of Directors. Mr. Prince was the Managing Director of DeliFrance Asia since its inception in 1981. DeliFrance Asia was owned by the JLV Group, the majority shareholder of Cuisine Solutions. DeliFrance Asia was listed on the Singapore Stock exchange (1996) with more than 180 retail outlets, bakeries, and restaurants in seven Asian countries. It was acquired by Prudential Asset Management Asia Ltd (PAMA) in 1999. Mr. Prince is currently a consultant and group advisor to the Cuisine Solutions majority shareholder. Mr. Prince has also served on the Cuisine Solutions Advisory Board since January 2003.

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SIGNATURES

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

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