SecProbe.io

CORRESP
1
filename1.htm

corresp

May 23, 2005

Ms. Regina Balderas

Division of Corporation Finance

United States Securities and Exchange Commission

450 Fifth Street, N.W., Stop 4-5

Washington, D.C. 20549-0405

    Re:

    Cuisine Solutions, Inc.

    Form 10-K, Filed September 24, 2004

    Form 10-Q Filed January 25, 2005

    File No. 0-12800

Dear Ms. Balderas:

               We have received the letter (the “Comment Letter”) dated May 4, 2005 from H. Roger Schwall,
Assistant Director, of the staff (the “Staff”) of the Division of Corporation Finance of the
Securities and Exchange Commission (the “Commission”) to Cuisine Solutions, Inc. (the “Company”).
As requested in the Comment Letter, we are submitting this letter in response to the Staff’s
comments. For your convenience, we have reproduced the Staff’s comments below, numbered in
accordance with the numbering from the Comment Letter. Where the Company’s response to a
particular comment includes proposed revised disclosure, we have presented the proposed text marked
to show changes from the disclosure in the Company’s original filing.

Form 10-Q for the quarterly period ended December 11, 2004

Note 5. Transaction with Related Parties, Page 7

    1.
    We understand from your response to prior comment 7 that the Chilean joint venture structured
as partnership was terminated before it began operations. We note that in 2003, subsequent to
the termination of the joint venture, you acquired 10% of the shares of a newly created
Chilean corporation, Cuisine Solutions Chile, Inc. (“Cuisine Chile”). Please revise your
disclosure to accurately describe the activities of theses entities. In this regard, note
that the current disclosure suggests that you have engaged in certain related party activity
during 2004 with the Chilean partnership as opposed to the Chilean corporation you describe in
your response.

In response to the Staff’s comment, we supplementally advise the Staff that the Company revised
the disclosure in Note 5. Transactions with Related Parties in the Form 10-Q for the quarterly
period ended April 2, 2005 as follows, and the Company intends to similarly revise the
disclosure in its future periodic reports:

On June 12, 2001, the Company signed an agreement with Inversiones Stefal ltda of Chile, Farmers
Market Land of Germany, Inversiones Continex of Chile, and Iso-Tech Ltda of Brazil (the
“parties”) to create a joint venture that was originally contemplated to be structured as a
partnership, to build a sous-vide processing facility in Chile. This initial agreement was
terminated without prejudice between the parties in fiscal year 2003 prior to the capitalization
of the partnership. However, the parties decided to continue the project through the formation
of a corporation, Cuisine Solutions Chile, S.A. (“Cuisine Solutions Chile”). The Company
received a 10% interest in Cuisine Solutions Chile and is a minority shareholder of Cuisine
Solutions Chile. The 10% interest was issued to the Company in consideration of

certain intangible assets, such as know-how for the plant development and operations and
marketing support, all of which had no carrying value on the Company’s balance sheet. Cuisine
Solutions Chile is controlled by its majority shareholder and its affiliates, none of which are
affiliated with the Company. The intended purpose of the facility is to produce high
quality, value priced whitefish, shellfish and salmon products in Chile for the Global Retail
and Foodservice markets. An agreement to market certain sous-vide products was signed by the
parties and a commercial agreement regarding the purchase of certain raw materials from Cuisine
Solutions Chile was signed in fiscal year 2004. The plant began operations in August
2004. During the Company’s second quarter of fiscal year 2005, Cuisine Solutions Chile
conducted a capital raise from its existing shareholders. In order to maintain the Company’s
10% interest in Cuisine Solutions Chile, the Company sold equipment from its discontinued
facility in Norway in exchange for a note receivable of $500,000 payable in three installments,
all due before March 2005, and $500,000 in equity in Cuisine Solution Chile (determined based
upon cash invested by the majority shareholder of Cuisine Solutions Chile). As of April 2,
2005, the $500,000 note has been paid in full. Management recorded a discount of $125,000
against the value of the equity received. Management believes that this discount is appropriate
because there is no ready market for the stock of Cuisine Solutions Chile, Cuisine Solutions
Chile has a limited operating history, and the Company’s ownership stake represents only a
minority interest in Cuisine Solutions Chile. The Company’s 10% equity investment in
Cuisine Solutions Chile is, therefore accounted for under the cost method as the Company does
not have the ability to exercise significant influence over the operating or financial policy of
Cuisine Solutions Chile.

    2.
    We understand from your response to prior comment 8 that you initially received your 10%
equity interest in Cuisine Chile in 2003 in consideration for the contribution of certain
intangible assets which had zero basis on your balance sheet. Since Cuisine Chile was an
early stage enterprise and had no operating history, you believed the fair value of the 10%
interest was nominal and as such did not record it on the balance sheet. According to APB
Opinion No. 29, the cost of a nonmonetary asset acquired in exchange for another nonmonetary
assets is the fair value of the assets surrendered to obtain it. You indicate that the
intangible assets you surrendered had no book basis. However, you make no mention of the fair
value of those intangible assets. Please confirm, if true, that you did consider the fair
value of the intangible assets surrendered. Indicate how this consideration contributed to
your decision not to record the initial 10% investment in Cuisine Chile in 2003.

In response to the Staff’s comment, we supplementally advise the Staff that the Company
initially received its 10% equity interest in Cuisine Solutions Chile, S.A. (“Cuisine Solutions
Chile”) in 2003 in consideration for the contribution of certain intangible assets, such as
know-how for the plant development and operation and the use of the trade name “Cuisine
Solutions,” all of which had zero basis on the Company’s balance sheet. The know-how that the
Company contributed consisted of training in the use of the sous-vide equipment, training in the
sous-vide cooking method, and an understanding of quality assurance and maintenance procedures.
The fair market values of these intangible assets was not readily determinable, APB Opinion No.
29 required that the fair value of the asset received be used to measure the fair value of the
asset surrendered (and the cost of the asset received) if it was more clearly evident than the
fair value of the asset surrendered. Since Cuisine Solutions Chile was an early stage
enterprise and had no operating history, the Company’s management believed that the fair value
of the 10% equity interest was nominal and, as such, did not record it on the Company’s balance
sheet.

    3.
    We understand from your response to prior comment 9 and related disclosures at page 8 of your
Form 10-Q that during the second quarter 2005 you avoided dilution of your ownership
percentage by selling equipment to Cuisine Chile at an agreed upon price of $1 million in
return for (i) a short term note receivable from Cuisine Chile payable in three installments
due before March 2005, and (ii) additional equity. We note that management determined the
fair value of the equity to be approximately $375,000 and that you recorded a gain of
approximately $571,000 in connection with the sale. Please address the following:

    a)
    Confirm, if true, that you have fully collected the note receivable from Cuisine Chile.

In response to the Staff’s comment, we supplementally advise the Staff that the note
receivable from Cuisine Solutions Chile was fully collected by April 2, 2005. As noted in
response to comment no. 1 above, we have revised our disclosures to clarify this fact.

    b)
    Explain in more detail how the $1 million agreed upon price was determined since you
indicate that at the time of the equipment sale, the fair market value of the equipment was
not readily available and as such, you were required under APB Opinion No. 29 to measure
the fair value of the assets received as opposed to the asset surrendered. In this regard,
confirm, if true, that the sale of equipment was conducted as an arms length transaction.

In response to the Staff’s comment, we supplementally advise the Staff that the price of the
equipment sale was negotiated at arms length between the Company and Cuisine Solutions Chile
to maximize each party’s respective economic interest. In this regard, we supplementally
advise the Staff that the majority and other shareholders of Cuisine Solutions Chile are not
affiliated with the Company nor are the Company and Cuisine Solutions Chile under common
control. The $1 million agreed upon price was based, in part, on the condition of the
equipment and the timing of delivery (i.e., the avoidance of a long wait for the equipment
to be manufactured) that the Company was able to provide, since there is no secondary market
for such equipment from which to ascertain the value of the equipment.

    c)
    Provide more details regarding your determination of the discount you applied to your
investment in Cuisine Chile. Further support your basis that a 25% discount was
appropriate and your conclusion that $375,000 was the minimum price that you could receive
for your investment from another unrelated, willing party in the absence of duress.

In response to the Staff’s comment, we supplementally advise the Staff that the decision to
make a $500,000 investment by the Company in Cuisine Solutions Chile was the result of the
majority shareholders’ increasing the capitalization of Cuisine Solutions Chile and the
Company’s desire to make its proportional contribution to retain its 10% equity ownership,
as explained in response to comment no. 1 above. With the new capital infusion in Cuisine
Solutions Chile, the Company maintained its 10% minority shareholder position, and continues
to have no rights to participate in the operational decisions of Cuisine Solutions Chile,
including purchasing strategy, pricing, manufacturing, distribution or any other aspect of
the company’s operations. Cuisine Solutions Chile is a private company with no public
market for its stock and a limited operating history, additionally, the Company’s equity
ownership constitutes a minority position (the $500,000 was based upon cash invested by the
majority shareholder to maintain its controlling interest). As such the Company’s
management determined that it was appropriate to take a $125,000 discount to its $500,000
follow-on equity investment in Cuisine Solutions Chile to give effect to the minority nature
of the Company’s position and the lack of marketability of this investment. As noted in
response to comment no. 1 above, we have revised our disclosures to provide further details
regarding how this discount was determined.

****

               We understand that the purpose of your review process is to assist us in our compliance with
the applicable disclosure requirements and to enhance the overall disclosure in our filing. In this
regard and pursuant to your request, the Company acknowledges that:

    •
    the Company is responsible for the adequacy and accuracy of the disclosure in the
filings;

    •
    staff comments or changes to disclosure in response to staff comments do not foreclose
the Commission from taking any action with respect to the filing; and

    •
    the Company may not assert staff comments as a defense in any proceeding initiated by
the Commission or any person under the federal securities laws of the United States.

               Thank you for diligence in ensuring that investors have the information required to make
informed decisions about their investment in Cuisine Solutions. If you have any questions, please
do not hesitate to call me at 703-270-2900.

Sincerely,

/s/ Stanislas Vilgrain

Stanislas Vilgrain

CEO