The following discussion of our financial condition and results of operations should be read in conjunction with the unaudited financial statements and notes thereto for the quarter ended May 31, 2012 found in this report. In addition to historical information, the following discussion contains forward-looking statements that involve risks, uncertainties and assumptions. Where possible, we have tried to identify these forward looking statements by using words such as "anticipate," "believe," "intends," or similar expressions. Our actual results could differ materially from those anticipated by the forward-looking statements due to important factors and risks.

Cautionary Note Regarding Forward-Looking Statements

This report and other documents that we file with the Securities and Exchange Commission contain forward-looking statements that are based on current expectations, estimates, forecasts and projections about our future performance, our business, our beliefs and our management's assumptions. Statements that are not historical facts are forward-looking statements. Words such as "expect," "outlook," "forecast," "would," "could," "should," "project," "intend," "plan," "continue," "sustain", "on track", "believe," "seek," "estimate," "anticipate," "may," "assume," and variations of such words and similar expressions are often used to identify such forward-looking statements, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are not guarantees of future performance and involve risks, assumptions and uncertainties, including, but not limited to, those described in our reports that we file or furnish with the Securities and Exchange Commission. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those indicated or anticipated by such forward-looking statements. Accordingly, you are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date they are made. Except to the extent required by law, we undertake no obligation to update publicly any forward-looking statements after the date they are made, whether as a result of new information, future events, changes in assumptions or otherwise.

General

The following analysis of our consolidated financial condition and results of operations for the quarter ended May 31, 2012 should be read in conjunction with the consolidated financial statements, including footnotes, and other information presented elsewhere in this Quarterly Report on Form 10-Q and the risk factors and the financial statements and the other information set forth in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on November 30, 2011

The following Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is intended to help the reader understand our results of operations and financial condition.

Overview

On December 15, 2010, we entered into a Merger Agreement in which The Original Soupman, Inc. ("OSM") was merged with and into OSM Merge, Inc. our subsidiary. All the shares of OSM were converted into an aggregate of 14,004,230 shares of our common stock and 1,987,783 shares of our preferred stock. In addition, principal and interest on $4,673,000 of OSM's convertible notes were converted into 4,830,256 shares of our common stock.

On January 31, 2011, we reincorporated in Delaware and changed our name from Passport Arts, Inc. to Soupman, Inc. Thereafter, our stock began trading on the OTC-Bulletin Board under the symbol SOUP.

We currently manufacture and sell soup to grocery chains and other outlets and to our franchised restaurants under the brand name "The Original Soupman".

Our brand is well known throughout the industry and our Chicken Vegetable soup has been rated as the best chicken soup in America by Consumer Reports. We are focusing on having our soups displayed in a new shelf stable tetra recart package that will be located next to our competitors' canned soup products in the soup aisles in grocery and club stores where most retail soup purchases are made. We have never sold any canned soup. Currently our soups can be found in the frozen food aisle. The Tetra Cart packaging will allow us to sell products in grocery stores that we previously could not sell such as our best selling soup in our restaurants, Lobster Bisque. We believe that many consumers have had some difficulty finding our retail product in their local frozen foods section, but that with the shelf-stable, Tetra Recart it will be easy for a consumer to find our famous soups from Al Yeganeh. We also have franchised restaurants in specifically designated heavy traffic locations such as casinos, airports, tourist locations and other travel destinations. Although our primary focus is on retail organic growth; we will also consider retail and other acquisitions that provide unique opportunities and fit our business objectives.

Results of Operations - Nine Months ended May 31, 2012

The following table summarizes our operating results for the nine months ended May 31, 2012 and May 31, 2011. Upon the consummation or our merger in December 2010, we changed our primary line of business and commenced operations as a public company engaged in the manufacture and sale of soup. Prior thereto we were engaged in a different line of business, the sale of art. Therefore, any comparisons between our three month numbers for the nine months ended May 31, 2012 and the nine months ended May 31, 2011 would not be meaningful to the reader on either a quantitative or qualitative basis. In addition, it should be noted that the sale of soup is seasonal and we experience a higher volume of sales during the period from October until March.

The following table summarizes our operating results for the nine months ended May 31, 2012 and, 2011:

                         May 31, 2012      May 31, 2011
Revenue                  $   1,304,350     $     760,451
Cost of Sales                  943,266           503,396
Gross Profit                   361,084           257,055
Operating Expenses           2,992,504         4,346,012
Other Income (Expense)        (561,288 )         (34,876 )
Net Loss                 $  (3,192,708 )   $  (4,123,833 )

For the Nine months ended May 31, 2012 soup sales accounted for 88% of overall revenues, and franchise revenues accounted for the remaining 12%.

Net loss for the nine months ended May 31, 2012 was $3,192,708 or $0.11 per share (basic and diluted). The net loss decrease of $931,125 from the nine months ended May 31, 2011 was attributable to the increase in revenue and the reduction of operating expenses.

Cost of Sales as a percent of soup revenues was 72% for the nine months ended May 31, 2012. This includes the disposition of packaging from the old frozen product of $21,527 as we move from the frozen food aisle to the soup aisle in the new tetra recart containers and some discounted selling prices as we burn through the remaining frozen soup inventory. This percentage is also affected by sales promotional items of $19,997 which has been netted against soup revenues.

Operating expenses for the nine months ended May 31, 2012 were $2,992,504 and as a percentage of total revenue was 229% for the period. This is a decrease of 27% from the prior year and we continue to work to reduce costs. These operating expenses for the nine months ended May 31, 2012 include $783,512 of expenses for the issuance of shares and stock options; $797,832 for payroll, payroll taxes and benefits; $1,104,529 in professional fees which include legal, accounting, strategic planning, public relations and branding and marketing; $168,750 for royalties; $171,527 for promotion and trade shows and $82,957 for insurance and $68,155 for bad debt expense.

Results of Operations - Three Months ended May 31, 2012

The following table summarizes our operating results for the three months ended
May 31, 2012 and 2011:

                         May 31, 2012      May 31, 2011
Revenue                  $     361,576     $     411,654
Cost of Sales                  247,680           312,997
Gross Profit                   113,896            98,657
Operating Expenses             894,357         1,754,362
Other Income (Expense)        (424,887 )          24,490
Net Loss                 $  (1,205,348 )   $  (1,631,215 )

For the three months ended May 31, 2012 soup sales accounted for 87% of overall revenues, and franchise revenues accounted for the remaining 13%.

Net loss for the three months ended May 31, 2012 was $1,205,348 or $0.04 per share (basic and diluted). The net loss decrease of $425,867 or 26% from the three months ended May 31, 2011 was attributable to the reduction of operating expenses which included expenses for issuances of shares and stock options of $926,462 in 2011 compared to $85,901 in 2012.

Cost of Sales as a percent of soup revenues was 78% for the three months ended May 31, 2012. This includes some discounted selling prices as we burn through the remaining frozen soup inventory while moving to the tetra recart which is now sold the soup aisle. This percentage is also affected by sales promotional items of $2,955 which has been netted against soup revenues.

Operating expenses for the three months ended May 31, 2012 were $894,357 and as a percentage of total revenue was 247% for the period. These operating expenses for the three months ended May 31, 2012 includes the $85,901 of expenses for the issuance of shares and stock options; $278,998 for payroll, payroll taxes and benefits; $157,339 in professional fees which include legal, accounting, strategic planning, public relations and branding and marketing; $56,250 for royalties; $79,543 for promotion and trade shows, a reserve for bad debts of $53,000 and $21,220 for insurance.

Liquidity and Capital Resources

                             As at May 31, 2012       As at August 31, 2011
Current assets              $            267,693     $               565,426
Current liabilities         $          7,884,685     $             6,015,960
Working capital (deficit)   $         (7,616,992 )   $            (5,450,534 )

At May 31, 2012, we had cash of $16,159 as compared to $343,927 at August 31, 2011. The working capital deficit at May 31, 2012 of $7,616,992 and as of August 31, 2011 of $5,450,534 or an increase of $2,166,458 is attributable to an increase in accounts payable and accrued expenses and an increase in convertible notes and related derivative liabilities. These have been partially offset by a decrease in notes receivable from franchisees. It should also be noted that included in the current liabilities as at May 31, 2012 are the current liabilities of Soup Kitchen International, Inc. in the amount of $4,997,020 which accounts for that amount of the total working capital deficit as that company has no assets and is included in the Soupman, Inc. statements (see note 3 Variable Interest Entities to the Soupman, Inc. and subsidiaries and Soup Kitchen International, Inc. Financial Statements).

For the nine months ended May 31, 2012 cash used in operating activities was $1,306,850 as compared to $1,459,022 for the nine months ended May 31, 2011. Our primary uses of cash from operating activities for the nine months ended May 31, 2012 were losses from operations offset by increases in share based payments, stock issued for services, amortization of debt discount and an increase in accounts payable and accrued expenses.

Net cash provided by investing activities for the nine months ended May 31, 2012 was $74,716, predominantly from the cash repaid by franchisees compared to $555,657 last year which predominately came from the cash acquired in the merger.

Net cash provided by financing activities for nine months ended May 31, 2012 was $904,366 which includes proceeds from notes of $875,250 and $100,000 from the exercise of stock options offset by repayment of debt of $79,884. For the nine months ended May 31, 2011, net cash provided by financing activities was $912,675 which was from the sale of common stock of $984,000 offset by the repayment of debt of $71,325.

Current and Future Financing Needs

We have incurred a stockholders' deficit of $ 6,982,681 through May 31, 2012 and have incurred a net loss of $3,192,708 for the nine months ended May 31, 2012. We have incurred negative cash flow from operations since inception and have primarily financed our operations through the sale of debt and equity. At May 31, 2012, we had short term debt of $4,519,462 and a working capital deficit of $7,613,577. These factors raise substantial doubt about our ability to continue as a going concern. Our debt in the amount of $4,519,462 includes a guarantee of Soup Kitchen International Inc's debt in the amount of $3,802,917 all of which is past due. (See Note 3 of the Financial Statements Variable Interest Entities). We have spent, and expect to continue to spend, substantial amounts in connection with implementing our business strategy, including the launch of our new shelf stable tetra recart packaging, our advertising and marketing campaign, and fees in connection with regulatory compliance and corporate governance and to that end, we are in a capital raise mode at the time of this filing. The actual amount of funds we will need to operate is subject to many factors, some of which are beyond our control. If our anticipated sales for the next few months do not meet our expectations, our existing resources will not be sufficient to meet our cash flow requirements. Furthermore, if our expenses exceed our anticipations, we will need additional funds to implement our business plan. We will not be able to fully establish our business if we do not have adequate working capital so we will need to raise additional funds, whether through a stock offering or otherwise.

We are obligated to pay the minority stockholder of Kiosk a royalty equal to 3% of the gross sales of all of its soup on the first $50,000,000 of gross sales, 2% on gross sales between $50,000,000 and $75,000,000, and 1% on gross sales thereafter. We are required to pay a minimum of $225,000 per year if the gross sales threshold is not met. Payments are due quarterly for ongoing services through June 30, 2014. The annual payments are as follows:

                      Years Ending August 31,
                      2012 (remaining 3 months)    $  56,250
                      2013                           225,000
                      2014                           187,500
                      Total                       $  468,750

At May 31, 2012 our debt includes the following:

  Interest Rate      Maturity Date     Monthly Installments      Collateral        Amount
                    June 2012 -
 8%                 November 2012      None                   None               $   865,250
None                Due on demand      None                   None                    37,500
Prime + 3%, Prime                                             All assets of
+ 4% and 6%         Due on Demand      None                   the Company          2,003,631
                                                              All assets of
None                Due on demand      None                   the Company            290,902
                                                              All assets of
 7%                 Due on demand      None                   the Company          1,508,384
None                Due on demand      None                   None                    10,000
                                                                                 $ 4,715,667