FRESH CHOICE INC - 10-Q Quarterly Report

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)
x	QUARTERLY REPORT under SECTION 13 OR 15(d) of the SECURITIES EXCHANGE ACT OF 1934

	For the quarter ended June 13, 2004

OR

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the transition period from ______________ to ______________.

Commission file number 0-20792

FRESH CHOICE, INC.
(Exact name of registrant as specified in its charter)

Delaware		77-0130849
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employee Identification No.)

485 Cochrane Circle, Morgan Hill, California 95037
(Address of principal executives offices) (Zip Code)

Registrant’s telephone number, including area code: (408) 776-0799

Former name, former address and former fiscal year, if changed since last report.

Indicate by check 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.

x

Yes

o

No

Indicate by check mark whether the registrant is an accelerated filer (as defined in rule 12B-2 of the Exchange Act).

o

Yes

x

No

APPLICABLE ONLY TO CORPORATE ISSUERS: The number of shares of Common Stock, $.001 par value, outstanding as of July 23, 2004 was 6,037,461.

FRESH CHOICE, INC.

INDEX

PART I - FINANCIAL INFORMATION

	Item 1 - Financial Statements

		Condensed Consolidated Balance Sheets at June 13, 2004 and December 28, 2003	3

		Condensed Consolidated Statements of Operations for the Twelve and Twenty-Four Weeks ended June 13, 2004 and June 15, 2003	4

		Condensed Consolidated Statements of Cash Flows for the Twenty-Four Weeks ended June 13, 2004 and June 15, 2003	5

		Notes to Condensed Consolidated Financial Statements	6

	Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations		11

	Item 3 - Quantitative and Qualitative Disclosures About Market Risk		26

	Item 4- Controls and Procedures.		26

PART II - OTHER INFORMATION

	Item 1 - Legal Proceedings		26
	Item 2 - Changes in Securities		26
	Item 3 - Defaults Upon Senior Securities		26
	Item 4 - Submission of Matters to a Vote of Security Holders		27
	Item 5 - Other Information		27
	Item 6 - Exhibits and Reports on Form 8-K		27

SIGNATURES			28

INDEX TO FORM 10-Q EXHIBITS			29

PART I. FINANCIAL INFORMATION

Item 1 - Financial Statements

FRESH CHOICE, INC. (Debtor in Possession as of July 12, 2004)
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
(Unaudited)

			June 13, 2004			December 28, 2003

ASSETS:

CURRENT ASSETS:
	Cash and cash equivalents		$	948			$	1,379
	Inventories			443				473
	Prepaid expenses and other current assets			636				780

	Total current assets			2,027				2,632

PROPERTY AND EQUIPMENT, net				19,710				27,497

DEPOSITS AND OTHER ASSETS				695				725

TOTAL ASSETS			$	22,432			$	30,854


LIABILITIES AND STOCKHOLDERS’ EQUITY:

CURRENT LIABILITIES:
	Accounts payable		$	1,999			$	1,948
	Other accrued expenses			3,114				3,411
	Accrued salaries and wages			1,506				1,538
	Sales tax payable			796				551
	Current portion of long-term obligations			4,866				918

	Total current liabilities			12,281				8,366
CAPITAL LEASE OBLIGATIONS				-				2,123
LONG-TERM DEBT				110				1,886
OTHER LONG-TERM LIABILITIES				2,601				2,769

	Total liabilities			14,992				15,144

STOCKHOLDERS’ EQUITY:
	Convertible preferred stock, $.001 par value;
		3.5 million shares authorized; shares
		outstanding: 2004 and 2003 - 1,187,906;
		liquidation preference; 2004-$9,133; 2003-$8,826		5,175				5,175
	Common stock - $.001 par value;
		15 million shares authorized; shares
		outstanding: 2004 - 6,037,461; 2003 - 6,017,190		42,743				42,714
	Accumulated deficit			(40,478	)			(32,179	)

	Total stockholders’ equity			7,440				15,710

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY			$	22,432			$	30,854

The December 28, 2003 amounts are derived from the Company’s audited financial statements.
See accompanying notes to condensed consolidated financial statements.

FRESH CHOICE, INC. (Debtor in Possession as of July 12, 2004)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)

				Twelve Weeks Ended								Twenty-Four Weeks Ended

				June 13, 2004				June 15, 2003				June 13, 2004				June 15, 2003


NET SALES					$	17,696			$	18,879			$	35,717			$	36,563

COSTS AND EXPENSES:
		Cost of sales				3,976				4,385				8,026				8,400
		Restaurant operating expenses:
			Labor			6,180				6,422				12,541				12,508
			Occupancy and other			6,025				6,021				11,944				11,721
	General and administrative expenses					1,218				1,304				2,434				2,670
	Depreciation and amortization					803				829				1,593				1,618
	Store closure and asset impairment expenses					7,254				-				7,254				-
	Restaurant opening costs					-				44				-				236

	Total costs and expenses					25,456				19,005				43,792				37,153

OPERATING LOSS						(7,760	)			(126	)			(8,075	)			(590	)

Interest income						-				-				1				2
Interest expense						(132	)			(105	)			(225	)			(184	)


Interest expense, net						(132	)			(105	)			(224	)			(182	)

LOSS FROM OPERATIONS BEFORE INCOME TAXES						(7,892	)			(231	)			(8,299	)			(772	)

Provision for income taxes						-				-				-				-

NET LOSS					$	(7,892	)		$	(231	)		$	(8,299	)		$	(772	)


Basic and diluted net loss per common share:					$	(1.31	)		$	(0.04	)		$	(1.38	)		$	(0.13	)