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 March 21, 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 April 16, 2004 was 6,017,190.

FRESH CHOICE, INC.

INDEX

PART I - FINANCIAL INFORMATION

	Item 1 - Financial Statements

		Condensed Consolidated Balance Sheets at March 21, 2004 and December 28, 2003	3

		Condensed Consolidated Statements of Operations for the Twelve Weeks ended March 21, 2004 and March 23, 2003	4

		Condensed Consolidated Statements of Cash Flows for the Twelve Weeks ended March 21, 2004 and March, 23 2003	5

		Notes to Condensed Consolidated Financial Statements	6

	Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations		9

	Item 3 - Quantitative and Qualitative Disclosures About Market Risk		18

	Item 4- Controls and Procedures		19

PART II - OTHER INFORMATION

	Item 1 - Legal Proceedings		19
	Item 2 - Changes in Securities		19
	Item 3 - Defaults Upon Senior Securities		19
	Item 4 - Submission of Matters to a Vote of Security Holders		19
	Item 5 - Other Information		19
	Item 6 - Exhibits and Reports on Form 8-K		19

SIGNATURES			20

INDEX TO FORM 10-Q EXHIBITS			21

PART I. FINANCIAL INFORMATION

Item 1 - Financial Statements

FRESH CHOICE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
(Unaudited)

	March 21, 2004				December 28, 2003

ASSETS

CURRENT ASSETS:
Cash and cash equivalents		$	675			$	1,379
Inventories			460				473
Prepaid expenses and other current assets			655				780

Total current assets			1,790				2,632

PROPERTY AND EQUIPMENT, net			27,112				27,497

DEPOSITS AND OTHER ASSETS			749				725


TOTAL ASSETS		$	29,651			$	30,854


LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES:
Accounts payable		$	1,475			$	1,948
Other accrued expenses			2,957				3,411
Accrued salaries and wages			1,631				1,538
Sales tax payable			936				551
Current portion of long-term obligations			934				918

Total current liabilities			7,933				8,366

CAPITAL LEASE OBLIGATIONS			1,920				2,123

LONG-TERM DEBT			1,848				1,886

OTHER LONG-TERM LIABILITIES			2,647				2,769


Total liabilities			14,348				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-$8,980; 2003-$8,826			5,175				5,175
Common stock - $.001 par value; 15 million shares authorized; shares outstanding: 2004 - 6,017,190; 2003 - 6,017,190			42,714				42,714
Accumulated deficit			(32,586	)			(32,179	)


Total stockholders’ equity			15,303				15,710


TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		$	29,651			$	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.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)

	Twelve Weeks Ended

	March 21, 2004				March 23, 2003


NET SALES		$	18,021			$	17,684


COSTS AND EXPENSES:
Cost of sales			4,050				4,015
Restaurant operating expenses:
Labor			6,361				6,086
Occupancy and other			5,919				5,700
General and administrative expenses			1,216				1,366
Depreciation and amortization			789				789
Restaurant opening costs			-				192

Total costs and expenses			18,335				18,148


OPERATING LOSS			(314	)			(464	)

Interest income			1				2
Interest expense			(94	)			(79	)


Interest expense, net			(93	)			(77	)


LOSS BEFORE INCOME TAXES			(407	)			(541	)
Provision for income taxes			-				-


NET LOSS		$	(407	)		$	(541	)


Basic and diluted net loss per common share:		$	(0.07	)		$	(0.09	)


Shares used in computing basic and diluted per share amounts			6,017				5,964

See accompanying notes to condensed consolidated financial statements.

FRESH CHOICE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

	Twelve Weeks Ended

	March 21, 2004				March 23, 2003

OPERATING ACTIVITIES :
Net loss		$	(407	)		$	(541	)
Adjustments to reconcile net loss to net cash provided (used) by operating activities:
Depreciation and amortization			840				838
Issuance of common stock for consulting services			-				1
Loss on disposal of property and equipment			2				8
Deferred rent			(120	)			(90	)
Change in operating assets and liabilities:
Inventories			5				(46	)
Prepa