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	)
Prepaid expenses and other current assets			126				(432	)
Accounts payable			(473	)			(689	)
Accrued salaries and wages			97				57
Other accrued expenses			(69	)			14


Net cash provided (used) by operating activities			1				(880	)


INVESTING ACTIVITIES:
Capital expenditures			(438	)			(1,386	)
Deposits and other assets			(41	)			8


Net cash used in investing activities			(479	)			(1,378	)


FINANCING ACTIVITIES:
Long-term debt - repayments			(37	)			(34	)
Capital lease obligations - borrowings			-				492
Capital lease obligations - repayments			(189	)			(156	)

Net cash provided (used) by financing activities			(226	)			302


DECREASE IN CASH AND CASH EQUIVALENTS			(704	)			(1,956	)

CASH AND CASH EQUIVALENTS:

Beginning of period			1,379				2,994

End of period		$	675			$	1,038


Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for interest		$	103			$	90


Cash paid during the period for income taxes		$	-			$	32

See accompanying notes to condensed consolidated financial statements.

FRESH CHOICE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the Twelve Weeks Ended March 21, 2004 and March 23, 2003
(Unaudited)

1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The accompanying condensed consolidated financial statements have been prepared by the Company without audit and reflect all adjustments, consisting of normal recurring adjustments and accruals, which are, in the opinion of management, necessary for a fair statement of financial position and the results of operations for the interim periods. The statements have been prepared in accordance with the regulations of the Securities and Exchange Commission, but omit certain information and footnote disclosures necessary to present the statements in accordance with accounting principles generally accepted in the United States of America. For further information, refer to the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 28, 2003.

2. SIGNIFICANT ACCOUNTING POLICIES

The Company’s accounting policies are described in Note 1 of the Company’s audited December 28, 2003 financial statements included in the Company’s Annual Report on Form 10-K. The accounting policies that management has identified as critical or complex accounting policies are described on Page 15 of this Form 10-Q under the caption “Critical Accounting Policies.”

3. STOCK-BASED COMPENSATION

The Company accounts for stock-based awards to employees using the intrinsic value method in accordance with Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees.” The Company accounts for stock-based awards to non employees in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 123 “Accounting for Stock-Based Compensation” and Emerging Issues Task Force (“EITF”) Issue No. 96-18 “Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services.

The following table illustrates the effect on net income (loss) and net income (loss) per common share if the Company had applied fair value recognition provisions of SFAS No. 123 to stock based employee compensation.

	Twelve Weeks Ended

(In thousands, except per share data)	March 21, 2004				March 23, 2003


Net loss		$	(407	)		$	(541	)
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects *			(37	)			(69	)

Pro forma net loss		$	(444	)		$	(610	)


Net loss per common share:
Basic and Diluted-as reported		$	(0.07	)		$	(0.09	)

Basic and Diluted-pro forma		$	(0.07	)		$	(0.10	)


* Of which there were none.

4. NET LOSS PER COMMON SHARE

Basic net loss per common share excludes dilution and is computed by dividing net income by the weighted average of its common shares outstanding for the period. Diluted net loss per common share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. The Company converts common stock options and warrants into potential dilutive shares using the treasury stock method and converts preferred stock into potential dilutive shares using the “if converted” method.

A reconciliation of the components of basic and diluted net income per share follows:

	Twelve Weeks Ended

(In thousands, except per share data)	March 21, 2004				March 23, 2003


Basic Net Loss Per Common Share

Net Loss		$	(407	)		$	(541	)

Average common shares outstanding			6,017				5,964

Basic net loss per common share		$	(0.07	)		$	(0.09	)


Diluted Net Loss Per Common Share

Net Loss		$	(407	)		$	(541	)


Average common shares outstanding			6,017				5,964

Dilutive shares:
Stock options			-				-
Convertible preferred stock			-				-

Total shares and dilutive shares			6,017				5,964

Diluted net loss per common share		$	(0.07	)		$	(0.09	)

The following table presents the total dilutive securities, which the Company excluded for each period presented from its diluted EPS computation because the exercise price of the securities exceeded the average fair value of the Company’s common stock or the Company had a net loss and therefore, these securities were anti-dilutive:

	Twelve Weeks Ended

(In thousands)	March 21, 2004	March 23, 2003


Potential Dilutive Securities

Stock options excluded	1,174	1,208
Stock warrants	100	100
Convertible preferred stock	1,188	1,188

5. OTHER ACCRUED EXPENSES

The components of other accrued expenses are as follows:

(In thousands)	March 21, 2004			December 28, 2003


Accrued workers’ compensation		$	828		$	836
Unredeemed gift certificates			571			645
Deferred vendor allowances			469			483
Accrued utilities			292			400
Accrued advertising			207			245
Accrued insurance			138			156
Accrued professional fees			104			108
Accrued property taxes			54			189
Other			294			349

		$	2,957		$	3,411

6. BORROWING ARRANGEMENTS

The Company has a $2,200,000 loan (the “Loan”), with a commercial bank. Under the terms of the Loan, the Company issued a promissory note (the “Note”) in the amount of $2,200,000. The Note is secured by a deed of trust on certain Company-owned real estate. The Note bears interest at the prime rate (4.0% at March 21, 2004) plus 0.625%. The Note has a fifteen-year amortization period and matures after 84 monthly payments of principal and interest. All unpaid principal and interest shall be due and payable on the Note’s maturity date of September 2, 2008.

On March 21, 2004, the Company had $1,886,000 of debt outstanding under the Loan described above. At March 21, 2004, $1,737,000 was included in long-term debt and $149,000 was included in the current portion of long-term obligations. The Deed of Trust requires the Company to maintain a minimum debt service coverage ratio and to maintain a minimum tangible net worth.

In March 2004 the Company amended its $2,000,000 revolving line of credit (the “Agreement”) with its bank to increase the amount to $3,000,000 and extend the Agreement to May 17, 2005. Borrowings bear interest at the prime rate (4.0% at March 21, 2004) plus 0.5%. Borrowings under the Agreement are collateralized by the Company’s personal property. On March 21, 2004 the Company had no borrowings under the Agreement, but had $1,972,000 utilized to support outstanding letters of credit required under its workers’ compensation program. The letters of credit, which are scheduled to expire March 1, 2005, will automatically extend for a one-year period.

The amended Agreement requires the Company to maintain (i) a minimum tangible net worth, (ii) a minimum debt service coverage ratio and (iii) a maximum debt to tangible net worth ratio. The Agreement also limits the Company’s fixed asset acquisitions and requires approval before paying dividends or repurchasing outstanding shares of stock. In addition the Agreement requires the outstanding principal balance of the loan to be zero for at least one period of thirty consecutive days during the term of the loan.

Covenant compliance is reported quarterly and the Company was in compliance with all covenants under the amended Agreement at March 21, 2004. Due to an expected second quarter charge for store closure and lease termination costs for one restaurant of between $200,000 and $375,000, the Company is likely to be out of compliance with one or more of these covenants at the end of the Company’s second quarter of 2004. The Company believes it can obtain a waiver or renegotiate these covenants with its bank. However, there can be no assurance that the Company will be able to obtain a waiver or renegotiate its covenants.

7. CONVERTIBLE PREFERRED STOCK

The Company’s outstanding Series B non-voting convertible preferred stock is currently held by one entity and is convertible, at the holders’ option, into Series A voting convertible preferred stock on a one-for-one basis. Although no Series A preferred stock is currently outstanding, holders of Series A preferred stock, if any, would be entitled to vote with common stockholders on all matters submitted to a vote of stockholders. When and if issued, the holders of a majority of the outstanding Series A preferred stock would have a separate right to approve certain corporate actions.

In fiscal 1998, the Company failed to achieve a specified earnings target, which constituted an event of default of the terms of the preferred stock agreement and which triggered the right of the Series A preferred stockholders to elect a majority of the Company’s Board of Directors. The holder of the Series B preferred stock has not initiated any action to convert such shares into shares of Series A preferred stock nor has it exercised its right to elect a majority of the Board of Directors. The holder has entered into a letter agreement waiving this right until the date that such holder elects to sell, transfer, convey or otherwise dispose of all its shares.

8. RECENTLY ISSUED ACCOUNTING STANDARDS

In January 2003, the FASB issued FASB Interpretation No. 46 (FIN No. 46), “Consolidation of Variable Interest Entities, an interpretation of ARB No. 51. FIN No. 46 requires existing unconsolidated variable interest entities to be consolidated by their primary beneficiaries if the entities do not effectively disperse risks among parties involved. Variable interest entities that effectively disperse risk will not be consolidated unless a single party holds an interest or combination of interests that effectively recombines risks that were previously dispersed. FIN No. 46 also requires enhanced disclosure requirements related to variable interest entities. FIN No. 46 was revised in December 2003 and is effective for the first financial reporting period ending after March 15, 2004. The Company adopted the provisions of FIN No. 46 for the fiscal quarter ending March 21, 2004, which did not have a material impact on the financial statements.

In May 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity”. The provisions of SFAS No. 150 are effective for financial instruments entered into or modified after May 31, 2003 and with one exception, is effective at the beginning of the first interim period beginning after June 15, 2003. The provisions of SFAS No. 150 have been delayed indefinitely, except for required disclosures, for certain mandatorily redeemable noncontrolling interests, while its measurement provisions have been delayed indefinitely for other mandatorily redeemable noncontrolling interests prior to November 5, 2003. The adoption of SFAS No. 150 did not have a material effect on the Company’s financial statements.

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

The following discussion is intended to highlight significant changes in the Company’s financial position and results of operations for the twelve weeks ended March 21, 2004. The interim financial statements and this Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the Consolidated Financial Statements and Notes thereto for the fiscal year ended December 28, 2003 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, both of which are contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 28, 2003.

Certain statements set forth in this discussion and analysis of financial condition and results of operations are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. They use such words as “may,” “will,” “expect,” “believe,” “plan” and other similar terminology. These statements reflect management’s current expectations regarding future events and operating performance and speak only as of the date of this release. These forward-looking statements involve a number of risks and uncertainties. Actual future results and trends may differ

materially depending on a variety of factors as set forth under the heading “Business Risks”. In particular, among these risks and uncertainties is the ability of the Company to return to positive comparable-store sales and improve newer restaurant sales, operate its restaurants profitably, obtain a waiver or renegotiate the Company’s current loan covenant’s with its bank and obtain additional financing, as well as general economic conditions.

In addition, terrorist threats and the possible responses by the U.S. government, the effects on consumer demand, the financial markets, food supply and distribution and other conditions increase the uncertainty inherent in forward-looking statements. Forward-looking statements reflect the expectations of the Company at the time they are made, and investors should rely on them only as expressions of opinion about what may happen in the future and only at the time they are made. The Company undertakes no obligation to update any forward-looking statement. Although the Company believes it has an appropriate business strategy and the resources necessary for its operations, future revenue and margin trends cannot be reliably predicted and the Company may alter its business strategies to address changing conditions.

Liquidity and Capital Resources

The Company’s primary capital requirements have been for the expansion of its restaurant operations and remodeling of its restaurants. The Company has traditionally financed these requirements with funds from equity offerings, cash flow from operations, landlord allowances, capital equipment leases and short-term bank debt. The Company does not have significant trade receivables or inventory and receives trade credit based upon negotiated terms in purchasing food and supplies.

The Company has a $2,200,000 loan (the “Loan”) with a commercial bank. Under the terms of the Loan, the Company issued a promissory note (the “Note”) in the amount of $2,200,000. The Note is secured by a deed of trust on certain Company-owned real estate. The Note bears interest at the prime rate (4.0% at March 21, 2004) plus 0.625%. The Note has a fifteen-year amortization period and matures after 84 monthly payments of principal and interest. All unpaid principal and interest shall be due and payable on the Note’s maturity date of September 2, 2008.

On March 21, 2004 the Company had $1,886,000 of debt outstanding under the Loan described above. At March 21, 2004 $1,737,000 was included in long-term debt and $149,000 was included in the current portion of long-term obligations. The amended Deed of Trust requires the Company to maintain a minimum debt service coverage ratio and to maintain a minimum tangible net worth.

The Company had capital lease obligations at March 21, 2004 that totaled $2,704,000 of which $784,000 was included in the current portion of long-term obligations. Long-Term Debt also included a $112,000 note for site construction costs of which $1,000 was included in the current portion of long-term obligations.

The Company’s other long-term liabilities include deferred rent of $2,242,000 at March 21, 2004. The Company’s deferred rent liability consists of the net cumulative rent expensed in excess of rent payments since inception of these leases. In addition other long term liabilities includes $171,000 of deferred income at March 21, 2004 from a gain on the 1993 sale and leaseback of a building and land for one of the Company’s restaurants. The Company is amortizing the gain over the 20-year initial term of the lease. The remaining balance in other long-term liabilities is the non-current portion of certain employee benefit plans.

Net cash provided by operating activities of continuing operations for the first twelve weeks of 2004 was $1,000 and consisted of:

(In thousands)

Loss from operations	$	(407	)
Adjustments to reconcile net loss to net cash used by operating activities:
Depreciation and amortization		840
Change in operating assets and liabilities		(315	)
Other		(117	)

Net cash provided by operating activities	$	1

Net cash provided by operating activities for the first twelve weeks of 2004 included a change in operating assets and liabilities of ($315,000). The change in operating assets and liabilities was primarily due to a reduction in accounts payable as the result of the timing of payments to certain vendors and payments for construction invoices that were included in accounts payable at December 28, 2003.

During the same period the Company invested $438,000 in property and equipment.

The Company’s contractual obligations as of March 21, 2004 are as follows:

(In thousands)
	Total			Remainder of 2004			2005 through 2007			2008 through 2009			2010 and thereafter

Capital Lease Obligations		$	2,704			581			2,016			107			-
Secured Note			1,886			111			486			1,289			-
Other Note Payable			112			1			5			4			102
Operating Leases			128,099			7,035			26,916			18,089			76,059
Puchase Obligations			481			90			337			55			-


Total Contractual Cash Obligations		$	133,282		$	7,818		$	29,760		$	19,544		$	76,161

The Company’s outstanding Series B non-voting convertible preferred stock is currently held by one entity and is convertible, at the holders’ option, into Series A voting convertible preferred stock on a one-for-one basis. Although no Series A preferred stock is currently outstanding, holders of Series A preferred stock, if any, would be entitled to vote with common stockholders on all matters submitted to a vote of stockholders. When and if issued, the holders of a majority of the outstanding Series A preferred stock will have a separate right to approve certain corporate actions.

In fiscal 1998, the Company failed to achieve a specified earnings target (before interest, taxes, depreciation and amortization) of at least $5.5 million which constituted an event of default of the terms of the preferred stock agreement and which triggered the right of the Series A preferred stockholders to elect a majority of the Company’s Board of Directors. The holder of the Series B preferred stock has not initiated any action to convert such shares into shares of Series A preferred stock nor has it exercised its right to elect a majority of the Board of Directors. In December 2003 such holder entered into a letter agreement whereby the holder of the Series B preferred stock agreed to not convert any of its shares of Series B preferred stock into Series A preferred stock so long as the holder owns the Series B preferred shares.

The Company’s continued growth depends to a significant degree on its ability to open new restaurants and to operate such restaurants profitably. The Company does not currently have plans to open any new restaurants in 2004. The Company’s ability to resume an expansion strategy will depend upon a variety of factors, including its return to profitability and the Company’s ability to obtain funds. See “Business Risks” included herein.

The Company intends to finance its operating cash requirements and fiscal 2004 capital requirements through existing cash balances, cash provided by operations and its borrowing arrangements. However, the Company’s operating cash flow is impacted by the Company’s comparable store sales increases or decreases as well as the Company’s newer restaurants’ sales performance. The Company’s comparable store sales increased 1.2% in the first quarter of 2004 but the average sales of the seven newer stores, opened less than eighteen months and open for both lunch and dinner, averaged 37.9% below the comparable-store average sales. The Company expects comparable store sales to continue to improve and the sales performance of its newer restaurants to improve, but there can be no assurance that comparable store sales will improve or newer restaurant sales will improve. In addition, the Company may seek additional financing to provide greater flexibility. There can be no assurance that the Company will be able to obtain additional financing when needed on acceptable terms or at all. To the extent operating cash flow declines, or financing cannot be obtained, the Company intends to further curtail its capital spending plans in 2004 and beyond.

Impact of Inflation

Many of the Company’s employees are paid hourly rates related to the federal and state minimum wage laws. Accordingly, increases in the minimum wage could materially increase the Company’s labor costs. In addition, the cost of food commodities utilized by the Company is subject to market supply and demand pressures. Shifts in these costs may have a significant impact on the Company’s food costs. The Company anticipates that increases in these costs may be offset through pricing and other cost control efforts; however, there is no assurance that the Company would be able to pass such costs on to its guests or that even if it were able to do so, it could do so in a short period of time.

Business Risks

Certain characteristics and dynamics of the Company’s business and of financial markets in general create risks to the Company’s long-term success and to predictable financial results. These risks include:

Operating Losses and Historical Declines in Comparable Store Sales. Our quarterly and annual operating results and same store sales have fluctuated significantly in the past and are likely to fluctuate significantly in the future. The Company has reported a loss for the last two years and for the first quarter of 2004 and there can be no assurance that the Company will be profitable over the long or short term.

The Company’s comparable store sales decreased for the three fiscal years of 2001 through 2003. Although the Company’s comparable store sales increased 1.2% in the first quarter of 2004, there can be no assurance that the comparable store sales declines experienced in 2001 through 2003 will not resume or not decline further.

Expansion. The Company believes its growth depends to a significant degree on its ability to open new restaurants and to operate such restaurants profitably. The Company resumed its expansion with one new Fresh Choice restaurant opening in 2001, five opening in 2002 and four restaurants opening in 2003. For the first quarter of 2004 certain

of these eight newer locations did not meet the Company’s financial expectations with average sales for the seven newer restaurants, open for both lunch and dinner, not open eighteen months 37.9% below the comparable-store average sales. There can be no assurance that these eight newer restaurants or any future restaurants will be successful. The Company recorded a non-cash impairment charge of $3.7 million in 2003 primarily related to four of these restaurants and one additional restaurant. An impairment charge was deemed appropriate based on the expected cash flows over the remaining lease terms, as compared to the net book value of the restaurant assets. If performance does not improve, or deteriorates further in certain other newer restaurants, the Company may be required to record additional impairment expenses.

The Company currently has no development plans for 2004 or beyond. The Company’s ability to successfully resume an expansion strategy will depend upon a variety of factors, many of which may be beyond the Company’s control, including the Company’s ability to locate suitable restaurant locations, negotiate acceptable lease terms, obtain required government approvals, construct new restaurants in a timely manner, attract, train and retrain qualified and experienced personnel and management, operate its restaurants profitably and obtain additional capital to finance expansion and equipment costs, as well as general economic conditions and the degree of competition in the particular market.

The Company’s future expansion plans may include entering new geographic regions in which the Company has no previous operating experience. There can be no assurance that the Fresh Choice concept will be successful in new geographic regions. In addition the Company expects intense competition for restaurant sites, which may result in the Company having difficulty leasing desirable sites on terms that are acceptable to the Company. The Company expects that in some cases competitors may be willing to pay more than the Company for sites. These circumstances may make it difficult for the Company to achieve any new store growth objectives.

Lease Renewals. As existing restaurant leases expire, the Company must negotiate new leases or lease extensions in order to continue operations at existing restaurants. There can be no assurance that the Company will be able to renew these leases on favorable terms or at all. If the Company is unable to obtain favorable terms on new leases or extensions on existing leases, it would increase costs and reduce the Company’s operating margins. Moreover, if the Company is unable to renew existing leases and is unable to find suitable alternate locations, the Company’s revenue and operating results would be adversely affected.

Geographic Concentration. As of April 16, 2004, 42 of the Company’s 56 restaurants were located in California, primarily in Northern California. Accordingly, the Company is susceptible to fluctuations in its business caused by adverse economic conditions in this region. In addition, net sales at certain of the Company’s restaurants have been adversely affected when a new Company restaurant has been opened in relatively close geographic proximity. There can be no assurance that expansion within existing or future geographic markets will not adversely affect the individual financial performance of Company restaurants in such markets or the Company’s overall results of operations. In addition, given the Company’s present geographic concentration in Northern California, adverse weather conditions or increased utility costs in the region or negative publicity relating to an individual Company restaurant could have a more pronounced adverse effect on results of operations than if the Company’s restaurants were more broadly dispersed.

Sensitivity to Economic Conditions and Consumer Spending. The restaurant industry historically has been subject to substantial cyclical variation. The California economy has slowed and there has been a downturn in the general economy and a decline in consumer spending in the restaurant industry. A continued decline could have a material adverse effect on the Company’s financial performance, as restaurant sales tend to decline during recessionary periods. A prolonged economic downturn could alter customers’ purchasing decisions, which most likely would have a material adverse impact on the Company’s revenue and results of operations.

Seasonality and Quarterly Fluctuations The Company’s restaurants have typically experienced seasonal fluctuations, as disproportionate amounts of net sales and net income are generally realized in the second and third fiscal quarters. In addition, the Company’s quarterly results of operations have been, and may continue to be, materially impacted by the timing of new restaurant openings, restaurant closings and impairment charges. The fourth quarter normally includes 16 weeks of operations as compared with 12 weeks for each of the three prior quarters. As a result of these factors, net sales and net income in the fourth quarter are not comparable to results in each of the first three fiscal quarters, and net sales can be expected to decline in the first quarter of each fiscal year in comparison to the fourth quarter of the prior fiscal year.

Dependence on Key Personnel. The success of the Company depends on the efforts of key management personnel. The Company’s success will depend on its ability to motivate and retain its key crewmembers and to attract qualified personnel, particularly general managers, for its restaurants. The Company faces significant competition in the recruitment of qualified crewmembers.

Restaurant Industry. The restaurant industry is affected by changes in consumer tastes, as well as national, regional and local economic conditions and demographic trends. The performance of individual restaurants, including the Company’s restaurants, may be affected by factors such as traffic patterns, demographic considerations, and the type, number and location of competing restaurants. In addition, factors such as inflation, increased food, labor and crewmember benefit costs, and the availability of experienced management and hourly crewmembers may also adversely affect the restaurant industry in general and the Company’s restaurants in particular. Restaurant operating costs are affected by increases in the minimum hourly wage, unemployment tax rates, and various federal, state and local governmental regulations, including those relating to the sale of food and alcoholic beverages. There can be no assurance that the restaurant industry in general, and the Company in particular, will be successful.

Competition. The Company’s restaurants compete with the rapidly growing mid-price, full-service casual dining segment; with traditional limited-service buffet, soup, and salad restaurants; and, increasingly, with fast-casual and quick-service outlets. The Company’s competitors include national and regional chains, as well as local owner-operated restaurants. Key competitive factors in the industry are the quality and value of the food products offered, quality and speed of service, price, dining experience, restaurant location and the ambiance of facilities. Many of the Company’s competitors have been in existence longer than the Company, have a more established market presence, and have substantially greater financial, marketing and other resources than the Company, which may give them certain competitive advantages. The Company believes that its ability to compete effectively will continue to depend in large measure upon its ability to offer a diverse selection of high-quality, fresh food products with an attractive price/value relationship. In addition, if and when the Company resumes expansion, it expects intense competition for restaurant sites, which may result in the Company having difficulty leasing desirable sites on terms that are acceptable to the Company. The Company expects that in some cases competitors may be willing to pay more than the Company for sites.

Ability to Obtain Additional Financing. The Company resumed its restaurant expansion in 2001. The Company currently has no expansion plans for 2004 or beyond. The Company’s ability to resume an expansion strategy will depend upon a variety of factors, including its ability to obtain funds. The Company believes its near-term capital requirements can be met through its existing cash balances, cash provided by operations and its borrowing arrangements. Should the Company seek new financing there can be no assurance that the Company would be able to obtain additional financing on acceptable terms or at all.

Loan Covenants. Due to a potential second quarter charge for store closure and lease termination costs for one restaurant of between $200,000 and $375,000, the Company may be out of compliance with one or more of its existing loan covenants by the end of the Company’s second quarter 2004. The Company believes it can obtain a waiver or renegotiate these covenants with its bank. However, there can be no assurance that the Company will be able to obtain a waiver or renegotiate its covenants. If the Company is unable to renegotiate the covenants or obtain a waiver from its bank, the bank could declare the Company’s outstanding loans in default and demand immediate payment in full of all outstanding principal and interest.

Control by Major Shareholder. Crescent Real Estate Equities Limited Partnership (“Crescent”) holds 1,187,906 shares of Series B non-voting convertible preferred stock, which is convertible into Series A voting convertible preferred stock at any time at the option of the holder. Upon conversion, holders of Series A preferred stock would be entitled to vote with common stockholders and would have a separate right to approve certain corporate actions, such as amending the Company’s Certificate of Incorporation or Bylaws, effecting a merger or sale of the Company, or making a fundamental change in the Company’s business activity. In addition, because the Company did not achieve a specified earnings target in 1998, the holders of Series A preferred stock would have the right to elect a majority of the Company’s Board of Directors. Crescent has entered into a letter agreement waiving this right until the date that Crescent elects to sell, transfer, convey or otherwise dispose of all its shares. These factors could have the effect of delaying, deferring or preventing a change in control of the Company and, as a result, could discourage acquisition bids for the Company and limit the price that investors are willing to pay for shares of common stock.

Critical Accounting Policies

Our accounting policies are more fully described in Note 1 of the Company’s audited December 28, 2003 financial statements. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“US GAAP”) requires management to make estimates and assumptions that affect reported amounts of assets, liabilities, revenues and expenses and related disclosures of contingent assets and liabilities as of the dates and for the periods presented. Management believes the following accounting policies, among others, represent its more critical or complex estimates and assumptions used in preparation of its consolidated financial statements.

The Company evaluates its estimates and assumptions on an on-going basis and believes its estimates and assumptions are reasonable based on historical experience and other factors. However, actual results could differ from those estimates and these differences could be material to the consolidated financial statements. The accounting policies management has identified as critical or complex accounting policies are described below.

Long-lived assets impairment. The Company reviews its long-lived assets related to each restaurant annually for impairment, or whenever events or changes in circumstances indicate that the carrying amount of a restaurant and the related equipment may not be recoverable. The Company considers a history of operating losses to be its primary indicator of potential impairment; therefore new restaurants are generally not identified for impairment until a sufficient operating history has been developed. Assets are grouped and evaluated for impairment at the lowest level for which there are identifiable cash flows, the individual restaurants. Impairment evaluations require an estimation of cash flows over the remaining useful life of the restaurants. If the long-lived assets of a restaurant are not recoverable based upon forecasted undiscounted cash flows, the Company writes down an impaired restaurant to its estimated fair value, which becomes its new cost basis. Generally, management considers the present value of a restaurant’s projected future cash flows and estimated sales values of a restaurant’s long-lived assets in determining fair value. Considerable management judgment is necessary to estimate projected future operating cash flows. Accordingly, if actual results vary from such estimates, significant future impairment could result.

In addition, accounting principles generally accepted in the United States of America, (“US GAAP”), requires that the operating losses of underperforming restaurants be recorded in the periods incurred. US GAAP also requires that reserves for store closures and lease termination costs for any restaurant to be closed not be recognized until a restaurant ceases operations. Accordingly, if the Company closes restaurants in the future, prior to lease expirations, the Company may incur significant store closure and lease termination charges in the period such restaurants close.

Workers’ Compensation Claims Accrual. The Company records estimates for workers’ compensation claims under its workers’ compensation program. The Company evaluates the adequacy of these accruals by evaluating information periodically provided by its insurance carrier regarding the Company’s historical experience and trends relating to insurance claims and payments and general industry experience regarding the expectation of future trends in claims development. If such information indicates that the accruals are overstated or understated, the Company will reduce or provide additional accruals as appropriate. If a greater number of claims occur in comparison to the amount of claims estimated or medical costs increase beyond anticipated costs, additional charges may be required in the period such determination was made.

Discontinued Operations. Considerable management judgment is necessary to determine whether a closed restaurant should be classified as discontinued operations. In general, the Company considers the extent to which the restaurant’s operations and cash flow are expected to be absorbed by other currently operated restaurants or replaced with a new restaurant in making this determination. A closed restaurant, or group of restaurants, which is located in an isolated market and not replaced, would generally be classified as discontinued operations.

Income taxes. The Company’s net deferred tax assets consist primarily of the tax benefit related to operating loss carryforwards, alternative minimum tax credits and asset write-downs, in connection with store asset

impairments, that are not deductible for tax purposes until the assets are disposed. The Company has provided valuation allowances against its deferred net tax assets based on management’s most recent assessment that it is not deemed more likely than not that the deferred tax assets will be realized. If future assessments by management were to determine that the Company would be able to realize its deferred tax assets in excess of their net recorded amounts, an adjustment to the deferred tax assets could result in an increase in net income in the period such determination was made.

Property and equipment. Property and equipment are stated at cost. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the assets which range from 5 to 30 years or the lease term of a restaurant including option periods, as appropriate, not to exceed 25 years.

Overview

For the first quarter of 2004 the Company’s earnings improved primarily due to the Company incurring no restaurant opening costs versus $192,000 in the first quarter of 2003. The Company’s earnings were negatively impacted by the weak sales performance at certain of the Company’s seven newer restaurants open for both lunch and dinner. Sales at these restaurants were 37.9% below the comparable store average sales. The Company was encouraged by the 1.2% increase, versus the first quarter of 2003, in comparable store sales, which was primarily the result of increased pricing during the quarter versus the first quarter last year. In addition, the Company experienced significant cost increases in workers’ compensation and medical insurance costs.

Results of Operations

The following table sets forth items in the Company’s statements of operations as a percentage of sales and certain operating data for the periods indicated:

	Twelve Weeks Ended

(Dollars in thousands)	March 21, 2004					March 23, 2003


NET SALES	$	18,021		100.0	%	$	17,684		100.0	%

COSTS AND EXPENSES:
Cost of sales		4,050		22.5	%		4,015		22.7	%
Restaurant operating expenses:
Labor		6,361		35.3	%		6,086		34.4	%
Occupancy and other		5,919		32.8	%		5,700		32.2	%
General and administrative expenses		1,216		6.7	%		1,366		7.7	%
Depreciation and amortization		789		4.4	%		789		4.5	%
Restaurant opening costs		-		-	%		192		1.1	%

Total costs and expenses		18,335		101.7	%		18,148		102.6	%


OPERATING LOSS		(314	)	(1.7	)%		(464	)	(2.6	)%

Interest income		1		-	%		2		-	%
Interest expense		(94	)	(0.6	)%		(79	)	(0.5	)%


Interest expense, net		(93	)	(0.6	)%		(77	)	(0.5	)%


LOSS BEFORE INCOME TAXES		(407	)	(2.3	)%		(541	)	(3.1	)%
Provision for income taxes		-		-	%		-		-	%

NET LOSS	$	(407	)	(2.3	)%	$	(541	)	(3.1	)%


Number of restaurants:
Open at beginning of period		57					53

Open at end of period		57					55

The following table presents the components of average restaurant operating income on a per restaurant basis, for the Fresh Choice and Zoopa restaurants open for both lunch and dinner during each period (the Company’s three Fresh Choice Express restaurants, one lunch only Fresh Choice restaurant and one licensed Starbucks retail store are excluded):

	Twelve Weeks Ended

(Dollars in thousands)	March 21, 2004				March 23, 2003


NET SALES	$	336	100.0	%	$	344	100.0	%

COSTS AND EXPENSES:
Cost of sales		74	22.2	%		77	22.5	%
Restaurant operating expenses:
Labor		119	35.3	%		118	34.4	%
Occupancy and other		109	32.6	%		110	32.0	%
Depreciation and amortization		14	4.1	%		14	4.1	%


Total costs and expenses		316	94.2	%		320	93.0	%


RESTAURANT OPERATING INCOME	$	19	5.8	%	$	24	7.0	%


Fresh Choice & Zoopa restaurants included		52.0				49.8


Restaurant operating income excludes restaurant opening costs, general and administrative expenses and interest expense, net.

Results of Operations: Twelve Weeks Ended March 21, 2004
Compared to Twelve Weeks Ended March 23, 2003

Net Sales. Net sales for the quarter ended March 21, 2004 were $18,021,000; an increase of $337,000, or 1.9%, from sales of $17,684,000 for the quarter ended March 23, 2003. The primary components of the net increase in sales were:

(In thousands)

Increase in comparable Fresh Choice restaurant sales	$	181

Incremental sales from eight new Fresh Choice restaurants		90

Change in sales in Fresh Choice Express restaurants and the licensed Starbucks retail store		66

	$	337

The Company had an average of 53.0 Fresh Choice restaurants included in sales in the first quarter of 2004 compared to 50.5 Fresh Choice restaurants in the first quarter of 2003. The Company does not include any new stores in its comparable store sales until a store has been open for 18-months. Management believes utilizing an 18-month basis for reporting comparable store sales represents a more realistic indication of the base business trends. On this basis, sales at the Company’s 45 comparable Fresh Choice restaurants increased 1.2% in the first quarter of 2004 versus the first quarter of 2003. Comparable store guest counts increased 0.1%, while the comparable store average check increased 1.1% to $7.83, primarily reflecting price increases.

Net sales per Fresh Choice restaurant open for both lunch and dinner averaged $336,000 in the first quarter of 2004, a decrease of 2.3% over net sales per restaurant of $344,000 in the first quarter of 2003, due to the lower than expected sales per restaurant from the seven newer restaurants, open for both lunch and dinner, not included in comparable

store sales. Sales at these restaurants were 37.9% below the comparable store average sales.

Costs and Expenses. Cost of sales (food and beverage costs) was 22.5% of sales in the first quarter of 2004 compared to 22.7% in the first quarter of 2003. Food and beverage costs declined as a percentage of sales due to the combined effect of controlling food cost per guest and increases in the average check.

Restaurant Operating Expenses. Restaurant operating expenses (labor, occupancy and other) were 68.1% of sales in the first quarter of 2004 compared to 66.6% of sales in the first quarter of 2003, an increase of 1.5% of sales.

Labor costs as a percentage of sales were 35.3% for the first quarter of 2004 compared to 34.4% in the first quarter of 2003. Labor costs, as a percentage of sales, were higher primarily due to lower average restaurant sales, a higher average wage, and higher workers’ compensation and medical benefits costs.

Occupancy and other expenses as a percentage of sales were 32.8% for the first quarter of 2004 compared to 32.2% of sales in the first quarter of 2003, an increase of 0.6%, as a percent of sales. This increase is due primarily to the higher occupancy costs as a percent of average restaurant sales resulting from the lower than expected sales from the Company’s newer restaurants.

Depreciation and Amortization. Depreciation and amortization expenses in the first quarter of 2004 were 4.4% of sales, a decrease of 0.1%, as a percent of sales. The decline is primarily the result of older restaurants’ assets becoming fully depreciated and the impairment of assets in fiscal 2003.

General and Administrative Expenses. General and administrative expenses were 6.7% of sales in the first quarter of 2004 compared to 7.7% of sales in the first quarter of 2003. The decrease is primarily the result of reduced spending compared to last year resulting from staff reductions taken in the second quarter of 2003, and higher sales.

Restaurant Opening Costs. The Company had no restaurant opening costs in the first quarter of 2004 versus $192,000 in the first quarter of 2003. The Company opened no new locations in the first quarter of 2004.

Interest Expense, net. Interest expense, net was $93,000 in the first quarter of 2004 compared to $77,000 in the first quarter of 2003. This increase is primarily due to additional equipment lease financing for the new stores. Interest expense consists of fees related to securing the Company’s borrowing arrangements and interest expense on outstanding borrowings and capital lease obligations.

Income Taxes. The Company recorded no tax benefit from its operating loss in the first quarter of 2004 or the first quarter of 2003 due to valuation allowances against its net deferred tax assets. The Company’s net deferred tax assets consist primarily of the tax benefit related to operating loss carryforwards, alternative minimum tax credits and asset write-downs, in connection with store asset impairments, that are not deductible for tax purposes until the assets are disposed. The Company will continue to provide a full valuation allowance for its deferred tax assets until it becomes more likely than not, in management’s assessment, that any portion of the Company’s deferred tax assets will be realized.

Item 3 - Quantitative and Qualitative Disclosures About Market Risk

The Company is exposed to interest rate risk primarily through its borrowing activities. The Company has not used derivative financial instruments to hedge such risks. There is inherent rollover risk for borrowings as they mature and are renewed at current market rates. The extent of this risk is not quantifiable or predictable because of the variability of future interest rates and business financing requirements. If market rates were to increase immediately by 10 percent from levels at March 21, 2004, the fair value of the Company’s borrowings would not be materially affected as borrowings are primarily subject to variable interest rates.

Item 4 - Controls and Procedures

Under the supervision and with the participation of management, including the principal executive and principal financial officers, we evaluated the effectiveness of our disclosure controls and procedures; as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended. Based on this evaluation, our principal executive officer and principal financial officer concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by this quarterly report. There were no changes in internal control over financial reporting that would require additional disclosure under Regulation S-K 308(c).

PART II. OTHER INFORMATION

Item 1 - Legal Proceedings	Not Applicable.

Item 2 - Changes in Securities	Not Applicable.

Item 3 - Defaults upon Senior Securities	Not Applicable.

Item 4 - Submission of Matters to a Vote of Security Holders	Not Applicable.

Item 5 - Other Information	Not Applicable.

Item 6 - Exhibits and Reports on Form 8-K

(a)	Exhibits. The exhibits listed in the accompanying index to Form 10-Q Exhibits are filed or incorporated by reference as part of this report.

(b)	Reports on Form 8-K. The registrant filed the following report on Form 8-K during the quarter ended March 21, 2004.
	-	on February 19, 2004 reporting the issuance of a press release announcing the results for the fourth quarter and fiscal year ended December 28, 2003.

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, thereunto duly authorized.

	FRESH CHOICE, INC.
	(Registrant)


	/S/ Everett F. Jefferson

	Everett F. Jefferson
	President and Chief Executive Officer
	(Principal Executive Officer)


	/S/ David E. Pertl

	David E. Pertl
	Senior Vice President and Chief Financial Officer
	(Principal Financial and Accounting Officer)

Dated: April 21, 2004

INDEX TO FORM 10-Q EXHIBITS

Exhibit No.			Description


3.1	(1)		Restated Certificate of Incorporation of Fresh Choice, Inc.

3.2	(8)		Amended By-Laws of Fresh Choice, Inc. dated April 11, 1996

3.3	(10)		Certificate of Amendment of Restated Certificate of Incorporation of Fresh Choice, Inc.

3.4	(10)		Certificate of Designation of Series A Voting Participating Convertible Preferred Stock of Fresh Choice, Inc.

3.5	(10)		Certificate of Designation of Series B Non-Voting Participating Convertible Preferred Stock of Fresh Choice, Inc.

3.6	(10)		Certificate of Designation of Series C Non-Voting Participating Convertible Preferred Stock of Fresh Choice, Inc.

4.1	(10)		Registration Rights Agreement dated September 13, 1996 between Fresh Choice, Inc. and Crescent Real Estate Equities Limited Partnership

10.1	(1)		Form of Indemnity Agreement for directors and officers

10.2	(2)	(3)	Second Amended and Restated 1988 Stock Option Plan

10.3	(2)	(3)	1992 Employee Stock Purchase Plan

10.8	(8)		Preferred Stock Purchase Agreement with Crescent Real Estate Equities Limited Partnership dated April 26, 1996

10.18	(6)		Warrant to Purchase up to 75,000 Shares of the Company’s Common Stock issued to Silicon Valley Bank on December 20, 1995

10.19	(6)		Common Stock Purchase Warrant to Purchase 100,000 Shares of the Company’s Common Stock issued to Bain & Company, dated December 15, 1995

10.26	(11)	(3)	Employment Offer Letter to David E. Pertl dated January 24, 1997

10.27	(11)	(3)	Employment Offer Letter to Everett F. Jefferson dated January 30, 1997

10.28	(11)	(3)	Amendment to Employment Offer Letter to Everett F. Jefferson dated February 10, 1997

10.34	(13)	(3)	Consulting Agreement with Charles A. Lynch dated April 17, 1998

10.36	(14)		Loan and Security Agreement dated December 29, 1998 with FINOVA Capital Corporation

10.37	(14)	(3)	Form of Severance Agreement with Senior Vice Presidents

10.43	(17)	(3)	Amendment to Employment offer letter to David E. Pertl dated August 23, 2001

10.44	(17)	(3)	Employment Agreement with Everett F. Jefferson dated October 9, 2001

10.45	(17)	(3)	Amended and Restated Form of Severance Agreement with Senior Vice Presidents dated August 14, 2001

10.46	(17)	(3)	2001 Employee Stock Purchase Plan

10.47	(17)	(3)	Second Amended and Restated 1988 Stock Option Plan as amended through July 12, 2001

10.48	(17)		Promissory Note Secured by Deed of Trust dated August 13, 2001 with Mid-Peninsula Bank

10.49	(17)		Commercial Deed of Trust, Financing Statement, Security Agreement and Fixture Filing dated August 13, 2001 with Mid-Peninsula Bank

10.50	(17)		Revolving Loan Agreement dated October 5, 2001 with Mid-Peninsula Bank

INDEX TO FORM 10-Q EXHIBITS (continued)

EXHIBIT NO.			DESCRIPTION


10.51	(17)		Pledge Agreement dated October 5, 2001 with Mid-Peninsula Bank

10.52	(17)		Promissory Note dated October 5, 2001 with Mid Peninsula Bank

10.55	(18)	(3)	Non Qualified Deferred Compensation Plan of Fresh Choice, Inc. effective as of December 1, 2001

10.56	(18)	(3)	Trust Agreement Under The Non Qualified Deferred Compensation Plan of Fresh Choice, Inc. dated December 17, 2001

10.57	(19)		Letter dated April 25, 2002 amending the Revolving Loan Agreement dated October 5, 2001 with Mid-Peninsula Bank

10.58	(20)		Change in Terms Agreement dated June 3, 2002 amending the Revolving Loan Agreement dated October 5, 2001with Mid-Peninsula Bank

10.59	(21)		Letter dated December 10, 2002 amending the Revolving Loan Agreement dated October 5, 2001 as amended June 3, 2002 with Mid-Peninsula Bank

10.60	(21)	(3)	2003 Home Office Incentive Plan

10.61	(22)		Letter dated April 7, 2003 amending the Revolving Loan Agreement dated October 5, 2001 as amended June 3, 2002 and December 10, 2002 with Mid-Peninsula Bank

10.62	(23)		Letter dated August 13, 2003 amending the Revolving Loan Agreement dated October 5, 2001 as amended June 3, 2002, December 10, 2002 and April 7, 2003 with Mid-Peninsula Bank.

10.63	(23)		Letter dated August 13, 2003 amending the Commercial Deed of Trust, Financial Security Agreement and Fixture Filing dated Aug 13, 2001 with Mid Peninsula Bank.

10.64	(24)		Letter dated November 19, 2003 amending the Revolving Loan Agreement dated October 5, 2001 as amended June 3, 2002, December 10, 2002, April 7, 2003 and August 13, 2003 with Mid-Peninsula Bank.

10.65	(24)		Letter dated November 19, 2003 amending the Commercial Deed of Trust, Financial Security Agreement and Fixture Filing dated Aug 13, 2001 as amended August 13, 2003 with Mid Peninsula Bank.

10.66	(24)	(3)	2004 Home Office Incentive Plan.

10.67	(24)		Letter agreement dated December 11, 2003 whereby Crescent Real Estate Equities Ltd. (‘Crescent”) agrees to not convert any of its shares of Series B Preferred into Series A Preferred so long as Crescent owns the Series B Preferred shares.

10.68			Change in Terms Agreement dated March 16, 2004 amending the Revolving Loan Agreement dated October 5, 2001 as amended June 3, 2002, December 10, 2002, April 7, 2003, August 13,2003 and November 19, 2003 with Mid-Peninsula Bank.

31.1			Certification by the Chief Executive Officer of his responsibility for financial reports under section 302 of the Sarbanes-Oxley Act.

31.2			Certification by the Chief Financial Officer of his responsibility for financial reports under section 302 of the Sarbanes-Oxley Act.

32.1			Certification by the Chief Executive Officer of his responsibility for financial reports under section 906 of the Sarbanes-Oxley Act.

32.2			Certification by the Chief Financial Officer of his responsibility for financial reports under section 906 of the Sarbanes-Oxley Act.

INDEX TO FORM 10-Q EXHIBITS (continued)

(1)	Incorporated by reference from the Exhibits with corresponding numbers filed with the Company’s Registration Statement on Form S-1 (No. 33-53904) filed October 29, 1992, as amended by Amendment No. 1 to Form S-1 (No. 33-53904) filed December 7, 1992, except that Exhibit 3.1 is incorporated by reference from Exhibit 3.1C and Exhibit 3.2 is incorporated by reference from Exhibit 3.2B.

(2)	Incorporated by reference from the Exhibits with corresponding numbers filed with the Company’s Quarterly Report on Form 10-Q for the quarter ended September 4, 1994.

(3)	Agreements or compensatory plans covering executive officers and directors of Fresh Choice, Inc.

(6)	Incorporated by reference from the Exhibits with corresponding numbers filed with the Company’s Annual Report on Form 10-K for the year ended December 31, 1995.

(8)	Incorporated by reference from the Exhibits with corresponding numbers filed with the Company’s Quarterly Report on form 10-Q for the quarter ended March 24, 1996.

(10)	Incorporated by reference from the Exhibits with corresponding numbers filed with the Company’s Quarterly Report on Form 10-Q for the quarter ended September 8, 1996.

(11)	Incorporated by reference from the Exhibits with corresponding numbers filed with the Company’s Annual Report on Form 10-K for the year ended December 29, 1996.

(13)	Incorporated by reference from Exhibits with corresponding numbers filed with the Company’s Quarterly Report on Form 10-Q for the quarter ended June 14, 1998.

(14)	Incorporated by reference from the Exhibits with corresponding numbers filed with the Company’s Annual Report on Form 10-K for the year ended December 27, 1998.

(17)	Incorporated by reference from Exhibits with corresponding numbers filed with the Company’s Quarterly Report on Form 10-Q for the quarter ended March 24, 2002.

(18)	Incorporated by reference from the Exhibits with corresponding numbers filed with the Company’s Annual Report on Form 10-K for the year ended December 30, 2001.

(19)	Incorporated by reference from Exhibits with corresponding numbers filed with the Company’s Quarterly Report on Form 10-Q for the quarter ended March 24, 2002.

(20)	Incorporated by reference from Exhibits with corresponding numbers filed with the Company’s Quarterly Report on Form 10-Q for the quarter ended June 16, 2002.

(21)	Incorporated by reference from Exhibits with corresponding numbers filed with the Company’s Annual Report on Form 10-K for the year ended December 29, 2002.

(22)	Incorporated by reference from Exhibits with corresponding numbers filed with the Company’s Quarterly Report on Form 10-Q for the quarter ended March 23, 2003.

(23)	Incorporated by reference from Exhibits with corresponding numbers filed with the Company’s Quarterly Report on Form 10-Q for the quarter ended September 7, 2003.

(24)	Incorporated by reference from Exhibits with corresponding numbers filed with the Company’s Annual Report on Form 10-K for the year ended December 28, 2003.