<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------
AMENDMENT NUMBER ONE
TO
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, 1999
--------------------
OR
[ ] 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 (I.R.S. Employee
incorporation or organization) Identification No.)
2901 TASMAN DRIVE - SUITE 109, SANTA CLARA, CALIFORNIA 95054
(Address of principal executives offices) (Zip Code)
Registrant's telephone number, including area code: (408) 986-8661
- --------------------------------------------------------------------------------
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.
[ ] Yes [ ] No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. [ ] Yes [ ] No
APPLICABLE ONLY TO CORPORATE ISSUERS:
The number of shares of Common Stock, $.001 par value, outstanding as of April
19, 1999 was 5,718,847.
<PAGE> 2
FRESH CHOICE, INC.
INDEX
<TABLE>
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Condensed Consolidated Balance Sheets at March 21, 1999
and December 27, 1998.....................................................................3
Condensed Consolidated Statements of Operations for the Twelve Weeks
ended March 21, 1999 and March 22, 1998 ..................................................4
Condensed Consolidated Statements of Cash Flow for the Twelve Weeks
ended March 21, 1999 and March 22, 1998...................................................5
Notes to Unaudited Condensed Consolidated Financial Statements............................6
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................................................8
Item 3 - Quantitative and Qualitative Disclosures About Market Risk..........................16
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings...................................................................17
Item 2 - Changes in Securities...............................................................17
Item 3 - Defaults Upon Senior Securities.....................................................17
Item 4 - Submission of Matters to a Vote of Security Holders.................................17
Item 5 - Other Information...................................................................17
Item 6 - Exhibits and Reports on Form 8-K....................................................17
SIGNATURES ......................................................................................18
INDEX TO FORM 10-Q/A EXHIBITS ...................................................................19
</TABLE>
2
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PART I. FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
FRESH CHOICE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
March 21, December 27,
1999 1998
-------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 2,123 $ 1,830
Receivables 127 126
Inventories 545 571
Pre-opening costs -- 70
Prepaid expenses and other current assets 480 503
-------- --------
Total current assets 3,275 3,100
PROPERTY AND EQUIPMENT, net 28,564 29,168
LEASE ACQUISITION COSTS, net 389 406
DEPOSITS AND OTHER ASSETS 567 531
-------- --------
TOTAL ASSETS $ 32,795 $ 33,205
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Line of credit borrowings $ -- $ 1,155
Accounts payable 2,482 3,324
Accrued salaries and wages 1,625 1,335
Sales tax payable 858 876
Other accrued expenses 1,657 1,995
Restructuring reserve 868 1,257
Current portion of long term obligations 506 359
-------- --------
Total current liabilities 7,996 10,301
CAPITAL LEASE OBLIGATIONS 1,091 1,171
OTHER LONG-TERM LIABILITIES 1,682 1,787
LONG TERM DEBT 2,492 --
-------- --------
Total liabilities 13,261 13,259
-------- --------
STOCKHOLDERS' EQUITY
Convertible preferred stock, $.001 par value; 3.5 million shares
authorized; shares outstanding: 1999 and 1998 - 1,187,906 5,175 5,175
Common stock, $.001 par value; 15 million shares authorized;
shares outstanding: 1999 and 1998 - 5,718,847 42,221 42,210
Accumulated deficit (27,862) (27,439)
-------- --------
Total stockholders' equity 19,534 19,946
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 32,795 $ 33,205
======== ========
The December 27, 1998 amounts are derived from the Company's audited financial statements.
See accompanying notes to unaudited condensed consolidated financial statements
</TABLE>
3
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FRESH CHOICE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Twelve Weeks Ended
-----------------------
March 21, March 22,
1999 1998
-------- --------
<S> <C> <C>
NET SALES $ 16,791 $ 16,192
COSTS AND EXPENSES:
Cost of sales 4,078 4,240
Restaurant operating expenses:
Labor 5,584 5,390
Occupancy and other 5,313 5,053
Depreciation and amortization 805 818
General and administrative expenses 1,269 1,309
-------- --------
Total costs and expenses 17,049 16,810
-------- --------
OPERATING LOSS (258) (618)
Interest income 10 8
Interest expense (105) (37)
-------- --------
Interest expense, net (95) (29)
-------- --------
LOSS BEFORE CUMULATIVE EFFECT
OF CHANGE IN ACCOUNTING PRINCIPLE (353) (647)
Cumulative effect of change in accounting principle - adoption
of SOP 98-5, "Reporting on the Costs of Start-Up Activities" (70) --
-------- --------
NET LOSS $ (423) $ (647)
======== ========
Basic and diluted net loss per common share before
cumulative effect of change in accounting principle $ (0.06) $ (0.11)
Cumulative effect of change in accounting principle (0.01) --
-------- --------
Basic and diluted net loss per common share $ (0.07) $ (0.11)
======== ========
Shares used in computing basic and diluted per share amounts 5,719 5,682
======== ========
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements
4
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FRESH CHOICE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Twelve Weeks Ended
----------------------
March 21, March 22,
1999 1998
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (423) $ (647)
Adjustments to reconcile net loss to
net cash provided by (used in) operating activities:
Depreciation and amortization 862 878
Cumulative effect of change in accounting principle 70 --
Issuance of stock options for consulting services 11 --
Loss on disposal of property 5 78
Deferred rent (101) (146)
Change in operating assets and liabilities:
Receivables (1) 17
Inventories 26 (6)
Pre-opening costs -- (1)
Prepaid expenses and other current assets 23 235
Accounts payable (842) (444)
Accrued salaries and wages 290 60
Other accrued expenses (356) 221
Restructuring reserve (389) (72)
------- -------
Net cash provided by (used in) operating activities (825) 173
------- -------
INVESTING ACTIVITIES:
Capital expenditures (232) (1,985)
Deposits and other assets (54) (54)
------- -------
Net cash used in investing activities (286) (2,039)
------- -------
FINANCING ACTIVITIES:
Line of credit - repayments (1,155) --
Long term debt - borrowings 2,623 --
Capital lease obligations - borrowings 25 828
Capital lease obligations - repayments (89) (44)
------- -------
Net cash provided by financing activities 1,404 784
------- -------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 293 (1,082)
CASH AND CASH EQUIVALENTS:
Beginning of period 1,830 2,415
------- -------
End of period $ 2,123 $ 1,333
======= =======
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for interest $ 77 $ 19
======= =======
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements
5
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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS For the Twelve
Weeks ended March 21, 1999 and March 22, 1998
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 generally accepted accounting
principles. For further information, refer to the financial statements and notes
thereto included in the Company's Annual Report on Form 10-K/A for the fiscal
year ended December 27, 1998.
2. NET INCOME (LOSS) PER SHARE
Basic EPS excludes potentially dilutive securities and is computed
by dividing the Company's net loss by the weighted average of its common shares
outstanding for the period. Diluted EPS 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 dilutive potential shares using the treasury stock
method and converts preferred stock into dilutive potential shares using the "if
converted" method.
Diluted EPS presented for the twelve weeks ended March 21, 1999 and
March 22, 1998 is the same as basic EPS since the Company had net losses and,
therefore, all potential dilutive securities are anti-dilutive and are excluded
from the computation.
The following table presents the total dilutive securities which
the Company excluded for each period presented from its diluted EPS computation
because either the exercise price of the securities exceeded the average fair
value of the Company's common stock or the Company had net losses, and,
therefore, these securities were anti-dilutive:
<TABLE>
<CAPTION>
Twelve Weeks Ended
-------------------
March 21, March 22,
(In thousands) 1999 1998
-------- --------
<S> <C> <C>
Potential Dilutive Securities
-----------------------------
Stock options 652 582
Stock warrants 732 732
Convertible preferred stock 1,188 1,188
</TABLE>
3. INCOME TAXES
The Company recorded no income tax benefit from its operating
losses during the twelve weeks ended March 21, 1999 and March 22, 1998 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 and non-deductible asset write-downs in connection with
restructuring reserves. The Company will continue to provide a valuation
allowance for its deferred tax assets until it becomes more likely than not, in
management's assessment, that the Company's deferred tax assets will be
realized.
6
<PAGE> 7
4. BORROWING ARRANGEMENTS
During the quarter ended March 21, 1999, the Company entered into a
$4,000,000 loan and security agreement (the "Agreement") with a finance company.
The Agreement expires on December 29, 2001 and provides for one-year renewals
thereafter. Under the terms of the Agreement, the Company may borrow up to
$2,330,000 against the value of certain Company-owned real estate secured by
deeds of trust and up to $1,670,000 against the value of any of the Company's
restaurant equipment in which the lender has established a first priority
perfected security interest, subject to a maximum available borrowing against
each restaurant. During the quarter ended March 21, 1999, the Company borrowed
$2,623,000 under the Agreement and used $1,155,000 of the amount borrowed to pay
off its bank line of credit. At March 21, 1999, the Company had $2,623,000 of
long term debt borrowed under the terms of the Agreement, of which $131,000 was
included in the current portion of long-term obligations. As of May 5, 1999, the
Company had a maximum of $2,839,000 available for borrowing under the Agreement
of which it had borrowed $2,695,000.
Borrowings under the Agreement initially bear interest at the prime
rate (7.75% at March 21, 1999) plus 1.25% and, once repaid, can be re-borrowed
unless converted to a term loan. Outstanding borrowings, if any, on the first
and second anniversaries of the Agreement convert into term loans which bear
interest at the prime rate plus 1.75% and become payable monthly based on a
five-year amortization schedule. All borrowings, including any term loans, are
fully payable on December 29, 2001. Aggregate borrowings in excess of $2,500,000
bear an additional 0.5% interest. The Agreement also provides for a monthly
collateral monitoring fee and a 0.5% unused line fee.
The Agreement requires the Company to maintain a minimum net worth
and debt service coverage ratio and to not exceed maximum interest and debt to
cash flow ratios and limits its aggregate indebtedness. The Agreement also
requires approval before paying dividends and limits the Company's fixed asset
acquisitions based on its operating cash flows. The Company was in compliance
with the loan agreement covenants at March 21, 1999.
5. RESTRUCTURING AND RESTAURANT CLOSURE RESERVE
The Company's restructuring reserve of $1,257,000 at December 27,
1998 consisted of the estimated cash costs to settle the lease obligations at
three closed restaurants, the estimated cash costs to close and settle the lease
obligation at one other restaurant identified for closure and the estimated cash
costs to close two additional restaurants at the end of their lease terms in
1999.
The Company made scheduled payments of $389,000 in the first
quarter of 1999 primarily in accordance with the terms of negotiated lease
settlements for the three closed restaurants. The Company negotiated the lease
settlements at amounts substantially provided for in the restructuring reserve.
At March 21, 1999, the Company's restructuring reserve of $868,000
consisted of the remaining scheduled payments to settle the lease obligations on
two of the closed restaurants, the estimated cash costs to close and settle the
lease obligation at one other restaurant identified for closure and the
estimated cash costs to close two additional restaurants at the end of their
lease terms in 1999.
6. ADOPTION OF SOP 98-5, "REPORTING ON THE COSTS OF START-UP ACTIVITIES"
In 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-5 ("SOP 98-5"), "Reporting on the Costs of
Start-Up Activities," which requires companies to expense the costs of start-up
activities and organization costs as incurred. The Company adopted SOP 98-5
effective the beginning of fiscal 1999 and expensed $70,000 of unamortized
pre-opening costs at the time of adoption. The Company's
7
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pre-opening costs consist of the direct costs associated with opening a new
restaurant, including the costs of hiring and training the initial workforce.
The Company accounted for the adoption of SOP 98-5 as the cumulative effect of a
change in accounting principle.
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 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
$5,500,000 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. Such holder has notified the Company
that it has no present intention of exercising such right; however, it has not
waived any of its rights under the agreement.
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, 1999. 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 27, 1998 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/A for the fiscal year ended December 27, 1998.
Certain statements set forth in this discussion and analysis of
financial condition and results of operations including anticipated store
openings, planned capital expenditures and trends in or expectations regarding
the Company's operations, specifically including the effect of problems
associated with the Year 2000, constitute "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995. Such
statements are based on currently available operating, financial and competitive
information and are subject to various risks and uncertainties. Actual future
results and trends may differ materially depending on a variety of factors as
set forth herein. Among the risks and uncertainties are the continuation of
positive comparable store sales; future profitability; the Company's successful
efforts to close, sell or improve operating results of underperforming stores
which depend on many factors not within the Company's control such as the
negotiation of settlements of existing lease obligations under acceptable terms;
the ability to obtain additional financing on favorable terms; and the Company's
ability to locate suitable restaurant sites and construct new restaurants in a
timely manner.
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-
8
<PAGE> 9
term bank debt. The Company does not have significant receivables or inventory
and receives trade credit based upon negotiated terms in purchasing food and
supplies.
During the quarter ended March 21, 1999, the Company entered into
a $4,000,000 loan and security agreement (the "Agreement") with a finance
company. The Agreement expires on December 29, 2001 and provides for one-year
renewals thereafter. Under the terms of the Agreement, the Company may borrow up
to $2,330,000 against the value of certain Company-owned real estate secured by
deeds of trust and up to $1,670,000 against the value of any of the Company's
restaurant equipment in which the lender has established a first priority
perfected security interest, subject to a maximum available borrowing against
each restaurant. During the quarter ended March 21, 1999, the Company borrowed
$2,623,000 under the Agreement and used $1,155,000 of the amount borrowed to pay
off its bank line of credit. At March 21, 1999, the Company had $2,623,000 of
long term debt borrowed under the terms of the Agreement, of which $131,000 was
included in the current portion of long-term obligations. As of May 5, 1999, the
Company had a maximum of $2,839,000 available for borrowing under the Agreement
of which it had borrowed $2,695,000.
Borrowings under the Agreement initially bear interest at the prime
rate (7.75% at March 21, 1999) plus 1.25% and, once repaid, can be re-borrowed
unless converted to a term loan. Outstanding borrowings, if any, on the first
and second anniversaries of the Agreement convert into term loans which bear
interest at the prime rate plus 1.75% and become payable monthly based on a
five-year amortization schedule. All borrowings, including any term loans, are
fully payable on December 29, 2001. Aggregate borrowings in excess of $2,500,000
bear an additional 0.5% interest. The Agreement also provides for a monthly
collateral monitoring fee and a 0.5% unused line fee.
The Agreement requires the Company to maintain a minimum net worth
and debt service coverage ratio and to not exceed maximum interest and debt to
cash flow ratios and limits its aggregate indebtedness. The Agreement also
requires approval before paying dividends and limits the Company's fixed asset
acquisitions based on its operating cash flows. The Company was in compliance
with the loan agreement covenants at March 21, 1999.
Long-term debt at March 21, 1999 also included $1,466,000 of
capital lease obligations, of which $375,000 was included in the current portion
of long term obligations, and a $117,000 note for site construction costs, which
is included in other long-term liabilities.
Operating activities during the quarter ended March 21, 1999 used
$825,000 which included an $842,000 reduction in accounts payable and $389,000
of scheduled payments, primarily in accordance with the terms of negotiated
lease settlements for three closed restaurants. The Company negotiated the lease
settlements at amounts substantially provided for in the restructuring reserve.
The Company's restructuring reserve of $1,257,000 at December 27,
1998 consisted of the estimated cash costs to settle the lease obligations at
three closed restaurants, the estimated cash costs to close and settle the lease
obligation at one other restaurant identified for closure and the estimated cash
costs to close two additional restaurants at the end of their lease terms in
1999.
At March 21, 1999, the Company's restructuring reserve of $868,000
consisted of the remaining scheduled payments to settle the lease obligations on
two of the closed restaurants, the estimated cash costs to close and settle the
lease obligation at one other restaurant identified for closure and the
estimated cash costs to close two additional restaurants at the end of their
lease terms in 1999.
During the quarter ended March 21, 1999, the Company invested
$232,000 in property and equipment, including restaurant point of sale systems
in connection with its strategic information systems plan.
9
<PAGE> 10
The Company did not remodel any restaurants in the first quarter of 1999 and has
no significant restaurant development planned for 1999.
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
$5,500,000 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. Such holder has notified the Company
that it has no present intention of exercising such right; however, it has not
waived any of its rights under the agreement.
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 intends to resume its restaurant expansion, assuming its financial
performance improves. The Company's ability to implement an expansion strategy
will depend upon a variety of factors, including the continued success of
efforts to restore profitability and the Company's ability to obtain funds. See
"Business Risks" included herein. The Company believes its operating cash
requirements and fiscal 1999 capital requirements can be met through existing
cash balances, cash provided by operations and it borrowing arrangements. The
Company may continue to seek additional debt or equity financing to provide
greater flexibility toward improving its operating performance and resuming
restaurant expansion.
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. The Federal minimum
wage increased effective September 1, 1997, the State of California minimum wage
increased effective March 1, 1998 and the State of Washington minimum wage
increased effective January 1, 1999. The Company raised prices in response to
these increases. No further minimum wage increases are scheduled. In addition,
the cost of food commodities utilized by the Company are 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.
Year 2000 Software Requirements
The Company has completed a review of all its restaurant and corporate
computer systems for compliance with the year 2000. The Company has determined
that certain of its existing computer systems use only two digits to identify a
year in the date field and, as a result, may improperly identify the year 2000
in calculating and processing information. The Company recognizes this system
design could cause certain systems to potentially fail or create erroneous
results by or at the year 2000 but believes its current strategic information
plan is addressing the problem.
10
<PAGE> 11
The Company is currently in the process of migrating its critical
processing and information requirements to outsourced processing companies whose
software is represented to be year 2000 compliant. The Company expects to
complete this system migration, begun in 1997, during 1999 with no significant
incremental costs. In accordance with its strategic information plan, the
Company is already replacing certain restaurant systems, primarily its
restaurant point of sale system, used for capturing and transmitting data to the
outsourced systems, with year 2000 compliant systems. The Company expects to
have the critical restaurant systems in place by approximately the middle of
1999 at an estimated cost of $500,000 which is to be capitalized in accordance
with normal policy and which will be funded either through operating cash flow,
equipment lease financing or borrowings under the Company's loan and security
agreement.
The Company has also contacted outside entities with which it interacts
electronically and has requested information regarding whether or not their
systems are or will be year 2000 compliant. The Company plans to monitor the
progress of outside entities that are in the process of developing year 2000
compliance, but it does not believe there is a material risk to the Company that
these entities will not achieve compliance or if these entities do not achieve
compliance. However, there can be no assurance that the systems of other
entities will be converted timely, or that a failure to convert by another
entity will not have a material adverse effect on the Company. As part of its
continuous monitoring process, The Company will implement contingency plans as
necessary. These plans could include, but are not limited to, alternate product
suppliers, manual recording and accumulation of restaurant transactions, and
restriction of the tender types accepted at the restaurants.
The Company believes it has an effective plan in place to anticipate
and resolve any potential year 2000 issues in a timely manner. In the event,
however, that the Company does not properly identify year 2000 issues and
remediation and testing is not conducted on a timely basis with respect to the
year 2000 issues that are identified, there can be no assurance that year 2000
issues will not materially and adversely affect the Company. In addition,
disruptions in the economy generally resulting from year 2000 issues also could
materially and adversely affect the Company.
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:
Recent Operating Losses and Declines in Comparable Store Sales. The
Company's profitability began to decline in the second half of 1994. In the
fourth quarter of 1994, the Company reported its first operating loss, and
reported operating losses in both 1995 and 1996. The Company reported a modest
profit in 1997 but again incurred an operating loss in 1998 and in the first
quarter of 1999.
Beginning late in the third quarter of fiscal 1994, the Company
began reporting comparable store sales declines. Comparable store sales
continued to decline in each quarter through the end of 1998. The Company
reported comparable store sales declines of 4.6%, 15.3%, 5.9%, 2.7% and 4.8% for
fiscal years 1994, 1995, 1996, 1997 and 1998, respectively. In the first quarter
of 1999, the Company reported a comparable store sales increase of 6.4%, its
first quarterly comparable store sales increase since 1994. However, there can
be no assurance that comparable store sales will continue to improve or that the
Company will return to long-term profitability.
Expansion. The Company experienced substantial growth prior to
mid-1995, having opened 14 restaurants in 1993, 15 restaurants in 1994, and
seven in 1995. In 1995, the Company suspended its expansion plans after opening
seven restaurants, reviewed the operating performance of all of its restaurants,
and identified certain restaurants which did not meet its expectations for
operating performance. As a result, in December 1995 the Company announced a
restructuring plan to close as many as ten restaurants. The Company closed or
sold eleven restaurants, including three at the end of 1995 and eight in 1996.
The Company closed no restaurants in 1997 and closed one restaurant at the
expiration of its lease term in early 1998. In September 1998, the Company
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<PAGE> 12
announced a plan to close four additional previously impaired underperforming
restaurants and for the closure of two additional restaurants where it does not
intend to renew the leases. To date, three of these restaurant have been closed.
The Company opened one Fresh Choice restaurant in 1996 and in 1997, acquired the
Zoopa trade name and three Zoopa restaurants and opened an additional two new
Zoopa restaurants. In 1998 two additional restaurants were opened. 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 has
currently stopped its expansion plans and while the Company intends to resume
its expansion, assuming its financial performance improves, there can be no
assurance that the Company will be able to continue expansion. The Company's
ability to successfully implement an expansion strategy will depend on a variety
of factors, including the selection and availability of affordable sites, the
selection and availability of capital to finance restaurant expansion and
equipment costs, the ability to hire and train qualified management and
personnel, the ability to control food and other operating costs, and other
factors, many of which are beyond the Company's control.
While on a long-term basis, the Company intends to expand its
operations in markets outside of California, assuming its financial performance
improves, there can be no assurance as to when or whether the Company will
resume its expansion. The Company's expansion plans may include entering new
geographic regions in which the Company has no previous operating experience.
There can be no assurance that the concept will be successful in regions outside
of California, where tastes and restaurant preferences may be different. As of
May 5, 1999, the Company had opened or purchased nine restaurants in Texas, six
restaurants in the state of Washington and three restaurants in the Washington,
D.C. metropolitan area. Of the fifteen restaurants closed or sold, two were in
Texas, two were in the state of Washington, eight were in California, and three
were in the Washington, D.C. metropolitan area (where the Company no longer
operates).
Geographic Concentration. As of May 5, 1999, 40 of the Company's 51
restaurants are 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, and such
pressure may continue to depress annual comparable store sales. 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 in the region or negative publicity relating to an individual
Company restaurant could have a more pronounced adverse affect on net sales than
if the Company's restaurants were more broadly dispersed.
Volatility of Stock Price. The market price of the Company's Common
Stock has fluctuated substantially since the initial public offering of the
Common Stock in December 1992. Changes in general conditions in the economy, the
financial markets or the restaurant industry, natural disasters or other
developments affecting the Company or its competitors could cause the market
price of the Company's Common Stock to fluctuate substantially. In addition, in
recent years the stock market has experienced extreme price and volume
fluctuations. This volatility has had significant effect on the market prices of
securities issued by many companies, including the Company, for reasons
sometimes unrelated to the operating performance of these companies. Any
shortfall in the Company's net sales or earnings from levels expected by
securities analysts could have an immediate and significant adverse effect on
the trading price of the Company's Common Stock in any given period.
Additionally, such shortfalls may not become apparent until late in the fiscal
quarter, which could result in an even more immediate and significant adverse
effect on the trading price of the Company's Common Stock.
Seasonality and Quarterly Fluctuations. The Company's restaurants
have typically experienced seasonal fluctuations, as a disproportionate amount
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 and restaurant closings. 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 and net income can be expected to decline in the first
quarter of each fiscal year in comparison to the fourth quarter of the prior
fiscal year. Comparable store sales, which were negative for four consecutive
years, may not continue the positive trend of the first quarter of 1999.
12
<PAGE> 13
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
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.
Ability to Obtain Additional Financing. The Company intends to
resume restaurant expansion, assuming its financial performance improves. The
Company's ability to implement an expansion strategy will depend upon a variety
of factors, including the success of its restructuring plan in restoring
profitability and 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. However, the Company
may seek additional financing to provide greater flexibility toward improving
its operating performance. There can be no assurance that the Company will be
able to obtain additional financing when needed on acceptable terms or at all.
Control by Major Shareholder. Crescent Real Estate Equities Limited
Partnership 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 an earnings target (before
interest, taxes, depreciation and amortization) of $5,500,000 in 1998, the
holders of Series A preferred stock would have the right to elect a majority of
the Company's Board of Directors. 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.
13
<PAGE> 14
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:
<TABLE>
<CAPTION>
Twelve Weeks Ended
-------------------------------------------------
(Dollars in thousands) March 21, 1999 March 22, 1998
--------------------- ---------------------
<S> <C> <C> <C> <C>
NET SALES $ 16,791 100.0% $ 16,192 100.0%
COSTS AND EXPENSES:
Cost of sales 4,078 24.3% 4,240 26.2%
Restaurant operating expenses:
Labor 5,584 33.3% 5,390 33.3%
Occupancy and other 5,313 31.6% 5,053 31.2%
Depreciation and amortization 805 4.8% 818 5.1%
General and administrative expenses 1,269 7.5% 1,309 8.0%
--------------------- ---------------------
Total costs and expenses 17,049 101.5% 16,810 103.8%
--------------------- ---------------------
OPERATING LOSS (258) (1.5)% (618) (3.8)%
Interest income 10 0.1 % 8 -%
Interest expense (105) (0.7)% (37) (0.2)%
--------------------- ---------------------
Interest income (expense), net (95) (0.6)% (29) (0.2)%
--------------------- ---------------------
LOSS BEFORE CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING PRINCIPLE (353) (2.1)% (647) (4.0)%
Cumulative effect of change in accounting principle -
adoption of SOP 98-5, "Reporting on the Costs
of Start-Up Activities" (70) (0.4)% - -%
--------------------- ---------------------
NET LOSS $ (423) (2.5)% $ (647) (4.0)%
===================== =====================
Number of restaurants:
Open at beginning of period 51 53
=========== =========
Open at end of period 51 53
=========== =========
</TABLE>
The following table presents the components of average operating
income (loss) on a per restaurant basis, based on the average number of
restaurants open during the period:
<TABLE>
<CAPTION>
Twelve Weeks Ended
-------------------------------------------------
(Dollars in thousands) March 21, 1999 March 22, 1998
--------------------- ---------------------
<S> <C> <C> <C> <C>
NET SALES $ 329 100.0% $ 306 100.0%
COSTS AND EXPENSES:
Cost of sales 80 24.3% 80 26.2%
Restaurant operating expenses:
Labor 109 33.3% 102 33.3%
Occupancy and other 104 31.6% 95 31.2%
Depreciation and amortization 16 4.8% 15 5.1%
General and administrative expenses 25 7.5% 25 8.0%
--------------------- ---------------------
Total costs and expenses 334 101.5% 317 103.8%
--------------------- ---------------------
OPERATING LOSS $ (5) (1.5)% $(11) (3.8)%
===================== =====================
Average restaurants open 51.0 53.0
=========== =========
</TABLE>
14
<PAGE> 15
Results of Operations: Twelve Weeks Ended March 21, 1999
Compared to Twelve Weeks Ended March 22, 1998
Net Sales. Net sales for the quarter ended March 21, 1999 were
$16,791,000, an increase of $599,000, or 3.7%, from sales of $16,192,000 for the
quarter ended March 22, 1998. The primary components of the net increase in
sales were:
<TABLE>
<S> <C>
Increase in comparable store sales $ 956,000
Incremental sales from new restaurants 321,000
Absence of sales from closed restaurants (678,000)
---------
$ 599,000
=========
</TABLE>
The Company operated 51 restaurants in the first quarter of 1999
compared to 53 restaurants in the first quarter of 1998. Sales at the Company's
47 comparable stores, which include restaurants open at least 18 months,
increased 6.4% in the first quarter of 1999 versus the first quarter of 1998.
Comparable store customer counts increased 1.7%, while the comparable store
average check increased 4.7% to $7.25, reflecting menu price increases and a
reduction in the level of discounting.
Net sales per restaurant averaged $329,000 in the first quarter of
1999, an increase of 7.5% over net sales per restaurant of $306,000 in the first
quarter of 1998.
Costs and Expenses. Cost of sales (food and beverage costs) was
24.3% of sales in the first quarter of 1999 compared to 26.2% in the first
quarter of 1998, a decrease of 1.9% of sales. In addition to the increase in the
Company's average check, food and beverage costs per guest were lower in the
first quarter of 1999 compared to the first quarter of 1998. Food costs
continued to benefit from the Company's food program which manages food costs
through an efficient product rotation while maintaining a quality menu offering
to guests. In addition, food costs benefitted from cost efficiencies experienced
with new products, including the introduction of the Company's new pizza product
in the first quarter of 1999, and new production methods.
Restaurant Operating Expenses. Restaurant operating expenses
(labor, occupancy and other) were 64.9% of sales in the first quarter of 1999
compared to 64.5% of sales in the first quarter of 1998, an increase of 0.4% of
sales.
Labor costs remained at 33.3% of sales in both the first quarters
of 1999 and 1998, despite an increase in the Company's average hourly wage
resulting from the increasingly competitive labor market and increases in the
minimum wage. Labor costs as a percentage of sales benefitted from the Company's
higher average check as well as labor savings from improved food production
methods.
Occupancy and other expenses were 0.4% of sales higher than last
year's first quarter. In the first quarter of 1999, the Company invested 3.9% of
sales on advertising, including the introduction of a radio advertising program,
compared to 2.6% of sales in the first quarter of last year. This increase of
1.3% of sales was partially offset by the higher average sales on these mostly
fixed costs.
Depreciation and Amortization. Depreciation and amortization
expenses were 4.8% of sales in the first quarter of 1999 compared to 5.1% of
sales in the first quarter of 1998. This decrease is primarily a result of
higher average unit sales compared to the first quarter of 1998.
General and Administrative Expenses. General and administrative
expenses were 7.5% of sales in the first quarter of 1999 compared to 8.0% of
sales in the first quarter of 1998. These expenses decreased $40,000 in the
first quarter of 1999 compared to the first quarter of 1998 as a result of
continued staffing and cost controls.
15
<PAGE> 16
Interest Expense. Interest expense consists of fees related to
securing the Company's borrowing arrangements and interest expense on
outstanding borrowings and capital lease obligations. Interest expense increased
to $105,000 in the first quarter of 1999 compared to $37,000 in the first
quarter of 1998 due primarily to long-term borrowings in the current year under
the Company's new loan and security agreement versus no borrowing in last year's
first quarter.
Income Taxes. The Company recorded no tax benefit from its
operating losses in the first quarters of 1999 and 1998 due to valuation
allowances against its net deferred tax assets.
Cumulative Effect of Change in Accounting Principle. In 1998, the
American Institute of Certified Public Accountants issued Statement of Position
98-5 ("SOP 98-5"), "Reporting on the Costs of Start-Up Activities", which
requires companies to expense the costs of start-up activities and organization
costs as incurred. The Company adopted SOP 98-5 effective the beginning of
fiscal 1999 and expensed $70,000 of unamortized pre-opening costs at the time of
adoption. The Company's pre-opening costs consist of the direct costs associated
with opening a new restaurant, including the costs of hiring and training the
initial workforce. The Company accounted for the adoption of SOP 98-5 as the
cumulative effect of a change in accounting principle.
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 roll-over 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, 1999, the fair value of the
Company's borrowings would not be materially affected as borrowings are
primarily subject to variable interest rates.
16
<PAGE> 17
PART II. OTHER INFORMATION
<TABLE>
<S> <C>
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
</TABLE>
(a) Exhibits. The exhibits listed in the accompanying index to Form 10-Q/A
Exhibits are filed or incorporated by reference as part of this report.
(b) Reports on Form 8-K. No reports on Form 8-K were filed during the quarter
ended March 21, 1999.
17
<PAGE> 18
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: May 5, 1999
18
<PAGE> 19
INDEX TO FORM 10-Q/A EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ---------------------------------------------------------------------------------------------------------------
<S> <C>
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
10.4 (1) Series A Preferred Stock Purchase Agreement dated August 10, 1988
10.5 (1) Series B Preferred Stock Purchase Agreement dated July 21, 1989
10.6 (1) Series C Preferred Stock Purchase Agreement dated January 15, 1990
10.7 (1) Master Lease and Warrant Agreement with Equitec Leasing Company and Warrant dated
January 18, 1990
10.8 (8) Preferred Stock Purchase Agreement with Crescent Real Estate Equities Limited Partnership
dated April 26, 1996
10.9 (1) Series D Preferred Stock Purchase Agreement dated April 17, 1991
10.10 (5) Amendment No. 1 dated September 3, 1993 to the Business Loan Agreement dated
September 3, 1993.
10.11 (5) Amendment No. 2 dated November 15, 1993 to the Business Loan Agreement dated
September 3, 1993.
10.12 (1) Amendment dated December 1, 1992 to Preferred Stock Purchase Agreements
10.13 (4) Business Loan Agreement dated September 3, 1993 with Bank of America National Trust
and Savings Association
10.14 (5) Amendment No. 4 dated March 31, 1995 to the Business Loan Agreement dated
September 3, 1993
</TABLE>
19
<PAGE> 20
INDEX TO FORM 10-Q/A EXHIBITS continued
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ---------------------------------------------------------------------------------------------------------------
<S> <C>
10.15 (5) Amendment No. 3 dated April 27, 1994 to the Business Loan Agreement dated September 3, 1993
10.16 (6) Loan and Security Agreement dated December 20, 1995 with Silicon Valley Bank
10.17 (6) Third Party Security agreement dated December 20, 1995 between Silicon Valley Bank and
Moffett Design Corporation
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
10.20 (6)(3) Employment Offer Letter to Robert Ferngren dated November 9, 1995
10.21 (9)(3) Amendment dated July 29, 1996 to Employment Offer Letter to Robert Ferngren
10.22 (10)(3) Severance Agreement with Charles A. Lynch dated July 18, 1996
10.23 (10)(3) Severance Agreement with David Anderson dated July 18, 1996
10.24 (10)(3) Severance Agreement with Tim G. O'Shea dated July 18, 1996
10.25 (10)(3) Severance Agreement with Joan M. Miller dated July 18, 1996
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
10.29 (11) Loan Modification Agreement dated November 27, 1996 with Silicon Valley Bank
10.30 (11)(3) Severance Agreement with Tina Freedman dated March 13, 1997
10.31 (12) Agreement of Sale and Purchase dated April 2, 1997 with RUI One Corp.
10.32 (12) Amendment to Loan and Security Agreement dated July 9, 1997 with Silicon Valley Bank
10.33 (13) Amendment to Loan and Security Agreement dated May 27, 1998 with Silicon Valley Bank
10.34 (13)(3) Consulting Agreement with Charles A. Lynch dated April 17, 1998
10.35 (14) Amendment to Loan and Security Agreement dated October 28, 1998 with Silicon Valley Bank
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
10.38 (14)(3) Officer Incentive Plan for fiscal year 1999
27 (7) Financial Data Schedule
</TABLE>
- -------------------------
(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.
20
<PAGE> 21
(3) Agreements or compensatory plans covering executive officers and directors
of Fresh Choice, Inc.
(4) Incorporated by reference from the Company's Annual Report on Form 10-K
for the period ended December 26, 1993.
(5) 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 19, 1995.
(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.
(7) Included in EDGAR filing only.
(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.
(9) Incorporated by reference from the Exhibits with corresponding numbers
filed with the Company's Quarterly Report on Form 10-Q for the quarter
ended June 16, 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.
(12) Incorporated by reference from the Exhibits with corresponding numbers
filed with the Company's Quarterly Report on Form 10-Q for the quarter
ended June 15, 1997.
(13) Incorporated by reference from the 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/A for the year ended
December 27,1998.
21
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FRESH
CHOICE, INC.'S REPORT ON FORM 10-Q/A FOR THE QUARTER ENDED MARCH 21, 1999 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH REPORT ON FORM 10-Q/A.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-26-1999
<PERIOD-START> DEC-28-1998
<PERIOD-END> MAR-21-1999
<CASH> 2,123
<SECURITIES> 0
<RECEIVABLES> 127
<ALLOWANCES> 0
<INVENTORY> 545
<CURRENT-ASSETS> 3,275
<PP&E> 44,808
<DEPRECIATION> (16,244)
<TOTAL-ASSETS> 32,795
<CURRENT-LIABILITIES> 7,996
<BONDS> 0
0
5,175
<COMMON> 42,221
<OTHER-SE> (27,862)
<TOTAL-LIABILITY-AND-EQUITY> 32,795
<SALES> 16,791
<TOTAL-REVENUES> 16,791
<CGS> 4,078
<TOTAL-COSTS> 17,049
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 105
<INCOME-PRETAX> (353)
<INCOME-TAX> 0
<INCOME-CONTINUING> (353)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (70)
<NET-INCOME> (423)
<EPS-PRIMARY> (0.07)<F1>
<EPS-DILUTED> (0.07)
<FN>
<F1>FOR PURPOSES OF THIS EXHIBIT, PRIMARY MEANS BASIC
</FN>
</TABLE>
