Briazz, Inc. Announces Second Quarter Results; Sales Increase Over Prior Quarter in Retail and Branded Sales Divisions.

Business Editors

SEATTLE--(BUSINESS WIRE)--Aug. 1, 2002

Briazz, Inc. (Nasdaq:BRZZ) today reported second quarter financial results for the period ended June 30, 2002.

For the second quarter 2002, Briazz reported a net loss of $2.53 million, or a loss of $0.43 per share, versus a net loss of $1.05 million, or $1.11 per share, in the same period last year. The higher net loss in 2002 reflects lower office building occupancy in the vicinity of our cafes, slower foot traffic in cafes, and a weakened economy. Sales for the second quarter 2002 were $8.11 million, compared to $8.39 million during the same period last year. EBITDA loss for the 2002 quarter increased to $1.52 million from $520,000 in second quarter of 2001. The company, however, is on target to become EBITDA positive during the first quarter of fiscal 2003.

Total sales for the second quarter 2002, including the retail and wholesale segments, decreased by $0.28 million, or 3.4%, to $8.11 million, from $8.39 million for the same period last year. Retail sales for the second quarter increased by $0.08 million, or 1.4%, to $6.01 million from $5.93 million from the same period last year. The increase comes primarily from new cafe openings in the latter part of 2001, and the first half of fiscal 2002. Same-store sales (comps) for the second quarter 2002 decreased $0.63 million, or (10.75%), to $5.19 million from $5.82 million for the comparable period last year. Branded sales for the second quarter decreased by $0.36 million, or (15%), to $2.10 million from $2.46 million in the same period last year. This decrease primarily resulted from a reduction in certain wholesale accounts and lower levels of office catering events.

For the first six months of 2002, net loss increased by $2.35 million, to $4.71 million from $2.36 million for the same period in 2001. Sales for the first six months of fiscal 2002 decreased to $15.55 million, compared to $16.66 million during the same period last year. EBITDA loss for the 2002 six month period increased to $2.94 million, from $1.20 million for the comparable period in 2001. Basic and diluted net loss per share attributable to common shareholders was $0.81 and $3.40 for the first six months in 2002 and 2001, respectively.

For the first six months of 2002, total sales decreased by $1.11 million, or 6.7%, to $15.55 million compared to $16.66 million for the same period last year. In the first six months of 2002, retail sales decreased by $0.40 million, or 3.4%, to $11.39 million from $11.78 million from the same period last year. This year-to-date decrease is attributable to lower office occupancy rates. Same-store sales (comps) for the first six months of 2002, decreased by $1.46 million, or 12.7%, to $10.10 million from $11.57 million for the comparable period last year. Branded sales for the first six months of 2002, decreased by $0.71 million, or 14.7%, to $4.16 million from $4.87 million in 2001. This decrease resulted from the planned discontinuation of unprofitable sales to certain wholesale outlets, as previously mentioned and lower levels of offices catering office events.

Looking forward to the third quarter of 2002, Briazz anticipates sales of $8.5 million to $8.7 million. This is approximately an 8% increase over the second quarter 2002. The company also anticipates an EBITDA loss between $1.1 million and $1.3 million for the third quarter this year. An approximate 28% improvement over the second quarter 2002. The third quarter will include top line growth from our new wholesale relationships. No benefit will be realized in earnings until the fourth quarter, as the third quarter will have account testing expenses.

"Briazz is committed to creating shareholder value. We realize that the economic conditions in our markets are difficult and will remain difficult. Accordingly, we are highly focused on growing the business through our wholesale partnerships and cafe sales by increasing the value proposition in our cafes. The major financial advantage of growth in wholesale is that it enables the company to grow our brand, and financially leverage existing assets. An example of our value focus in retail cafes is a new combination of offerings that we will be introducing in the next few weeks for both breakfast and lunch. With a focus on food that is fresh, fast, and fabulous, combined with great service and great value, we believe we have the strategic and tactical initiatives in place to enable us to become EBITDA positive in Q1 `03," said Victor Alhadeff, chairman and CEO of Briazz.

Briazz began operations in 1995 in Seattle, and opened new markets in San Francisco in 1996, Chicago in 1997 and Los Angeles in 1998. The company currently operates 47 cafes across these metropolitan regions.

"Our business strategy is to solidify our current markets and build Briazz into a national brand by expanding our existing four markets , as well as distributing our products through strategic alliances," Alhadeff said.

The company anticipates generating positive cash flow sometime in the first part of fiscal 2003. Four factors serve as the basis for this anticipated result: the projected contribution of new locations already opened during the first half of 2002; modest growth in our box lunch and catering business; modest improvement in office occupancy by the end of the third quarter of 2002 and new strategic wholesale relationships with accounts such as Target and Sodexho.

Briazz will host a conference call to discuss second quarter results, the 2002 operational outlook today and third quarter guidance, August 1, at 1:30 p.m. Pacific Time (4:30 p.m.) Eastern Time.

About Briazz, Inc.

Founded in Seattle, Wash. in 1995, Briazz, Inc. prepares and sells high-quality, branded lunch and breakfast foods for the "on-the-go" consumer. Briazz sells its products primarily through its company-operated cafes, through delivery of box lunches and catered platters directly to corporate customers and through selected wholesale accounts.

                             BRIAZZ, INC.
                            BALANCE SHEETS
                   (in thousands, except share data)

                                                   June 30,   Dec. 30,
                                                     2002       2001
                                                 ----------- ---------
                                                 (unaudited)
Assets
Current assets
      Cash and cash equivalents                     $ 1,674   $ 6,193
      Accounts receivable, net of allowance of
       $29 (2002) and $104 (2001)                       743       472
      Inventory                                         567       507
      Prepaid expenses and other current assets         876       447
      Current portion of restricted certificates
       of deposit                                        96       149
                                                 ----------- ---------
                  Total current assets                3,956     7,768
Property and equipment, net                          13,507    13,555
Restricted certificates of deposit, net of
 current portion                                        391       453
Deposits and other assets                               352       177
                                                 ----------- ---------
                  Total assets                     $ 18,206  $ 21,953
                                                 =========== =========

Liabilities and Stockholders' Equity
Current liabilities
      Bank overdraft                               $      -  $    754
      Current portion of long-term debt                 821       138
      Accounts payable                                1,452     1,322
      Accrued compensation                            1,096       996
      Accrued and other liabilities                     499       492
                                                 ----------- ---------
                  Total current liabilities           3,868     3,702
                                                 ----------- ---------
Long-term debt, net of current portion                  716       335
                                                 ----------- ---------

Commitments and contingencies

Stockholders' equity (deficit)
     Common stock, no par value; 100,000,000
      shares authorized; 5,847,310 (2002)
      and 5,824,993 (2001) shares issued and
      outstanding                                    73,765    73,746
     Additional paid-in capital                         434       209
     Deferred stock compensation                       (807)     (981)
     Accumulated deficit                            (59,770)  (55,058)
                                                 ----------- ---------
                  Total stockholder' equity          13,622    17,916
                                                 ----------- ---------
                  Total liabilities and
                   stockholders' equity            $ 18,206  $ 21,953
                                                 =========== =========

The accompanying notes are an integral part of these financial
statements.


                             BRIAZZ, INC.
                       STATEMENTS OF OPERATIONS
                   (in thousands, except share data)

                               Thirteen weeks       Twenty-six weeks
                                    ended                 ended
                           --------------------- ---------------------
                            June 30,   July 1,    June 30,   July 1,
                              2002       2001       2002       2001
                           ---------- ---------- ---------- ----------
                                (unaudited)           (unaudited)
Sales
     Retail                  $ 6,014    $ 5,932   $ 11,390   $ 11,785
     Branded sales             2,095      2,461      4,157      4,871
                           ---------- ---------- ---------- ----------
             Total Sales       8,109      8,393     15,547     16,656
                           ---------- ---------- ---------- ----------
Operating Expenses
     Cost of food and
      packaging                3,003      3,206      5,816      6,370
     Occupancy expenses        1,034        936      2,030      1,867

     Labor expenses (including
      amortization of deferred
      stock compensation for
      the 13 and 26 weeks
      expense, respectively,
      of $0 and $0 for 2002
      and $46 and $92 for
      2001)                    2,894      2,828      5,620      5,591
     Depreciation and
      amortization               885        644      1,673      1,250
     Other operating expenses    803        549      1,256        985

     General and administrative
      expenses (including
      amortization of deferred
      stock compensation for
      the 13 and 26 weeks
      expense, respectively,
      of $87 and $174 for 2002
      and $22 and $44 for
      2001)                    1,894      1,394      3,745      3,045
     Loss on sale of assets        -          -          2          -
     Provision for asset
      impairment and store
      closure                      6          -         22          -
                           ---------- ---------- ---------- ----------
             Total operating
              expenses        10,519      9,557     20,164     19,108
                           ---------- ---------- ---------- ----------
Loss from operations          (2,410)    (1,164)    (4,617)    (2,452)
                           ---------- ---------- ---------- ----------

Other (expense) income
     Interest and other
      expense                   (127)       (14)      (137)       (62)
     Interest and other
      income                      10        126         42        151
                           ---------- ---------- ---------- ----------
                                (117)       112        (95)        89
                           ---------- ---------- ---------- ----------
Net loss                      (2,527)    (1,052)    (4,712)    (2,363)
Accretion of
 dividends/amortization of
 discount on preferred
 stock                             -      3,264          -      4,317
                           ---------- ---------- ---------- ----------
Net loss attributable to
 common stockholders        $ (2,527)  $ (4,316)  $ (4,712)  $ (6,680)
                           ========== ========== ========== ==========
Basic and diluted net loss
 per share                   $ (0.43)   $ (1.11)   $ (0.81)   $ (3.40)
                           ========== ========== ========== ==========
Weighted-average shares
 used in computing basic
 and diluted net loss
 per share                 5,847,310  3,905,373  5,839,340  1,964,744
                           ========== ========== ========== ==========

The accompanying notes are an integral part of these financial
statements.

This press release contains statements that may constitute "forward-looking statements" within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934, as amended by the Private Securities Litigation Reform Act of 1995. Such statements include comments regarding the ability and anticipated timing for the company to achieve positive cash flow and projections regarding future sales, store openings, office occupancy, results or success of particular segments or undertakings and the future rate of growth of Briazz. Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and actual results may differ materially from those contemplated by such forward-looking statements. Important factors currently known to management that could cause actual results to differ materially from those in forward-looking statements include, without limitation, fluctuation of the company's operating results, the ability to compete successfully, office occupancy, the ability of the company to maintain current cafe locations and secure new ones, food and labor costs, operation in only four geographic areas and reliance upon distributors and wholesale customers. For additional factors that may cause actual results to differ materially from those contemplated by such forward-looking statements, please see the "Risk Factors" contained in the company's Report on Form 10-K, filed on April 1, 2002 and also described in Exhibit 99.1 to the company's Report on Form 10-Q, filed on May 15, 2002, and in other filings on file with the SEC, which Risk Factors are incorporated herein as though fully set forth. The company undertakes no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results.