Briazz, Inc. Announces Third Quarter Results and Fourth Quarter Guidance; Restructuring Savings Anticipated to be Over $5 Million in 2003.

Business Editors

SEATTLE--(BUSINESS WIRE)--Nov. 13, 2002

Briazz, Inc. (Nasdaq:BRZZ) today reported third quarter financial results for the period ended September 29, 2002.

For the third quarter 2002, Briazz reported a net loss of $4.76 million, or a loss of $0.81 per share, versus a net loss of $1.86 million, or $0.32 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 and a weakened economy. Total sales for the third quarter 2002, including the retail and wholesale segments, decreased by $0.17 million, or 2.1%, to $7.77 million, from $7.94 million for the same period last year. EBITDA loss for the 2002 quarter increased to $3.70 million from $1.31 million in third quarter of 2001. Included in the results for the quarter is a non-cash expense for an asset impairment write-down totaling $2.11 million.

Retail sales for the third quarter increased by $0.04 million, or 0.7%, to $5.68 million from $5.64 million from the same period last year. The increase comes primarily from five new cafe openings during fiscal 2001, and the five additional cafe openings the first half of fiscal 2002 offset by the closure of two cafes in 2002. Same-store sales (comps) for the third quarter 2002 decreased $0.67 million, or (12.5%), to $4.69 million from $5.36 million for the comparable period last year. Branded sales for the third quarter decreased by $0.21 million, or (9.1%), to $2.09 million from $2.30 million in the same period last year. This decrease primarily resulted from a reduction in QFC sales.

For the first three quarters of 2002, net loss increased by $5.25 million, to $9.47 million from $4.23 million for the same period in 2001. Sales for the first three quarters of fiscal 2002 decreased to $23.32 million, compared to $24.60 million during the same period last year. EBITDA loss for the 2002 three quarters increased to $6.64 million, from $2.51 million for the comparable period in 2001. Basic and diluted net loss per share attributable to common shareholders was $1.62 and $2.62 for the first three quarters in 2002 and 2001, respectively.

For the first three quarters of 2002, total sales decreased by $1.28 million, or 5.2%, to $23.32 million compared to $24.60 million for the same period last year. In the first three quarters of 2002, retail sales decreased by $0.36 million, or 2.0%, to $17.07 million from $17.43 million from the same period last year. This year-to-date decrease is attributable to lower office occupancy rates, which more than offset the sales from additional cafes opened in 2001 and 2002. Same-store sales (comps) for the first three quarters of 2002, decreased by $2.13 million, or (12.6%), to $14.80 million from $16.93 million for the comparable period last year. Branded sales for the first three quarters of 2002 decreased by $0.92 million, or 12.9%, to $6.25 million from $7.17 million in 2001. This decrease was primarily due to a decrease in QFC sales and the discontinuation of sales to Kozmo.com.

Looking forward to the fourth quarter of 2002, Briazz anticipates sales of $8.1 million to $8.3 million, an increase over the third quarter 2002. The company also anticipates an EBITDA loss between $3.3 million and $3.5 million for the fourth quarter this year, an improvement over the third quarter 2002. The fourth quarter EBITDA forecast includes the projected operating loss and costs associated with the closure of the kitchens and an estimated restructuring non-cash write-down of the central kitchen assets due to the closure of the kitchens, totaling $2.11 million.

"Briazz is committed to wowing our guests, providing a great work environment for our employees, and building shareholder value. As announced on October 31, 2002, we have entered into negotiations to offer and sell up to $2.0 million in secured convertible notes to Flying Food Group (FFG) or one or more of its affiliates. FFG or its affiliates have currently invested $350,000 in demand notes secured by the Company's assets, which will convert into the secured convertible note financing. In connection to the convertible note financing, we are negotiating with FFG to produce our food at FFG's central kitchens, which are located in each of Briazz's geographic markets. Our intent is to close our own central kitchens following the move of the food preparation operations to FFG and anticipate that all of our central kitchens, which accounted for a $2.9 million loss for the first nine months of 2002, will be closed by early December. The closure of the Briazz Central Kitchens and the outsourcing agreement with Flying Food is a transformational event for Briazz. The significant reduction in expenses that we project for 2003 are primarily due to this demission.

"In addition to the Flying Food Group financing, we are currently pursing new avenues of funding including $3.0 to $4.0 million of equity or debt financing with institutional investors," said Victor Alhadeff, chairman and CEO of Briazz.

"In conjunction with the closure of the central kitchens, we will reduce the operational complexity of the business and the related general and administrative expenses. In addition to the expected savings resulting from the central kitchen closures, we expect to reduce overhead by eliminating 15 to 17 corporate positions by early December. The Company's total general and administrative staff including field level management will be reduced from 54 on August 13, 2002 to 27 by year end. We anticipate that total Company employment as a result of the restructuring and closure of the kitchens will be reduced from 526 employees on August 13, 2002 to 272 by year end," said Alhadeff.

"The changes we have made to our business over the last two quarters impact the face of Briazz dramatically. Labor reductions taken during the third quarter of 2002 will result in annual savings of approximately $2.2 to $2.4 million. The G&A reductions in the fourth quarter are estimated to result in annual savings of approximately $1.0 million. We anticipate our net savings for the central kitchen closures will result in an additional estimated annual savings of $2.0 million," continued Alhadeff.

"The total annualized benefit of these savings is estimated to be between $5.2 to $5.4 million. Briazz and FFG are in the final planning stages of the closure of our kitchens and the transfer of operations to the FFG kitchens. Our objective is to complete the transfer of all four kitchens in December. Based on this plan we project that we will begin to fully realize the financial impact of these actions in Q1 of 2003.

"The anticipated restructuring savings coupled with the $2.0 convertible note financing and an additional $3.0 to $4.0 million of additional debt or equity capital would enable the Company to be adequately capitalized and require minimal new sales growth to achieve our foremost goal of becoming EBITDA positive," continued Alhadeff.

Subject to completion of additional financing, the Company anticipates generating positive cash flow in the first part of fiscal 2003. Three factors serve as the basis for this anticipated result: the dramatic reduction in expenses as a result of the restructuring; the projected contribution of new locations opened during the first half of 2002; and modest growth in the Company's retail, box lunch and catering business and wholesale business.

"Briazz is at the forefront of one of the hottest trends in the restaurant industry, the fast, casual segment. We are highly focused in meeting the needs of our guests with food that is fresh, fast, and fabulous. Our recent menu focus has emphasized hot and value. As we approach 2003, with dramatically reduced overhead levels, we are truly excited about our ability to meet our guests' needs and profitably grow the business," concluded Alhadeff.

With respect to the Company's Nasdaq National Market listing, Briazz announced today that it had not regained compliance with the public float requirement for continued listing on Nasdaq National Market by November 5, 2002, the date for compliance set by Nasdaq in a previously-disclosed letter to the Company. Briazz has received a Nasdaq Staff Determination indicating that the Company fails to comply with Marketplace Rule 4450(a)(2) and that its shares are subject to delisting from the Nasdaq National Market at the opening of business on November 14, 2002. The Company has requested a hearing before a Nasdaq Listing Qualifications Panel to review the Staff Determination. The Company will continue to trade on the Nasdaq National Market under the symbol BRZZ pending the outcome of these proceedings. There can be no assurance that the Company will be able to regain compliance with Nasdaq's continued listing requirements or that the Panel will grant the Company's request for continued listing on the National Market.

If the Company is unable to maintain its National Market position, it expects to apply for quotation on the Nasdaq SmallCap Market. The Company does not currently meet the SmallCap Market requirement that a company maintain a minimum bid price of $1.00; however, Nasdaq will, as a matter of policy, permit a company that has been delisted from the National Market to take advantage of the 180-day grace period provided by the SmallCap Market for regaining compliance with this rule, provided that the company meets the other requirements for continued listing on the SmallCap Market. On August 20, 2002, Nasdaq notified the Company that it did not comply with the minimum bid price requirement of $1.00. Nasdaq has informed the Company that if it began quotation on the SmallCap Market, the Company would have until February 18, 2003 to regain compliance with the rule unless a further grace period was available. There can be no assurance that Company will be able to fulfill or obtain a further grace period with respect to this requirement. If the Company is delisted from the National Market and is not accepted for or ceases quotation on the SmallCap Market, its shares may continue to trade on the Over-the-Counter Bulletin Board.

Briazz will host a conference call to discuss second quarter results, the 2002 operational outlook today and fourth quarter guidance, November 13, at 1:30 p.m. Pacific Time (4:30 p.m. ET).

None of the securities described herein have been registered under the Securities Act of 1933, as amended, and none of the securities described herein will be registered under the Securities Act. None of the securities described herein may be offered or sold in the United States or to, or for the account or benefit of, U.S. persons absent registration or an applicable exemption from registration requirements.

This press release does not constitute an offer of any of the securities described herein in any jurisdiction.

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 began operations in Seattle, and opened new markets in San Francisco in 1996, Chicago in 1997 and Los Angeles in 1998. The company currently operates 46 cafes across these metropolitan regions and 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)

                                     September  December
                                        29,       30,
                                       2002      2001
                                     ----------- --------
                                     (unaudited)
Assets
Current assets
         Cash and cash equivalents       $762   $6,193
         Accounts receivable, net
          of allowance of $28
          (2002) and $104 (2001)          570      472
         Inventory                        607      507
         Prepaid expenses and other
          current assets                1,051      447
         Current portion of
          restricted certificates
          of deposit                      100      149
                                  ----------- --------
             Total current assets       3,090    7,768
Property and equipment, net            10,814   13,555
Restricted certificates of
 deposit, net of current portion          388      453
Deposits and other assets                 335      177
                                   ----------- --------
                      Total assets     $14,627  $21,953
                                   =========== ========

Liabilities and Stockholders' Equity
Current liabilities
         Book overdraft                  $687     $754
         Current portion of long-
          term debt                     1,065      138
         Accounts payable               1,727    1,322
         Accrued compensation             940      996
         Accrued and other
          liabilities                     497      492
                                  ----------- --------
             Total current liabilities  4,916    3,702
                                  ----------- --------
Long-term debt, net of current portion    745      335
                                  ----------- --------

Stockholders' equity
     Common stock, no par value; 100,000,000
      shares authorized; 5,870,173 (2002)
      and 5,824,993 (2001) shares issued and
      outstanding                      73,784   73,746
     Additional paid-in capital           434      209
     Deferred stock compensation         (720)    (981)
     Accumulated deficit              (64,532) (55,058)
                                  ----------- --------
     Total stockholders' equity         8,966   17,916
                                  ----------- --------

      Total liabilities and
       stockholders' equity           $14,627  $21,953
                                  =========== ========

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

                       STATEMENTS OF OPERATIONS
                 (in thousands, except share data)

                       Thirteen weeks ended  Thirty-nine weeks ended
                         Sep 29,  Sep 30,     Sep 29,    Sep 30,
                          2002     2001        2002       2001
                            (unaudited)          (unaudited)
Sales
     Retail               $5,681   $5,642    $17,071      $17,427
     Branded sales         2,093    2,302      6,250        7,173
                       ---------- --------- ----------  ----------
         Total Sales       7,774    7,944     23,321       24,600
                       ---------  ---------- ---------- ----------
Operating expenses
     Cost of food and
      packaging            2,995    3,099      8,812        9,469
     Occupancy expenses    1,123      991      3,152        2,858

    Labor expenses (including amortization of deferred stock
      compensation for the 13 and 39 weeks of $0 and $0 for 2002 and
      $45 and $136 for
      2001)                2,810    2,843      8,430         8,433
     Asset Impairment      2,108        -      2,108             -
     Depreciation and
      amortization           954      643      2,626         1,894
     Other operating
      expenses               575      508      1,831         1,492

     General and administrative
      expenses (including
      amortization of deferred
      stock compensation for the 13 and
      39 weeks, respectively, of $87 and $261
      for 2002 and $23 and $68
      for 2001)            1,807     1,808      5,552        4,854
     Gain on disposal
      of assets              (12)        -        (10)           -
     Provision for
      asset impairment
      and store closure       64         -         87            -
                       ----------  ---------- ----------   ----------
         Total
          operating
          expenses        12,424     9,892     32,588       29,000
                       ---------- ---------- ---------   ----------
Loss from operations      (4,650)   (1,948)    (9,267)      (4,400)
                       ---------- ---------- ----------  ----------

Other (expense) income
     Interest and other
      expense               (115)       (1)      (252)         (63)
     Interest and other
      income                   3        87         45          238
                       ---------- ---------- ----------    ---------
                            (112)       86       (207)         175
                       ----------  ---------- ----------   ---------
Net loss                  (4,762)   (1,862)    (9,474)      (4,225)
Accretion of
 dividends/amortization
 of discount on
 preferred stock               -         -          -        4,317
                       ----------  ---------- ----------   ----------
Net loss attributable
 to common stockholders  $(4,762)   $(1,862)   $(9,474)    $(8,542)
                       ==========  ========== ==========   ==========
Basic and diluted net
 loss per share           $(0.81)    $(0.32)    $(1.62)     $(2.62)
                       ==========  ========== ==========   ==========
Weighted-average
 shares used in
 computing basic and diluted
 net loss per share    5,860,375   5,824,988  5,846,352    3,256,222
                       ========== ========== ==========    ==========

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, revenue and earnings expectations; estimates of next quarter's expenses; the expected outsourcing of our central kitchens to Flying Food; the potential cost savings and other benefits of an alliance with Flying Food; anticipated financings; the potential results of a market test with Starbucks; and continued Nasdaq listing. 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 cost, the terms of a production contract with Flying Food, the ability to complete anticipated financings, the ability to transition our central kitchen operations to Flying Food, 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 August 13, 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.