Coffee People reports record sales for year and fourth quarter.

PORTLAND, Ore.--(BUSINESS WIRE)--Feb. 6, 1997--Coffee People Inc. (NASDAQ:MOKA), a specialty coffee retailer and operator of coffee houses, today reported record sales for its year and fourth quarter ended Dec. 31, 1996, with fourth quarter same-store sales showing the strongest percentage gain during 1996.

Revenue for the full year was $12.3 million, an increase of 9 percent from $11.3 million in 1995. Net income for the year was $204,000, down slightly from $211,000 in 1995, due to higher expenses incurred to support the company's growth plans. On a per share basis, earnings for the year, on approximately 57 percent more shares used in the calculation, were $.09, compared to $0.14 reported last year.

"Our full year results were capped by a strong fourth quarter," said Jim Roberts, chairman and chief executive officer. "We began our expansion outside Oregon, maintained profitability while adding new stores, and produced solid improvement in comparable store sales."

For the quarter, the company posted revenue of $3.3 million, an increase of 10 percent over $3.0 million in the same 1995 quarter. Expenses associated with opening three new stores in the quarter caused net income to decline to $23,000, or $.01 per share, from $56,000, or $.04 per share, in 1995's fourth quarter. Per share results for the quarter reflect a 117 percent increase in shares used in the calculation, as a result of a private placement of common stock in Jan. 1996 and completion of the company's initial public offering in September.

"We ended the year with comparable store sales up 6.7 percent in the fourth quarter -- the best quarter-over-quarter gain in 1996," said Roberts. He attributed the improvement to increased transaction volumes, higher average sales per transaction, a price increase implemented in September and robust sales at the company's airport stores.

During the year, same-store sales rose 2 percent overall. Average store sales for the company's 12 neighborhood and drive-through stores open for all of 1996 were $729,000, with one more store in operation for the full year than in 1995. The average store contribution margin in 1996 on these same stores was 20 percent.

"We accomplished a great deal in 1996, raising $13 million in new capital, laying the foundation to support planned store growth and beginning the expansion of Coffee People into new markets," Roberts said. "And we maintained profitability in both the year and fourth quarter while investing in new stores."

Since Oct. 1996, the company has opened or announced a total of 10 new stores -- one-third of the 30 it intends to add by the end of 1997. During the fourth quarter, Coffee People opened one new store in Oregon, two in Denver and incurred expenses related to a new store in Huntington Beach, Calif. which opened in January. In addition, the company has announced that it expects to open its first store in San Diego in March as well as five new Motor Moka(R) drive-through stores in the Portland area by the end of April.

"Opening new stores requires the investment of significant up-front costs, such as employee recruiting and training and store promotion," Roberts said. "On average, we expect stores to take six months before they achieve profitability." Costs associated with recent and scheduled store openings are expected to result in losses during the first and second quarters of 1997.

"We are encouraged by the early results at our newest store in Huntington Beach," said Roberts. "While our two Denver stores have been slower in building sales, initial customer response to the Huntington Beach store reinforces our belief that the Coffee People concept has appeal in new geographic markets."

In business since 1983, Coffee People currently has 23 outlets in Oregon, California and Colorado including coffee houses, drive-through Motor Mokas and Aero Moka(TM) kiosks at the Portland International Airport. The company's stores feature a menu of more than 200 coffee drinks, shakes, pastries and other coffee-related products.

This news release contains forward-looking statements that involve a number of risks and uncertainties. Actual results may differ materially from projected results. For a complete discussion of the risks associated with forward-looking information, refer to the Risk Factors contained in the company's Registration Statement on Form SB-2 as filed with the Securities and Exchange Commission, effective Sept. 25, 1996.

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                      COFFEE PEOPLE INC.
                     STATEMENTS OF INCOME
       (Dollars in thousands, except per share amounts)

                           Three Months Ended      Year Ended
                            Dec. 31   Dec. 31   Dec. 31   Dec. 31
                             1996      1995      1996      1995
                               (unaudited)

Revenues:
 Retail sales             $   3,219  $  2,914   $12,104   $11,045
 Wholesale and other             35        64       177       212
  Total revenues              3,254     2,978    12,281    11,257

 Cost of sales and
  related occupancy expenses  1,536     1,392     5,860     5,388
 Store operating expenses     1,128       895     3,873     3,451
 Other operating expenses        -         17        44        63
 Depreciation and amortization  166       120       530       391
 General and administrative
  expenses                      545       444     1,868     1,550
  Income from operations       (121)      110       106       414
Other income, net               166        15       298        43
Interest expense                 (8)      (39)      (73)     (134)
  Income before provision
   for income taxes              37        86       331       323
 Provision for income taxes     (14)      (30)     (127)     (112)
 Net income                    $ 23      $ 56     $ 204     $ 211
 Earnings per share           $0.01     $0.04     $0.09     $0.14
 Shares used in computing
  earnings per share      3,265,461  1,502,418  2,349,850  1,500,975


                              COFFEE PEOPLE INC.
                                BALANCE SHEETS
                           (Dollars in thousands)

                               ASSETS

                                      December 31,    December 31,
                                          1996           1995

Current assets:
  Cash and cash equivalents            $10,274         $   260
  Accounts receivable                       26               9
  Inventories                              205             264
  Prepaid expenses                         141             112
  Deferred tax assets                       28              13
  Other current assets                      96               -
    Total current assets                10,770             658

  Property and equipment, net            5,513           2,155
  Other assets                             129              23
    Total assets                       $16,412         $ 2,836


                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
 Current portion of long-term debt
  and capital lease obligations        $  135          $   147
 Line of credit                             -              175
 Accounts payable                         854              775
 Accrued liabilities                      262              196
 Income taxes payable                      47               55
  Total current liabilities             1,298            1,348

 Deferred tax liability                    86               66
 Long-term debt and capital lease
  obligations                             426              567
 Stockholders' equity:
  Preferred stock, no par value,
   authorized 10,000,000 shares,
   none issued or outstanding              -               -
  Common stock, no par value;
   authorized, 50,000,000 shares;
   issued, 3,228,020 and 1,936,233
   shares; outstanding, 3,237,432
   and 1,405,054                       14,492            1,476
  Stock subscription notes receivable    (281)            (341)
  Retained earnings                       391              187
  Treasury stock                           -              (467)
   Total stockholders' equity          14,602              855

 Total liabilities and stockholders'
  equity                              $16,412           $2,836

CONTACT: Coffee People, Inc.

Ken Ross, 503/223-7714 (CFO)

or

In.ves'com

Dolores Chenoweth, 503/291-1924 (investor relations)