##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION


WASHINGTON, D.C. 20549


FORM 10-Q

(MARK ONE)

|  |                                                                                                                                          
|- | -----------------------------------------------------------------------------------------------------------------------------------------
|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 29, 2002
|  |                                                                                                                                          
|  | OR                                                                                                                                       
|  |                                                                                                                                          
|o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934                                                 
|  |                                                                                                                                          
|  | FOR THE TRANSITION PERIOD FROM      TO                                                                                                   

COMMISSION FILE NUMBER 000-32527

BRIAZZ, INC.

(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)


|                                  |  |                                     
|--------------------------------- |  | ------------------------------------
|WASHINGTON                        |  | 91-1672311                          
|(STATE OR OTHER JURISDICTION      |  | (I.R.S. EMPLOYER IDENTIFICATION NO.)
|OF INCORPORATION OR ORGANIZATION) |  |                                     

3901 7TH AVENUE SOUTH, SUITE 200
SEATTLE, WASHINGTON 98108-5206

(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)


(206) 467-0994

(REGISTRANTS TELEPHONE NUMBER, INCLUDING AREA CODE)


Indicate by check mark 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 x No o

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes o No x

The number of outstanding shares of common stock, no par value, of the
Registrant at October 24, 2002 was 5,870,173.





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TABLE OF CONTENTS



|                               |                                                                                               |                                   |  |  |  |  |  | 
|------------------------------ | --------------------------------------------------------------------------------------------- | --------------------------------- |  |  |  |  |  | 
|PART I  FINANCIAL INFORMATION
|                               | ITEM 1. FINANCIAL STATEMENTS                                                                 
|                               |                                                                                               | BALANCE SHEETS                   
|                               |                                                                                               | STATEMENTS OF OPERATIONS         
|                               |                                                                                               | Statement of Stockholders Equity
|                               |                                                                                               | STATEMENTS OF CASH FLOWS         
|                               |                                                                                               | NOTES TO FINANCIAL STATEMENTS    
|                               | ITEM 2: MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|                               | ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                           
|                               | ITEM 4. CONTROLS AND PROCEDURES                                                              
|PART II  OTHER INFORMATION   
|                               | ITEM 1. LEGAL PROCEEDINGS                                                                    
|                               | ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS                                            
|                               | ITEM 3. DEFAULTS UPON SENIOR SECURITIES                                                      
|                               | ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                  
|                               | ITEM 5. OTHER INFORMATION                                                                    
|                               | ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K                                                     
|SIGNATURES                    
|CERTIFICATIONS                
|EXHIBIT 10.22                 
|EXHIBIT 99.1                  
|EXHIBIT 99.2                  



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##### Table of Contents



BRIAZZ, INC.

INDEX TO THE FORM 10-Q
FOR THE 39-WEEK PERIOD ENDED SEPTEMBER 29, 2002

|                               |                                                                                               |                                   |    |      |   | 
|------------------------------ | --------------------------------------------------------------------------------------------- | --------------------------------- | -- | ---- | - | 
|                               |                                                                                               |                                   |    | PAGE
|                               |                                                                                               |                                   |    |     
|PART I  FINANCIAL INFORMATION |                                                                                               |                                   |    |     
|                               | ITEM 1. FINANCIAL STATEMENTS                                                                  |                                   |    | 2    |  
|                               |                                                                                               | BALANCE SHEETS                    |    |      | 2 | 
|                               |                                                                                               | STATEMENTS OF OPERATIONS          |    |      | 3 | 
|                               |                                                                                               | STATEMENT OF STOCKHOLDERS EQUITY |    |      | 4 | 
|                               |                                                                                               | STATEMENTS OF CASH FLOWS          |    |      | 5 | 
|                               |                                                                                               | NOTES TO FINANCIAL STATEMENTS     |    |      | 6 | 
|                               | ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |                                   |    | 11   |  
|                               | ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK                             |                                   |    | 19   |  
|                               | ITEM 4. CONTROLS AND PROCEDURES                                                               |                                   |    | 19   |  
|PART II  OTHER INFORMATION    |                                                                                               |                                   |    |     
|                               | ITEM 1. LEGAL PROCEEDINGS                                                                     |                                   |    | 20   |  
|                               | ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS                                             |                                   |    | 20   |  
|                               | ITEM 3. DEFAULTS UPON SENIOR SECURITIES                                                       |                                   |    | 20   |  
|                               | ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                   |                                   |    | 20   |  
|                               | ITEM 5. OTHER INFORMATION                                                                     |                                   |    | 20   |  
|                               | ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K                                                      |                                   |    | 22   |  
|SIGNATURES                     |                                                                                               |                                   | 23 |     
|CERTIFICATIONS                 |                                                                                               |                                   | 24 |     





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##### Table of Contents






PART I  FINANCIAL INFORMATION




ITEM 1. FINANCIAL STATEMENTS




BRIAZZ, INC.

BALANCE SHEETS
(in thousands)

|                                                           |                                                                                                                                |                                                                     |                                            |         |               |        |              |         |       |        | 
|---------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------ | ------------------------------------------------------------------- | ------------------------------------------ | ------- | ------------- | ------ | ------------ | ------- | ----- | ------ | 
|                                                           |                                                                                                                                |                                                                     |                                            |         | September 29, |        | December 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   |       
|                                                           |                                                                                                                                | Line of credit borrowings                                           |                                            |         | 360           |        |              |         |      |       
|                                                           |                                                                                                                                | Current portion of long-term debt                                   |                                            |         | 705           |        |              |         | 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          |        
|                                                           |                                                                                                                                |                                                                     |                                            |         |               |        |              |        
|Commitments and contingencies (see note 4)                 |                                                                                                                                |                                                                     |                                            |         |               |        |              |        
|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.

2



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BRIAZZ, INC.

STATEMENTS OF OPERATIONS
(in thousands, except share data)

|                                                                               |                                                                                                                                                                                      |                          |           |                      |        |                         |           |               |       |               |           |        |        |   |           |        |        | 
|------------------------------------------------------------------------------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ------------------------ | --------- | -------------------- | ------ | ----------------------- | --------- | ------------- | ----- | ------------- | --------- | ------ | ------ | - | --------- | ------ | ------ | 
|                                                                               |                                                                                                                                                                                      |                          |           | Thirteen weeks ended |        | Thirty-nine weeks ended
|                                                                               |                                                                                                                                                                                      |                          |           |                      |        |                        
|                                                                               |                                                                                                                                                                                      |                          |           | September 29,        |        | September 30,           |           | September 29, |       | September 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  |       
|                                                                               | 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                                                                                                                                     |                          |           | 2,172                |        |                         |           |              |       |               |           | 2,195  |        |   |           |       |       
|                                                                               |                                                                                                                                                                                      |                          |           |                      |        |                         |           |               |       |               |           |        |        |   |           |       
|                                                                               |                                                                                                                                                                                      | 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.

3



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Briazz, Inc.
Statement of Stockholders Equity
(in thousands)
(unaudited)

|                                                  |  |                      |       |            |  |          |        |              |  |         |     |       |  |   |      |   |  |   |         |   |  |   |        |  
|------------------------------------------------- |  | -------------------- | ----- | ---------- |  | -------- | ------ | ------------ |  | ------- | --- | ----- |  | - | ---- | - |  | - | ------- | - |  | - | ------ | -
|                                                  |  | Stockholders' equity
|                                                  |  |                     
|                                                  |  | Common Stock         |       | Additional |  | Deferred |        |              |  |         |     |       |  |  
|                                                  |  |                      |       | paid-in    |  | stock    |        | Accumulated  |  |         |     |      
|                                                  |  | Shares               |       | Amount     |  | capital  |        | compensation |  | deficit |     | Total
|                                                  |  |                      |       |            |  |          |        |              |  |         |     |      
|Balance at December 30, 2001                      |  |                      | 5,825 |            |  | $        | 73,746 |              |  | $       | 209 |       |  | $ | (981 | ) |  | $ | (55,058 | ) |  | $ | 17,916 |  
|Amortization of deferred compensation             |  |                      |      |            |  |          |       |              |  |         |    |       |  |   | 261  |   |  |   |        |   |  |   | 261    |  
|Employee stock purchase plan                      |  |                      | 45    |            |  |          | 38     |              |  |         |    |       |  |   |     |   |  |   |        |   |  |   | 38     |  
|Issuance of stock warrants                        |  |                      |      |            |  |          |       |              |  |         | 113 |       |  |   |     |   |  |   |        |   |  |   | 113    |  
|Beneficial conversion feature of convertible debt |  |                      |      |            |  |          |       |              |  |         | 112 |       |  |   |     |   |  |   |        |   |  |   | 112    |  
|Net loss                                          |  |                      |      |            |  |          |       |              |  |         |    |       |  |   |     |   |  |   | (9,474  | ) |  |   | (9,474 | )
|                                                  |  |                      |       |            |  |          |        |              |  |         |     |       |  |   |      |   |  |   |         |   |  |   |        |  
|Balance at September 29, 2002                     |  |                      | 5,870 |            |  | $        | 73,784 |              |  | $       | 434 |       |  | $ | (720 | ) |  | $ | (64,532 | ) |  | $ | 8,966  |  
|                                                  |  |                      |       |            |  |          |        |              |  |         |     |       |  |   |      |   |  |   |         |   |  |   |        |  

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

4



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BRIAZZ, INC.

STATEMENTS OF CASH FLOWS
(in thousands)

|                                                                       |                                                                            |                                                                  |                                           |                                           |       |                         |        |               |       |        |        |  
|---------------------------------------------------------------------- | -------------------------------------------------------------------------- | ---------------------------------------------------------------- | ----------------------------------------- | ----------------------------------------- | ----- | ----------------------- | ------ | ------------- | ----- | ------ | ------ | -
|                                                                       |                                                                            |                                                                  |                                           |                                           |       | Thirty-nine weeks ended
|                                                                       |                                                                            |                                                                  |                                           |                                           |       |                        
|                                                                       |                                                                            |                                                                  |                                           |                                           |       | September 29,           |        | September 30,
|                                                                       |                                                                            |                                                                  |                                           |                                           |       | 2002                    |        | 2001         
|                                                                       |                                                                            |                                                                  |                                           |                                           |       |                         |        |              
|                                                                       |                                                                            |                                                                  |                                           |                                           |       | (unaudited)            
|Cash flows from operating activities                                   |                                                                            |                                                                  |                                           |                                           |       |                         |        |              
|                                                                       | Net loss                                                                   |                                                                  | $                                         | (9,474                                    | )     |                         | $      | (4,225        | )    
|                                                                       | Adjustments to reconcile net loss to net cash used in operating activities |                                                                  |                                           |                                           |       |                         |        |               |      
|                                                                       |                                                                            | Amortization of deferred stock compensation                      |                                           |                                           | 261   |                         |        |               | 204   |       
|                                                                       |                                                                            | Non cash interest expense                                        |                                           |                                           | 176   |                         |        |               |      |       
|                                                                       |                                                                            | Depreciation and amortization                                    |                                           |                                           | 2,626 |                         |        |               | 1,894 |       
|                                                                       |                                                                            | Gain on disposal of assets                                       |                                           |                                           | (10   | )                       |        |               |      |       
|                                                                       |                                                                            | Provision for asset impairment and store closure                 |                                           |                                           | 2,195 |                         |        |               |      |       
|                                                                       |                                                                            | Non-cash expense related to issuance of common stock and options |                                           |                                           |      |                         |        |               | 29    |       
|                                                                       |                                                                            | Changes in operating assets and liabilities:                     |                                           |                                           |       |                         |        |               |       |       
|                                                                       |                                                                            |                                                                  | Accounts receivable                       |                                           |       | (98                     | )      |               |       | (42    | )     
|                                                                       |                                                                            |                                                                  | Inventory                                 |                                           |       | (100                    | )      |               |       | 16     |       
|                                                                       |                                                                            |                                                                  | Prepaid expenses and other current assets |                                           |       | (604                    | )      |               |       | (133   | )     
|                                                                       |                                                                            |                                                                  | Deposits and other assets                 |                                           |       | (50                     | )      |               |       | 1      |       
|                                                                       |                                                                            |                                                                  | Accounts payable                          |                                           |       | 599                     |        |               |       | (2,061 | )     
|                                                                       |                                                                            |                                                                  | Accrued compensation                      |                                           |       | (56                     | )      |               |       | 145    |       
|                                                                       |                                                                            |                                                                  | Accrued and other liabilities             |                                           |       | 5                       |        |               |       | (261   | )     
|                                                                       |                                                                            |                                                                  |                                           |                                           |       |                         |        |              
|                                                                       |                                                                            |                                                                  |                                           | Net cash used in operating activities     |       |                         | (4,530 | )             |       |        | (4,433 | )
|                                                                       |                                                                            |                                                                  |                                           |                                           |       |                         |        |              
|Cash flows from investing activities                                   |                                                                            |                                                                  |                                           |                                           |       |                         |        |              
|                                                                       | Purchases of property and equipment                                        |                                                                  |                                           | (2,282                                    | )     |                         |        | (1,903        | )    
|                                                                       | Proceeds from asset disposal                                               |                                                                  |                                           | 41                                        |       |                         |        |              |      
|                                                                       |                                                                            |                                                                  |                                           |                                           |       |                         |        |              
|                                                                       |                                                                            |                                                                  |                                           | Net cash used in investing activities     |       |                         | (2,241 | )             |       |        | (1,903 | )
|                                                                       |                                                                            |                                                                  |                                           |                                           |       |                         |        |              
|Cash flows from financing activities                                   |                                                                            |                                                                  |                                           |                                           |       |                         |        |              
|                                                                       | Change in book overdraft                                                   |                                                                  |                                           | (67                                       | )     |                         |        | 645           |      
|                                                                       | Proceeds from (repayments of) line-of-credit borrowings                    |                                                                  |                                           | 360                                       |       |                         |        | (2,000        | )    
|                                                                       | Repayment of long-term debt                                                |                                                                  |                                           | (182                                      | )     |                         |        | (143          | )    
|                                                                       | Proceeds from long-term debt and warrants                                  |                                                                  |                                           | 1,250                                     |       |                         |        |              |      
|                                                                       | Debt issue costs                                                           |                                                                  |                                           | (173                                      | )     |                         |        |              |      
|                                                                       | Decrease in restricted certificates of deposit                             |                                                                  |                                           | 114                                       |       |                         |        | 69            |      
|                                                                       | Proceeds from sale of preferred stock, net of issuance costs               |                                                                  |                                           |                                          |       |                         |        | 3,034         |      
|                                                                       | Proceeds from initial public offering, net of issuance costs               |                                                                  |                                           |                                          |       |                         |        | 13,592        |      
|                                                                       | Proceeds from exercise of stock options                                    |                                                                  |                                           |                                          |       |                         |        | 6             |      
|                                                                       | Employee stock purchase plan                                               |                                                                  |                                           | 38                                        |       |                         |        |              |      
|                                                                       |                                                                            |                                                                  |                                           |                                           |       |                         |        |              
|                                                                       |                                                                            |                                                                  |                                           | Net cash provided by financing activities |       |                         | 1,340  |               |       |        | 15,203 |  
|                                                                       |                                                                            |                                                                  |                                           |                                           |       |                         |        |              
|Net (decrease) increase in cash and cash equivalents                   |                                                                            |                                                                  | (5,431                                    | )                                         |       |                         | 8,867  |              
|Cash and cash equivalents                                              |                                                                            |                                                                  |                                           |                                           |       |                         |        |              
|                                                                       | Beginning of period                                                        |                                                                  |                                           | 6,193                                     |       |                         |        | 555           |      
|                                                                       |                                                                            |                                                                  |                                           |                                           |       |                         |        |              
|                                                                       | End of period                                                              |                                                                  | $                                         | 762                                       |       |                         | $      | 9,422         |      
|                                                                       |                                                                            |                                                                  |                                           |                                           |       |                         |        |              
|Supplemental disclosure of cash flow information                       |                                                                            |                                                                  |                                           |                                           |       |                         |        |              
|                                                                       | Cash paid for interest                                                     |                                                                  | $                                         | 76                                        |       |                         | $      | 63            |      
|                                                                       |                                                                            |                                                                  |                                           |                                           |       |                         |        |              
|Supplemental disclosure of non-cash investing and financing activities |                                                                            |                                                                  |                                           |                                           |       |                         |        |              
|                                                                       | Accretion of dividends/amortizaton of discount on preferred stock          |                                                                  | $                                         |                                          |       |                         | $      | 4,317         |      
|                                                                       |                                                                            |                                                                  |                                           |                                           |       |                         |        |              

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

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BRIAZZ, INC.

NOTES TO FINANCIAL STATEMENTS
(unaudited)

1. Summary of operations and significant accounting policies

Operations

BRIAZZ, Inc. (Briazz or the Company) manufactures and distributes
branded lunch and breakfast foods through multiple points of distribution in
urban and suburban locations. The Company commenced operations in 1995 in
Seattle, and opened new markets in San Francisco in 1996, Chicago in 1997 and
Los Angeles in 1998. The Companys business strategy is to solidify current
markets and build Briazz into a national brand by expanding in major
metropolitan areas across the United States. The Companys retail distribution
network includes Briazz cafés, as well as box lunch delivery. The Company also
distributes its products through select strategic alliances. Each market
operates a central kitchen, which prepares meals daily.

Interim financial information

The financial information at September 29, 2002, and for the 13-week and
39-week periods ended September 29, 2002 and September 30, 2001 is unaudited
but includes all adjustments, consisting of only normal recurring adjustments,
that the Company considers necessary for a fair presentation, in all material
respects, of its financial position, operating results and cash flows for the
interim dates and periods presented. The results of operations for the 13-week
and 39-week periods ended September 29, 2002 and September 30, 2001 are not
necessarily indicative of results for the entire fiscal year or future periods.

Financial conditions and basis of presentation

The accompanying financial statements have been prepared assuming that we
will continue as a going concern and do not include any adjustments to reflect
the possible future effects on the recoverability of assets and liquidation of
liabilities that may result from this uncertainty. The Company has incurred
substantial operating losses and negative cash flows from operations since
inception and had an accumulated deficit of $64.5 million at September 29,
2002. These matters raise substantial doubt about the Companys ability to
continue as a going concern. To date, the Company has finalized its
operations principally through the net proceeds of debt and equity offering
(see note 8). The Companys ability to continue as a going concern is
dependent upon numerous factors, including the ability to obtain additional
financing, the ability to increase the level of future revenues or the ability
to reduce operating expenses.

There can be no assurance that the Company will be able to obtain
additional financing, reduce expenses or successfully complete other steps to
continue as a going concern. If the Company is unable to unable to obtain
sufficient funds to satisfy its cash requirements, it may be forced to curtail
operations, dispose of assets, or seek extended payments terms from its
vendors. Such events would materially and adversely affect the Companys
financial position and results of operations.

Recent accounting pronouncements

In July 2001, the Financial Accounting Standards Board issued SFAS No.
143, Accounting for Asset Retirement Obligations (SFAS No. 143). SFAS No.
143 addresses financial accounting and reporting for obligations associated
with the retirement of tangible long-lived assets and the associated asset
retirement costs. It applies to legal obligations associated with the
retirement of long-lived assets that result from the acquisition, construction,
development, and (or) the normal operation of a long-lived asset, except for
certain obligations of lessees. The provisions of SFAS No. 143 will be
effective for fiscal years beginning after June 15, 2002, however early
application is permitted. The Company is currently evaluating the implications
of adoption of SFAS No. 143.

In April 2002, the Financial Accounting Standards Board issued SFAS 145,
Rescission of FAS Nos. 4, 44, and 64, Amendment of FAS 13, and Technical
Corrections which is generally effective for transitions occurring after May
15, 2002. Through the rescission of FASB statement 4 and 64, SFAS 145
eliminates the requirement that gain and losses from extinguishment of debt be
aggregated and, if material, be classified as an extraordinary item net of and
income tax effect. SFAS 145 makes several other technical connections to
existing pronouncements that may change accounting practice. The adoption of
SFAS 145 is not expected to have a material effect on the Companys results of
operations.

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In June 2002, the Financial Accounting Standards Board issued SFAS No.
146, Accounting for Costs Associated with Exit or Disposal Activities (SFAS
No. 146). SFAS No. 146 addresses financial accounting and reporting for costs
associated with exit or disposal activities and nullifies Emerging Issues Task
Force (EITF) Issue No. 94-3, Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (including Certain
Costs Incurred in a Restructuring). The provisions of this Statement are
effective for exit or disposal activities that are initiated after December 31,
2002, with early application encouraged.

2. Net loss per share

The computation of basic and diluted net loss per share is based on the
weighted-average number of shares of common stock outstanding during the
period. The Company has excluded all outstanding convertible debt, options and
warrants to purchase common stock from the calculation of diluted net loss per
share, as such securities are anti-dilutive for all periods presented.

The following table presents the calculation of basic and diluted net loss per
share (in thousands, except share and per share data):

|                                                                               |  |                      |           |                      |  |                    |           |                    |  |   |           |   |  |   |           |  
|------------------------------------------------------------------------------ |  | -------------------- | --------- | -------------------- |  | ------------------ | --------- | ------------------ |  | - | --------- | - |  | - | --------- | -
|                                                                               |  | 13-week period ended |           | 39-week period ended
|                                                                               |  |                      |           |                     
|                                                                               |  | September 29, 2002   |           | September 30, 2001   |  | September 29, 2002 |           | September 30, 2001
|                                                                               |  |                      |           |                      |  |                    |           |                   
|Net loss attributable to common stockholders                                   |  | $                    | (4,762    | )                    |  | $                  | (1,862    | )                  |  | $ | (9,474    | ) |  | $ | (8,542    | )
|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 |  
|Basic and diluted net loss per share                                           |  | $                    | (0.81     | )                    |  | $                  | (0.32     | )                  |  | $ | (1.62     | ) |  | $ | (2.62     | )
|Antidilutive securities not included in diluted net loss
per share calculation |  |                      |           |                      |  |                    |           |                    |  |   |           |   |  |   |           |  
|Options to purchase common stock                                               |  |                      | 1,102,549 |                      |  |                    | 954,643   |                    |  |   | 1,102,549 |   |  |   | 954,643   |  
|Convertible debt                                                               |  |                      | 1,041,667 |                      |  |                    |          |                    |  |   | 1,041,667 |   |  |   |          |  
|Warrants to purchase common stock                                              |  |                      | 1,180,404 |                      |  |                    | 930,404   |                    |  |   | 1,180,404 |   |  |   | 930,404   |  

3. Convertible debt, mandatorily redeemable convertible preferred stock and
stockholders equity

In connection with a $3 million private placement offering of shares of
Series C preferred stock in January and February 2001, the Company issued
approximately 500,000 shares at $6.00 per share. At the time of issuance of
the Series C preferred stock, the Company determined that the fair value of its
common stock exceeded the conversion price of the convertible preferred stock.
As a result, the Company recorded a beneficial conversion feature in accordance
with EITF 00- 27 Application of Issue 98-5 to Certain Convertible Instruments
at the time of issuance of the preferred stock. Accordingly, the beneficial
conversion feature was calculated as of January 29, 2001, the commitment date,
as the difference between the conversion price and the fair value of the common
stock multiplied by the number of shares into which the security was
convertible (intrinsic value). The Company recorded a beneficial conversion
feature of approximately $3 million. The beneficial conversion feature is
analogous to a dividend and was being recognized as a return to the preferred
shareholders over the period from date of issuance to the redemption date
(October 2005) using the effective interest yield method. As of May 1, 2001,
the beneficial conversion feature of $3.0 million was fully amortized upon the
conversion of the Series C preferred stock to common stock. This beneficial
conversion feature was recognized as a dividend, increasing the net loss
attributable to common stockholders.

The warrants outstanding to purchase 907,240 (947,817 as adjusted for
anti-dilution) shares of Series C preferred stock were converted into warrants
to purchase common stock on May 7, 2001. In February 2001, the Company
modified the warrants to remove the automatic expiration date upon an initial
public offering, thereby allowing the warrant holders the ability to exercise
the warrants through the original expiration date. This modification initially
resulted in a non-cash charge to expense of approximately $635,000 at the time
of the initial public offering, related to approximately 100,000 warrants held
by an officer of the Company. This charge to expense was reversed as of
September 30, 2001 when the market price of the Companys common stock dropped
to a level below the exercise price of $6.00.

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On June 18, 2002, the Company entered into a Securities Purchase Agreement
with Laurus Master Fund, Ltd. in connection with the issuance of a 14%
convertible note to the Laurus Master Fund, Ltd. in the amount of $1.25 million
and a warrant to purchase 250,000 shares of common stock at exercise prices
ranging from $1.43 to $1.95. The note matures on December 18, 2003, and is
collateralized by all of the Companys assets. The note is initially
convertible into 1,041,667 shares of common stock. Net proceeds to the Company
after paying escrow fees, legal fees of Laurus and a fee to Laurus fund
manager were $1.14 million. The Company recorded a debt discount of
approximately $225,000 related to the issuance of the warrants and the
beneficial conversion feature. The note was convertible into common stock from
the date of issuance at an initial conversion price of $1.20 per share. If the
Company elects to convert at a time when the market price is less than $1.50
per share, the conversion price would be at a discount to market. Accordingly,
the Company fully recognized the beneficial conversion feature of approximately
$112,000 as interest expense during the period. The debt discount related to
the warrant is being amortized to interest expense over the term of the note.

On August 30, 2002, the Company entered into a $1.0 million nonconvertible
revolving credit line based upon and secured by the Companys accounts
receivable. A fee equal to 0.0667% is applied to the outstanding daily balance
(equivalent to 2% per month). As of September 29, 2002, the Company qualified
for approximately $0.36 million under this credit line and this amount had been
fully drawn. The credit line has a term of 12 months.

4. Commitments and contingencies

The Company is subject to various legal proceedings and claims that arise
in the ordinary course of business. Company management currently believes that
resolution of such legal matters will not have a material adverse impact on the
Companys financial position, results of operations or cash flows.

5. Segment information

The Company changed its segment disclosures in the fourth quarter of
fiscal 2001, to more closely match how it currently manages its business. In
previous periods, the Company disclosed two reportable segments: Retail, and
Wholesale and Other. Beginning in the fourth quarter of fiscal 2001, the
Company has managed its business through four reportable segments: Retail,
Branded Sales, Kitchens and General and Administrative. Retail consists of
sales generated through the Companys cafés. Branded Sales consists of two
subgroups: 1) box lunch, catering and vending and 2), wholesale and grocery.
Branded Sales subgroups consist of sales that are aggregated because they have
similar economic characteristics. Kitchens consist of unallocated cost of
products and packaging, along with unallocated costs of kitchen operations.
General and Administrative consists of all costs incurred by the corporate
office as well as those administrative costs incurred by Retail. Management
evaluates segment performance primarily based on sales and segment operating
income (loss). Prior periods have been restated to reflect the new
classifications. Following the anticipated fourth quarter closure of the
kitchens, the kitchen segment will no longer exist.

In the table below and elsewhere in this report, EBITDA represents
earnings before interest income and expense, income taxes and depreciation and
amortization.

The following table presents certain financial information for each segment
(amounts in thousands).

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Briazz, Inc.
Segment Information (in thousands)
(unaudited)

|                                       |                                 |   |                      |        |                         |   |               |        |               |   |         |        |   |   |         |        |  
|-------------------------------------- | ------------------------------- | - | -------------------- | ------ | ----------------------- | - | ------------- | ------ | ------------- | - | ------- | ------ | - | - | ------- | ------ | -
|                                       |                                 |   | Thirteen weeks ended |        | Thirty-nine weeks ended
|                                       |                                 |   |                      |        |                        
|                                       |                                 |   | September 29,        |        | September 30,           |   | September 29, |        | September 30,
|                                       |                                 |   | 2002                 |        | 2001                    |   | 2002          |        | 2001         
|                                       |                                 |   |                      |        |                         |   |               |        |              
|Retail                                 |                                 |   |                      |        |                         |   |               |        |               |   |         |        |   |   |         |       
|Net Sales                              |                                 | $ | 5,681                |        |                         | $ | 5,642         |        |               | $ | 17,071  |        |   | $ | 17,426  |       
|Cost of food and packaging             |                                 |   | (2,046               | )      |                         |   | (2,055        | )      |               |   | (6,165  | )      |   |   | (6,268  | )     
|                                       |                                 |   |                      |        |                         |   |               |        |               |   |         |        |   |   |         |       
|                                       |                                 |   | 3,635                |        |                         |   | 3,587         |        |               |   | 10,906  |        |   |   | 11,158  |       
|Cost of operations                     |                                 |   | (5,665               | )      |                         |   | (3,071        | )      |               |   | (12,494 | )      |   |   | (9,078  | )     
|                                       |                                 |   |                      |        |                         |   |               |        |               |   |         |        |   |   |         |       
|Income (loss) from operations          |                                 | $ | (2,030               | )      |                         | $ | 516           |        |               | $ | (1,588  | )      |   | $ | 2,080   |       
|                                       |                                 |   |                      |        |                         |   |               |        |               |   |         |        |   |   |         |       
|EBITDA                                 |                                 | $ | (1,440               | )      |                         | $ | 926           |        |               | $ | (25     | )      |   | $ | 3,281   |       
|                                       |                                 |   |                      |        |                         |   |               |        |               |   |         |        |   |   |         |       
|Branded Sales                          |                                 |   |                      |        |                         |   |               |        |               |   |         |        |   |   |         |       
|                                       | Box Lunch, Catering and Vending |   |                      |        |                         |   |               |        |               |   |         |        |   |   |         |        |  
|                                       | Net Sales                       |   | $                    | 1,185  |                         |   | $             | 1,407  |               |   | $       | 3,854  |   |   | $       | 4,205  |  
|                                       | Cost of food and packaging      |   |                      | (398   | )                       |   |               | (462   | )             |   |         | (1,197 | ) |   |         | (1,449 | )
|                                       |                                 |   |                      |        |                         |   |               |        |               |   |         |        |   |   |         |       
|                                       |                                 |   | 787                  |        |                         |   | 945           |        |               |   | 2,657   |        |   |   | 2,756   |       
|                                       |                                 |   |                      |        |                         |   |               |        |               |   |         |        |   |   |         |       
|                                       | Wholesale and Grocery           |   |                      |        |                         |   |               |        |               |   |         |        |   |   |         |        |  
|                                       | Net Sales                       |   |                      | 908    |                         |   |               | 895    |               |   |         | 2,396  |   |   |         | 2,968  |  
|                                       | Cost of food and packaging      |   |                      | (461   | )                       |   |               | (464   | )             |   |         | (1,261 | ) |   |         | (1,470 | )
|                                       |                                 |   |                      |        |                         |   |               |        |               |   |         |        |   |   |         |       
|                                       |                                 |   | 447                  |        |                         |   | 431           |        |               |   | 1,135   |        |   |   | 1,498   |       
|                                       |                                 |   |                      |        |                         |   |               |        |               |   |         |        |   |   |         |       
|                                       | Total Branded Sales             |   |                      |        |                         |   |               |        |               |   |         |        |   |   |         |        |  
|                                       | Net Sales                       |   |                      | 2,093  |                         |   |               | 2,302  |               |   |         | 6,250  |   |   |         | 7,173  |  
|                                       | Cost of food and packaging      |   |                      | (859   | )                       |   |               | (926   | )             |   |         | (2,458 | ) |   |         | (2,919 | )
|                                       |                                 |   |                      |        |                         |   |               |        |               |   |         |        |   |   |         |       
|                                       |                                 |   | 1,234                |        |                         |   | 1,376         |        |               |   | 3,792   |        |   |   | 4,254   |       
|                                       | Cost of operations              |   |                      | (1,108 | )                       |   |               | (1,235 | )             |   |         | (3,248 | ) |   |         | (3,544 | )
|                                       |                                 |   |                      |        |                         |   |               |        |               |   |         |        |   |   |         |       
|                                       | Income from operations          |   | $                    | 126    |                         |   | $             | 141    |               |   | $       | 544    |   |   | $       | 710    |  
|                                       |                                 |   |                      |        |                         |   |               |        |               |   |         |        |   |   |         |       
|                                       | EBITDA                          |   | $                    | 189    |                         |   | $             | 186    |               |   | $       | 737    |   |   | $       | 856    |  
|                                       |                                 |   |                      |        |                         |   |               |        |               |   |         |        |   |   |         |       
|Kitchens                               |                                 |   |                      |        |                         |   |               |        |               |   |         |        |   |   |         |       
|Unallocated cost of food and packaging |                                 | $ | (90                  | )      |                         | $ | (118          | )      |               | $ | (189    | )      |   | $ | (282    | )     
|Unallocated cost of operations         |                                 |   | (924                 | )      |                         |   | (849          | )      |               |   | (2,678  | )      |   |   | (2,573  | )     
|                                       |                                 |   |                      |        |                         |   |               |        |               |   |         |        |   |   |         |       
|Loss from operations                   |                                 | $ | (1,014               | )      |                         | $ | (967          | )      |               | $ | (2,867  | )      |   | $ | (2,855  | )     
|                                       |                                 |   |                      |        |                         |   |               |        |               |   |         |        |   |   |         |       
|EBITDA                                 |                                 | $ | (847                 | )      |                         | $ | (820          | )      |               | $ | (2,373  | )      |   | $ | (2,419  | )     
|                                       |                                 |   |                      |        |                         |   |               |        |               |   |         |        |   |   |         |       
|General and Administrative             |                                 |   |                      |        |                         |   |               |        |               |   |         |        |   |   |         |       
|Cost of operations                     |                                 | $ | (1,732               | )      |                         | $ | (1,638        | )      |               | $ | (5,356  | )      |   | $ | (4,335  | )     
|                                       |                                 |   |                      |        |                         |   |               |        |               |   |         |        |   |   |         |       
|EBITDA                                 |                                 | $ | (1,600               | )      |                         | $ | (1,597        | )      |               | $ | (4,979  | )      |   | $ | (4,225  | )     
|                                       |                                 |   |                      |        |                         |   |               |        |               |   |         |        |   |   |         |       
|Total                                  |                                 |   |                      |        |                         |   |               |        |               |   |         |        |   |   |         |       
|Net Sales                              |                                 | $ | 7,774                |        |                         | $ | 7,944         |        |               | $ | 23,321  |        |   | $ | 24,599  |       
|Cost of food and packaging             |                                 |   | (2,995               | )      |                         |   | (3,099        | )      |               |   | (8,812  | )      |   |   | (9,469  | )     
|                                       |                                 |   |                      |        |                         |   |               |        |               |   |         |        |   |   |         |       
|                                       |                                 |   | 4,779                |        |                         |   | 4,845         |        |               |   | 14,509  |        |   |   | 15,130  |       
|Cost of operations                     |                                 |   | (9,429               | )      |                         |   | (6,793        | )      |               |   | (23,776 | )      |   |   | (19,530 | )     
|                                       |                                 |   |                      |        |                         |   |               |        |               |   |         |        |   |   |         |       
|Loss from operations                   |                                 | $ | (4,650               | )      |                         | $ | (1,948        | )      |               | $ | (9,267  | )      |   | $ | (4,400  | )     
|                                       |                                 |   |                      |        |                         |   |               |        |               |   |         |        |   |   |         |       
|EBITDA                                 |                                 | $ | (3,698               | )      |                         | $ | (1,305        | )      |               | $ | (6,640  | )      |   | $ | (2,507  | )     
|                                       |                                 |   |                      |        |                         |   |               |        |               |   |         |        |   |   |         |       

7. Asset Impairment

In August 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standard (SFAS) No. 144, Accounting for
the Impairment or Disposal of Long-Lived Assets. The provisions of SFAS No.
144 are effective for financial statements issued for fiscal years beginning
after December 15, 2001, and interim periods within those fiscal years. SFAS
No. 144 requires recording an impairment loss if the carrying amount of a
long-lived asset is not recoverable from its undiscounted cash flows and to
measure the impairment loss as the difference between the carrying amount

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and fair value of the asset. The Company evaluates at each balance sheet
date whether events and circumstances have occurred that indicate possible
impairment. During the quarter ended September 29, 2002, the Company wrote down
approximately $2.1 million of long-lived assets in accordance with SFAS No.
144. These write-downs consisted primarily of leasehold improvements at certain
café locations.

8. Equity-based compensation

Stock options

In February 2002, the board of directors approved a grant of option of
approximately 29,000 shares of common stock to employees with exercise prices
of $1.66 per share. Since the exercise price was equal to the fair value at
the date of grant, no deferred compensation was recognized.

In June 2002, the board of directors approved a grant of options of
approximately 81,000 shares of common stock to employees with exercise prices
of $1.26 per share. Since the exercise price was equal to the fair value at
the date of grant, no deferred compensation was recognized.

In August 2002, the board of directors approved a grant of options of
approximately 120,000 shares of common stock to employees with exercise prices
of $0.69 per share. Since the exercise price was equal to the fair value at
the date of board approval, no deferred compensation was recognized.

8. Subsequent events

On October 3, 2002, the Company completed a $0.5 million financing by
issuing a nonconvertible note to a commercial bank. The note bears interest at
an annual rate of 3.590% and is secured by a certificate of deposit from the
Companys CEO, Victor D. Alhadeff. The note matures on March 31, 2003.
Interest on the note is payable monthly.

The Company is currently in 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. Flying Food Group is a provider of in-flight catering
services at major international airports in the United States, and freshly-made
food products for grocery and specialty retail. The notes would be secured by
the assets of the Company and would be convertible into the common stock of the
Company at $1.00 per share, at the option of the investors, or upon the
occurrence of certain events, such as a subsequent equity financing. The
investor would have registration rights covering the shares issuable upon
conversion of the notes. The investment in the convertible notes would be made
over the next few months in a series of closings. There can be no assurance
that the negotiations with the investor will be successful or that the offering
will be completed on the terms described, or at all. In addition to the $2.0
million debt financing, the Company is in initial discussions with
institutional investors for an additional $3.0 to $4.0 million of capital.
There can be no assurance that the negotiations with institutional investors
will be successful or that the offering will be completed.

While the Company negotiates these additional financings, it is attempting
to conserve cash to the greatest extent permitted while continuing to operate
its business by reducing expenses and by delaying or deferring payments to
certain of its suppliers and on certain of its leases. As of the date of this
report, FFG or its affiliates have purchased demand notes having an aggregate
principal amount of $0.35 million. These notes are secured by the Companys
assets and will convert into, and be part of, the $2.0 million investment once
the terms of such investment has been finalized. The Company has used the
proceeds received to date, and will use the proceeds received in the future, to
pay down existing debts and for general working capital. There can be no
assurance that the investor will purchase additional demand notes in amounts
sufficient to meet the Companys immediate capital needs. The investor may
require payment on the demand notes at any time.

In connection with the $2.0 million financing, the Company is negotiating
with FFG to produce its food at FFGs central kitchens. FFG has central
kitchen facilities in each of the Companys geographic markets. The Companyss
intent is to close its own central kitchens following the move of the food
preparation operations to FFG. Briazz anticipates that all of its central
kitchens will be closed by early December. The estimated charge to expense
associated with closing the kitchens is approximately $2.1 million.

The Company proposes to enter into a management services contract with
FFG, outlining the terms on which the Company will outsource its food
production and provide other services to the Company. Under the proposed terms
of the agreement, the Company would grant FFG a five-year right to purchase up
to 2 million shares of common stock at $1.10 per share. FFG would have
registration rights covering the shares issuable upon exercise of the right.
Unless and until the Company obtained shareholder approval, exercise of the
right, together with conversion of the convertible notes, would be

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limited to 19.9% of the Companys outstanding common stock.




ITEM 2: MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This report, including the following discussion of our financial condition
and results of operations, contains forward-looking statements within the
meaning of section 27A of the Securities Act of 1933 and section 21E of the
Securities Exchange Act of 1934. Our actual results and the timing of certain
events could differ materially from those anticipated in these forward-looking
statements as a result of certain factors including, but not limited to, those
described in connection with the forward-looking statement, fluctuation of the
Companys operating results, the Companys ability to negotiate a management
services agreement with Flying Food Group, LLC (FFG) and to obtain additional
financing from FFG and other investors on terms favorable to the Company, or at
all, the ability of the company to compete successfully, office occupancy, the
ability of the company to maintain current café locations and secure new ones,
food and labor costs, operation in only four geographic areas and reliance upon
distributors and wholesale customers and the factors listed on Exhibit 99.1 to
this report, which factors are hereby incorporated by reference in this report.

In some cases, you can identify forward-looking statements by our use of
words such as may, will, should, could, expect, plan, intend,
anticipate, believe, estimate, predict, potential or continue or
the negative or other variations of these words, or other comparable words or
phrases.

Although we believe the expectations reflected in our forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements or other future events. Moreover,
neither we nor anyone else assumes responsibility for the accuracy and
completeness of forward-looking statements. We are under no duty to update any
of our forward-looking statements after the date of this filing. You should
not place undue reliance on forward-looking statements.

OVERVIEW

BRIAZZ prepares and sells high-quality, branded lunch and breakfast foods
for the on-the-go consumer. We sell our products primarily through our
Company-operated cafés, through delivery of box lunches and catered platters
directly to corporate customers and through selected wholesale accounts. Our
core products are sandwiches, salads and soups, which are complemented by a
variety of fresh baked goods, premium juices, Starbucks coffees and fresh
fruit.

We currently operate 46 cafés in the Seattle, San Francisco, Chicago and
Los Angeles metropolitan areas, a net increase of three cafés since December
30, 2001. The three café increase in 2002 is due to the opening of a café in
the first quarter and four cafés in the second quarter of 2002 as well as the
closure of a location in the first quarter and another in the third quarter of
2002. The first closure resulted from decreased sales as the cafés building
occupancy shifted from normal office occupancy to a data-center. The second
café closure resulted from an occupancy level significantly below capacity in
the building the café was located. We discontinued plans to open one more
additional café (which would have been the sixth café opened during 2002)
following the change of the development site to a less desirable location. Due
to the discontinuation of this planned opening and due to capital restrictions,
we do not currently plan to open any additional cafés during 2002. Our growth
strategy is to open new cafés in our existing markets and, when appropriate,
enter into new markets.

During the fourth quarter 2001, we reduced our workforce at our general
and administrative office. The cost of this reduction approximated the salary
expense in the fourth quarter of 2001 that would have been incurred without the
reduction. The expected annual cash savings in the fiscal year 2002 will
approximate $0.64 million.

On May 20, 2002, we began testing our new frozen panini products in eight
Target stores (four in Seattle, four in Chicago), and we began testing our
fresh food products in 18 Albertsons stores in southern California on July 16,
2002.

On June 18, 2002, we entered into a Securities Purchase Agreement with
Laurus Master Fund, Ltd. in connection with the issuance of a 14% convertible
note to the Laurus Master Fund, Ltd. in the amount of $1.25 million and a
warrant to purchase 250,000 shares of common stock at exercise prices ranging
from $1.43 to $1.95. The note matures on December 18, 2003, and is
collateralized by all of our assets. The note is initially convertible into
1,041,667 shares of our common stock. The conversion price and the number of
shares into which the note is convertible are subject to adjustment for stock
splits, dilutive issuances, defaults and, in the case of conversion at the
Companys option, the prevailing market price at the time of such conversion.
Net proceeds to us after paying escrow fees, legal fees of Laurus and a fee to
Laurus fund manager were $1.14 million. The Company recorded a debt discount
of approximately $0.22 million related to the issuance of the warrants and the
beneficial conversion features. The note was convertible into common stock
from the date of issuance at $1.20 per share.

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Accordingly, the Company fully recognized the beneficial conversion feature of
approximately $0.11 million as interest expense during the period. For a more
detailed description of the financing, see Sales of Unregistered Securities
in the Companys Quarterly Report on Form 10-Q for the quarter ended June 30,
2002, and for its impact on our financial position, see Liquidity and Capital
Resources. For certain risks related to this financing, see the risk factors
set forth in Exhibit 99.1 to this report.

During the third quarter 2002, we made a reduction in our entire workforce
of approximately twenty percent. The cost of this reduction approximated the
salary expense in the third quarter of 2002 that would have been incurred
without the reduction. The expected cash savings in the fourth quarter of 2002
will approximate $0.64 million.

On August 30, 2002, the Company entered into a $1.0 million nonconvertible
revolving credit line based upon and secured by the Companys accounts
receivable. A fee equal to 0.0667% is applied to the outstanding daily balance
(equivalent to 2% per month). As of September 29, 2002, the Company qualified
for approximately $0.36 million under this credit line and this amount had been
fully drawn. The credit line has a term of 12 months. As of November 10,
2002, the Company qualified for $0.54 million, which amount has been fully
drawn.

On October 3, 2002, the Company completed a $0.5 million financing by
issuing a nonconvertible note to a commercial bank. The note bears interest at
an annual rate of 3.590% and is secured by a certificate of deposit from Victor
D. Alhadeff. The note matures on March 31, 2003. Interest on the note is
payable monthly.

Commencing on October 21, 2002, Briazz began supplying sandwiches and
salads to 40 Starbucks locations in the Chicago metro area as part of a test
program to introduce new sandwich and salad menus at Starbucks in Chicago. The
test program will continue through December 31, 2002.

The Company is currently in 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. Flying Food Group is a provider of in-flight catering
services at major international airports in the United States, and freshly-made
food products for grocery and specialty retail. The notes would be secured by
the assets of the Company and would be convertible into the common stock of the
Company at $1.00 per share, at the option of the investors, or upon the
occurrence of certain events, such as a subsequent equity financing. The
investor would have registration rights covering the shares issuable upon
conversion of the notes. The investment in the convertible notes would be made
over the next few months in a series of closings. There can be no assurance
that the negotiations with the investor will be successful or that the offering
will be completed on the terms described, or at all. In addition to the $2.0
million debt financing, the Company is in initial discussions with
institutional investors for an additional $3.0 to $4.0 million of capital.
There can be no assurance that the negotiations with institutional investors
will be successful or that the offering will be completed.

While the Company negotiates these additional financings, it is attempting
to conserve cash to the greatest extent permitted while continuing to operate
its business by reducing expenses and by delaying or deferring payments to
certain of its suppliers and on certain of its leases. FFG has
assisted the Company in negotiating more favorable payment terms with
some of the Companys suppliers as part of the transition of its production to FFG. As of the date of this
report, FFG or its affiliates have purchased demand notes having an aggregate
principal amount of $0.35 million. These notes are secured by the Companys
assets and will convert into, and be part of, the $2.0 million investment once
the terms of such investment has been finalized. The Company has used the
proceeds received to date, and will use the proceeds received in the future, to
pay down existing debts and for general working capital. There can be no
assurance that the investor will purchase additional demand notes in amounts
sufficient to meet the Companys immediate capital needs. The investor may
require payment on the demand notes at any time.

In connection with the $2.0 million financing, the Company is negotiating
with FFG to produce its food at FFGs central kitchens. FFG has central
kitchen facilities in each of the Companys geographic markets. The Companys
intent is to close its own central kitchens following the move of the food
preparation operations to FFG. Briazz anticipates that all of its central
kitchens will be closed by mid December. The estimated charge to expense
associated with closing the kitchens is approximately $2.1 million.

The Companys central kitchens are currently underutilized. The Company
reported $3.7 million of unallocated central kitchen losses in 2001 and $2.9
million in the first three quarters of 2002. The Company believes that
outsourcing its food production to FFG would maintain the advantages of central
kitchens, while limiting overhead. The Company believes that outsourcing its
food production would also allow it to move into new geographic markets more
quickly, and allow it to work with FFG cooperatively to better serve shared
customers. For example, Starbucks is a customer of both the Company and FFG.
If the Company successfully negotiates an agreement with FFG, it anticipates
that the two companies would work cooperatively to better serve Starbucks.

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The Company proposes to enter into a management services contract with
FFG, outlining the terms on which the Company will outsource its food
production. Under the proposed terms of the agreement, the Company would grant
FFG a five-year right to purchase up to 2 million shares of common stock at
$1.10 per share. FFG would have registration rights covering the shares
issuable upon exercise of the right. Unless and until the Company obtained
shareholder approval, exercise of the right, together with conversion of the
convertible notes, would be limited to 19.9% of our outstanding common stock.

There can be no assurance that the negotiations with FFG regarding food
preparation will be successful or that the transition to a third-partys
central kitchens for food preparation will be completed.

In conjunction with the closure of the central kitchens, the Company will
reduce the operational complexity of the business and the related general and
administrative expenses. In addition to the expected savings resulting from
its central kitchen closures, the Company expects to reduce its overhead by
eliminating approximately 15 to 17 corporate positions. The Company has begun
and expects to complete these reductions by mid 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. The
savings from the recent work force reduction may not be realized until the
first quarter of 2002.

Due to the Companys decision to move its food preparation to FFG, the
Company is reevaluating its grocery business and has withdrawn from the test
with Albertsons.

RESULTS OF OPERATIONS 13-WEEK PERIOD ENDED SEPTEMBER 29, 2002 COMPARED WITH 13-WEEK PERIOD ENDED SEPTEMBER 30, 2001

Sales

Total sales decreased by $0.17 million, or 2.1%, from $7.94 million to
$7.77 million.

Retail sales increased by $0.04 million, or 0.7%, from $5.64 million to
$5.68 million. This increase was due to the opening of five additional cafés
during the fiscal year 2001 and five cafés opening in the first half of 2002,
offset by the closure of two cafés in 2002. Same-store sales decreased by
$0.67 million, or 12.5%, from $5.36 million to $4.69 million. Same-store sales
consist only of sales from cafés, and do not include Branded Sales. The
decrease in same-store sales was primarily due to the decrease in occupancy
rates of many of the buildings in which the Company is located.

Branded sales decreased by $0.21 million, or 9.1%, from $2.30 million to
$2.09 million. This decrease was primarily due to a decrease in Tullys and
QFCs sales.

Operating expenses

Operating expenses consist of costs of food and packaging, occupancy,
labor, depreciation and amortization, other operating expenses, general and
administrative and provision for asset impairment and store closure. Total
operating expenses increased by $2.53 million, or 25.6%, from $9.89 million to
$12.42 million. As a percentage of sales, our operating expenses increased
from 124.5% to 159.8%. The increase in operating expense as a percentage of
sales was primarily due to the costs related to occupancy expenses for new
retail locations and decreased sales.

Cost of food and packaging decreased by $0.10 million, or 3.4%, from $3.10
million to $3.00 million due primarily to lower sales volume. Cost of food and
packaging decreased as a percentage of sales from 39.0% to 38.5%.

Cost of food and packaging for retail sales decreased by $0.01 million, or
0.4%, from $2.05 million to $2.04 million. This decrease was due primarily to
lower sales volume. Cost of food and packaging for branded sales decreased by
$0.07 million, or 7.2%, from $0.93 million to $0.86 million. The decrease for
branded sales was due to the lower sales volumes. Unallocated cost of food and
packaging for kitchens decreased by $0.03 million, or 23.7%, from $0.12 million
to $0.09 million. This decrease was due to implementing a series of changes in
the management and operations of our central kitchens to reduce our operating
costs, particularly with respect to unit labor costs.

Occupancy expense consists of costs related to the leasing of retail space
for our cafés and our central kitchens. Occupancy expense increased by $0.13
million, or 13.3%, from $0.99 million to $1.12 million. This increase was due
to the

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opening of five additional cafés during the fiscal year 2001 and five
cafés in the first half of 2002, offset by the closure of two cafés in 2002.
As a percentage of sales, occupancy expenses increased from 12.5% to 14.4%,
primarily due to decreased sales. Our rents are fixed or variable determined
as a percentage of sales, or a combination of both.

Labor expenses consist of wages and salaries paid to employees. Labor
expenses decreased by $0.03 million, or 1.2%, from $2.84 million to $2.81
million. This decrease was due to the reduction in workforce in the third
quarter of 2002. As a percentage of sales, labor expenses increased from 35.8%
to 36.1%. This increase was primarily due to decreased sales. Labor expenses
are expected to decrease following the closure of the kitchens.

Depreciation and amortization relates to leasehold improvements, equipment
and vehicles. Depreciation and amortization expense increased by $0.31
million, or 48.4%, from $0.64 million to $0.95 million, primarily as a result
of opening new cafés. As a percentage of sales, depreciation and amortization
increased from 8.1% to 12.3%. This increase was primarily due to decreased
sales.

Other operating expenses consist of direct operating, marketing, repair
and maintenance expense. Other operating expenses increased by $0.07 million,
or 13.2%, from $0.51 million to $0.58 million, primarily as a result of opening
new cafés. As a percentage of sales, other operating expenses increased from
6.4% to 7.4%. This increase was primarily due to decreased sales.

General and administrative expenses relate to the support functions
performed by our corporate office, such as finance, human resources, marketing,
food development and information systems. This expense primarily consists of
salaries of our corporate executives, senior management and staff, and our
corporate office lease and related office expenses. General and administrative
expenses remained the same at $1.81 million. As a percentage of sales, general
and administrative expenses increased from 22.8% to 23.2%, primarily due to
decreased sales. General and administrative expenses are to decrease beginning
in 2003 following the 2002 fourth quarter personnel reductions.

Provision for asset impairment and store closure relates to the write-down
of leasehold improvements at some café locations. Provision for asset
impairment and store closure increased by $2.17 million in the thirteen weeks
ended September 29, 2002, due to the closure of the E-Port store located in
Chicago in the third quarter of 2002 and a write down of fixed assets. We
performed an impairment analysis of our café locations by comparing the
carrying amount of the long-term assets to their associated undiscounted cash
flow. Because the carrying amount exceeded the associated undiscounted cash
flow we recorded an impairment charge. No other store closures are planned in
fiscal 2002.

Other (Expense) Income

Other (expense) income includes interest and other expense and interest
and other income. Other (expense) income decreased by $0.20 million, or
230.2%, from $.09 million to ($.11) million. This decrease was due to the
interest expense associated with the new note payable obtained in the second
quarter of 2002 and lower interest income in 2002 resulting from lower cash and
cash equivalents. As a percentage of sales, other (expense) income increased
from 1.1% to (1.4%) due to the new note payable.

Net Loss

Net loss increased by $2.90 million, or 155.7%, from $1.86 million to
$4.76 million. This increase was primarily due to decreased same-store and
branded sales and increased occupancy expense, depreciation and amortization,
and the asset impairment of $2.11 million. As a percentage of sales, net loss
increased from 23.4% to 61.3%. The Company recognized no tax benefit from its
losses in 2002 and 2001.

EBITDA represents earnings before interest income and expense, income
taxes and depreciation and amortization. EBITDA for the 13-week periods ended
September 29, 2002 and September 30, 2001 was ($3.70) million and ($1.30)
million, respectively.

RESULTS OF OPERATIONS 39-WEEK PERIOD ENDED SEPTEMBER 29, 2002 COMPARED WITH
39-WEEK PERIOD ENDED SEPTEMBER 30, 2001

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Sales

Total sales decreased by $1.28 million, or 5.2%, from $24.60 million to
$23.32 million.

Retail sales decreased by $0.36 million, or 2.0%, from $17.43 million to
$17.07 million. This decrease was primarily due to reduced same store sales
which more than offset the sales from cafés opened in 2001 and 2002.
Same-store sales decreased by $2.13 million, or 12.6%, from $16.93 million to
$14.80 million. Same-store sales consist only of sales from cafés, and do not
include Branded sales. The decrease in same-store sales was primarily due to
the decrease in occupancy rates of many of the buildings in which we are
located.

Branded sales decreased by $0.92 million, or 12.9%, from $7.17 million to
$6.25 million. This decrease was primarily due to a decrease in Tullys and
QFCs sales and the discontinuation of sales to Kozmo.com. Sales to Kozmo.com
were eliminated due to discontinuance of that company.

Operating expenses

Operating expenses consist of cost of food and packaging, occupancy,
labor, depreciation and amortization, other operating, general and
administrative and provision for asset impairment and store closure. Total
operating expenses increased by $3.59 million, or 12.4%, from $29.00 million to
$32.59 million. As a percentage of sales, our operating expenses increased
from 117.9% to 139.7%. The increase in operating expense as a percentage of
sales was primarily due to the costs related to being a public company,
occupancy expenses for new retail locations , decreased sales, and the asset
impairment.

Cost of food and packaging decreased by $0.66 million, or 6.9%, from $9.47
million to $8.81 million due to lower sales volume. Cost of food and packaging
decreased as a percentage of sales from 38.5% to 37.8%.

Cost of food and packaging for retail sales decreased by $0.10 million, or
1.6%, from $6.27 million to $6.17 million. Cost of food and packaging for
branded sales decreased by $0.46 million, or 15.8%, from $2.92 million to $2.46
million. The decrease for both retail sales and branded sales was due to the
lower sales volumes. Unallocated cost of food and packaging for kitchens
decreased by $0.09 million, or 33.0%, from $0.28 million to $0.19 million.
This decrease was due to implementing a series of changes in the management and
operations of our central kitchens to reduce our operating costs, particularly
with respect to unit labor costs.

Occupancy expense consists of costs related to the leasing of retail space
for our cafés and our central kitchens. Occupancy expense increased by $0.29
million, or 10.3%, from $2.86 million to $3.15 million. This increase was due
to the opening of five additional cafés during the fiscal year 2001 and five
cafés in the first half of 2002, offset by the closure of two cafés in 2002.
As a percentage of sales, occupancy expense increased from 11.6% to 13.5%,
primarily due to decreased sales. Our rents are fixed or variable determined
as a percentage of sales, or a combination of both.

Labor expenses consist of wages and salaries paid to employees. Labor
expenses remained the same at $8.43 million. This stayed constant despite the
opening of five additional cafés during the fiscal year 2001 and five cafés in
the first half of 2002, offset by the closure of two cafés in 2002 because of a
workforce reduction in the fourth quarter of 2001 and the third quarter of
2002. As a percentage of sales, labor expenses increased from 34.3% to 36.1%.
This increase was primarily due to decreased sales.

Depreciation and amortization relates to leasehold improvements, equipment
and vehicles. Depreciation and amortization expense increased by $0.74
million, or 38.6%, from $1.89 million to $2.63 million, primarily as a result
of opening new cafés. As a percentage of sales, depreciation and amortization
increased from 7.7% to 11.3%. This increase was primarily due to decreased
sales.

Other operating expenses consist of direct operating, marketing, repair
and maintenance expense. Other operating expenses increased by $0.34 million,
or 22.7%, from $1.49 million to $1.83 million, primarily as a result of opening
new cafés. As a percentage of sales, other operating expenses increased from
6.1% to 7.9%. This increase was primarily due to decreased sales.

General and administrative expenses relate to the support functions
performed by our corporate office, such as finance, human resources, marketing,
food development and information systems. This expense primarily consists of
salaries of our corporate executives, senior management and staff, and our
corporate office lease and related office expenses. General and

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administrative expenses increased by $0.70 million, or 14.4%, from $4.85
million to $5.55 million. The increase was primarily due to expenses relating
to being a public company such as additional legal and accounting expenses. As
a percentage of sales, general and administrative expenses increased from 19.7%
to 23.8%, primarily due to decreased sales.

Provision for asset impairment and store closure relates to the write-down
of leasehold improvements at some café locations. Provision for asset
impairment and store closure increased by $2.19 million in the thirty-nine
weeks ended September 29, 2002, due to the closure of the Westin café located
in Seattle in the first quarter of 2002, the closure of the E-Port store
located in Chicago in the third quarter of 2002 and a write down of fixed
assets. We performed an impairment analysis of our café locations by comparing
the carrying amount of the long-term assets to their associated undiscounted
cash flows. Because the carrying amount exceeded the associated undiscounted
cash flows we recorded an impairment charge. No other store closures are
planned in fiscal 2002.

Other (Expense) Income

Other (expense) income includes interest and other expense and interest
and other income. Other (expense) income decreased by $0.39 million, or
218.3%, from $0.18 million to ($0.21) million. This decrease was due to the
interest expense associated with the new note payable obtained in the second
quarter of 2002 and lower interest income in 2002 resulting from lower cash and
cash equivalents. As a percentage of sales, other (expense) income increased
from 0.7% to (0.9%).

Net Loss

Net loss increased by $5.24 million, or 124.2%, from $4.23 million to
$9.47 million. This increase was primarily due to decreased sales and
increased occupancy, general and administrative expenses, and the asset
impairment of $2.11 million. As a percentage of sales, net loss increased from
17.2% to 40.6%. The Company recognized no tax benefit from its losses in 2002
and 2001.

EBITDA for the 39-week periods ended September 29, 2002 and September 30,
2001 was ($6.64) million and ($2.51) million, respectively.

LIQUIDITY AND CAPITAL RESOURCES

Net cash used in operating activities during the 39 weeks ending September
29, 2002 and September 30, 2001 was $4.53 million and $4.43 million,
respectively. Net cash used in operating activities resulted primarily from
net loss before non-cash charges.

Net cash used in investing activities for the 39 weeks ending September
29, 2002 and September 30, 2001 was approximately $2.24 million and $1.90
million, respectively. Net cash used in investing activities resulted from
capital additions primarily related to cafés opened in 2001 and 2002. During
the 39 weeks ended September 29, 2002 we opened five additional cafés.

Net cash provided by financing activities for the 39 weeks ending
September 29, 2002 was approximately $1.34 million. The financing activities
consisted primarily of cash received from the net proceeds of $1.61 million in
debt financing ($1.25 million from Laurus and $0.36 million from revolving line
of credit), and a $0.07 million decrease in the book overdraft. Net cash
provided by financing activities for the 39 week ending September 30, 2001 was
$15.20 million. Net cash provided by financing activities in the first three
quarters of 2001 resulted primarily from the issuance of capital stock, which
was partially offset by financing costs, the repayment of the line of credit of
$2.0 million in May 2001 and scheduled principal repayments primarily relating
to delivery vehicle financing. In January and February 2001, net cash provided
from the issuance of additional shares of Series C preferred stock was $3.0
million. In May 2001, net cash provided from our initial public offering was
approximately $13.7 million.

We have lease obligations in 2002 of $2.9 million which are due primarily
to operating leases on our facilities, of which $2.2 million has been paid.
Capital vehicle leases make up $0.1 million of our total 2002 lease obligation.
A small portion of our 2002 lease obligation is for office equipment. The
increase in rental expense in future years is not material. The lease
obligation amount will increase with the addition of each new café.

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At December 30, 2001, we had the contractual cash obligations as set forth
in the table below. The $1.25 million convertible debt and the $0.36 million
in additional financing is not included in the table. For a description of the
$1.25 million and $0.36 financings, see below:

|                                   |  |       |        |        |  |                |       |       |  |       |       |         |  |   |       |  |  |   |       | 
|---------------------------------- |  | ----- | ------ | ------ |  | -------------- | ----- | ----- |  | ----- | ----- | ------- |  | - | ----- |  |  | - | ----- | 
|                                   |  |       |        |        |  | Less than      |       | 1 - 3 |  | 4 - 5 |       | After 5
|Contractual Obligations            |  | Total |        | 1 year |  | years          |       | years |  | years
|                                   |  |       |        |        |  |                |       |       |  |      
|                                   |  |       |        |        |  | (in thousands) |       |       |  |      
|Capital Lease Obligations          |  | $     | 612    |        |  | $              | 139   |       |  | $     | 278   |         |  | $ | 166   |  |  | $ | 29    | 
|Operating Leases                   |  |       | 14,838 |        |  |                | 2,792 |       |  |       | 5,313 |         |  |   | 4,253 |  |  |   | 2,480 | 
|Other Long-Term Obligations        |  |       | 38     |        |  |                | 38    |       |  |       |      |         |  |   |      |  |  |   |      | 
|                                   |  |       |        |        |  |                |       |       |  |       |       |         |  |   |       |  |  |   |       | 
|Total Contractual Cash
Obligations |  | $     | 15,488 |        |  | $              | 2,969 |       |  | $     | 5,591 |         |  | $ | 4,419 |  |  | $ | 2,509 | 
|                                   |  |       |        |        |  |                |       |       |  |       |       |         |  |   |       |  |  |   |       | 

Since inception we have financed our operations primarily through the
issuance of capital stock and debt. Since inception through September 29,
2002, we have raised cash of approximately $64.2 million from sales of
preferred stock, convertible debt and common stock. In addition to funding
capital expenditures, which have approximated $28.5 million since inception,
cash provided by financing activities has funded our initiatives in business
and market development and related operating losses. Since inception through
the 39 weeks ending September 29, 2002, we have incurred net losses of
approximately $57.6 million. In the near term, operating losses may continue
despite actions taken to reduce negative cash flow from operations. Actions
taken to reduce negative cash flow from operations, including improving
operational efficiencies, cost controls and cutbacks, workforce reductions and
closing of certain unprofitable operating properties, continued during 2002.

The accompanying financial statements have been prepared assuming that we
will continue as a going concern and do not include any adjustments to reflect
the possible future effects on the recoverability of assets and liquidation of
liabilities that may result from this uncertainty. We have incurred
substantial operating losses and negative cash flows from operations since
inception and had an accumulated deficit of $64.5 million at September 29,
2002. These matters raise substantial doubt about our ability to continue as a
going concern. Our ability to continue as a going concern is dependent upon
numerous factors, including our ability to obtain additional financing, our
ability to increase our level of future revenues or our ability to reduce
operating expenses.

On June 18, 2002, we entered into a Securities Purchase Agreement with
Laurus Master Fund, Ltd. in connection with the issuance of a 14% convertible
note to the Laurus Master Fund, Ltd. in the amount of $1.25 million and a
warrant to purchase 250,000 shares of common stock at exercise prices ranging
from $1.43 to $1.95. The note matures on December 18, 2003, and is
collateralized by all of our assets. The note is initially convertible into
1,041,667 shares of out common stock at $1.20 per share. The conversion price
and the number of shares into which the note is convertible are subject to
adjustment for stock splits, dilutive issuances, defaults and, in the case of
conversion at the Companys option, the prevailing market price at the time of
such conversion. Net proceeds to us after paying escrow fees, legal fees of
Laurus and a fee to Laurus fund manager were $1.14 million. The Company
recorded a debt discount of approximately $0.22 million related to the issuance
of the warrants and the beneficial conversion features. The note was
convertible into common stock from the date of issuance. Accordingly, the
Company fully recognized the beneficial conversion feature of approximately
$0.11 million as interest expense during the period. For a more detailed
description of the financing, see Sales of Unregistered Securities in the
Companys Quarterly Report on Form 10-Q for the quarter ended June 30, 2002.
For certain risks related to this financing, see the risk factors set forth in
Exhibit 99.1 to this report. As of September 29, 2002, the unpaid principal
and accrued and unpaid interest under the convertible note was approximately
$1.2 million.

On August 30, 2002, the Company entered into a $1.0 million nonconvertible
revolving credit line based upon and secured by the Companys accounts
receivable. A fee equal to 0.0667% is applied to the outstanding daily balance
(equivalent to 2% per month). As of September 29, 2002, the Company qualified
for approximately $0.36 million under this credit line and this amount had been
fully drawn. The credit line has a term of 12 months.

On October 3, 2002, the Company completed a $0.5 million financing by
issuing a nonconvertible note to a commercial bank. The note bears interest at
an annual rate of 3.59% and is secured by a certificate of deposit from Victor
D. Alhadeff. The note matures on March 31, 2002. Interest on the note is
payable monthly.

The Company is currently in negotiations to offer and sell up to $2.0
million in secured convertible notes to Flying Food Group or one or more of its
affiliates. The Company is also in initial discussions with institutional
investors for an additional $3.0 to $4.0 million of capital. While the Company
negotiates these additional financings, it is attempting to

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conserve cash to the greatest extent permitted while continuing to operate
its business by reducing expenses and by delaying or deferring payments to
certain of its suppliers and on certain of its leases. As of the date of this
report, FFG or its affiliates have purchased demand notes having an aggregate
principal amount of $0.35 million. These notes are secured by the Companys
assets and will convert into, and be part of, the $2.0 million investment once
the terms of such investment has been finalized. The Company has used the
proceeds received to date, and will use the proceeds received in the future, to
pay down existing debts and for general working capital. There can be no
assurance that the investor will purchase additional demand notes in amounts
sufficient to meet the Companys immediate capital needs. The investor may
require payment on the demand notes at any time.

At September 29, 2002, we had cash and cash equivalents of approximately
$0.76 million. Since September 29, 2002, we have used a combination of cash
and cash equivalents, operating revenues and the proceeds of demand notes
purchased by the investors to meet our immediate cash needs; however, we will
need additional capital in the immediate future in order to continue operating
our business. We are attempting to conserve cash by reducing expenses and by
delaying or deferring payments to some of our suppliers and on some of our
leases. We believe that, if we successfully complete our $2.0 million
convertible note financing on terms favorable to us (of which we have already
received $0.35 million in the form of demand notes), the proceeds of the
convertible note financing will be sufficient to meet our anticipated cash
needs for working capital and capital expenditures for the remainder of 2002,
depending upon our fourth quarter revenues and the success of our proposed
outsourcing of central kitchen functions to FFG. Thereafter, we will need to
raise additional capital to finance our operations, as well as to enhance our
operations, fund our expansion and respond to competitive pressures. There can
be no assurance that we will be able to obtain additional financing at terms
favorable to us, or at all, reduce expenses or successfully complete other
steps to continue as a going concern. If we are unable to obtain sufficient
funds to satisfy our cash requirements, we may be forced to curtail operations,
dispose of assets, or seek extended payment terms from our vendors. Such
events would materially and adversely affect our financial position and results
of operations. If we are unable to find sufficient financing within the
required timeframe on terms favorable to us, we may be required to discontinue
our operations.

The Company is negotiating with FFG to produce its food at FFGs central
kitchens. FFG has central kitchen facilities in each of the Companys
geographic markets. The Companys intent is to close its own central kitchens
following the move of the food preparation operations to FFG. Briazz
anticipates that all of its central kitchens will be closed by mid December.
The Company believes that outsourcing its food production to FFG would maintain
the advantages of central kitchens, while limiting overhead. The Company
believes that outsourcing its food production would also allow it to move into
new geographic markets more quickly, and allow it to work with FFG
cooperatively to better serve shared customers. Although the Company believes
that outsourcing its central kitchen functions will result in significant cost
savings to the Company, the negotiations and transition are not sufficiently
finalized to permit the Company to provide guidance regarding the magnitude of
anticipated savings. There can be no assurance that the negotiations with FFG
regarding food preparation will be successful, that the transition to a
third-partys central kitchens for food preparation will be completed or that
the Company will be able to realize anticipated cost savings.

In conjunction with the closure of the central kitchens, the Company will
reduce the operational complexity of the business and the related general and
administrative expenses. In addition to the expected savings resulting from
its central kitchen closures, the Company expects to reduce its overhead by
eliminating approximately 15 to 17 corporate positions. The Company has begun
and expects to complete these reductions by mid December.

Due to the Companys decision to move its food preparation to FFG, the
Company is reevaluating its grocery business and will be withdrawing from the
test with Albertsons.

For additional information regarding the Companys proposed financing and
outsourcing plans, see Overview above. For certain risks relating to the
Companys liquidity and capital resources, the terms of its convertible debt
financings and its proposed outsourcing of central kitchen functions, see the
risk factors set forth in Exhibit 99.1 to this report.

Poor financial results, unanticipated expenses or unanticipated
opportunities that require financial commitments could give rise to additional
financing requirements sooner than we expect. If we raise additional funds
through the issuance of equity or convertible debt securities, the percentage
ownership of our existing shareholders would be reduced, and these securities
may have rights, preferences or privileges senior to those of our common stock.
If adequate funds are not available or are not available on acceptable terms,
our ability to enhance our services, fund our expansion, respond to competitive
pressures or take advantage of business opportunities would be significantly
limited, and we might need to significantly restrict our operations.

EQUITY-BASED COMPENSATION

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Stock options

In February 2002, the board of directors approved a grant of options to
purchase approximately 29,000 shares of common stock to employees with exercise
prices of $1.66 per share. Since the exercise price was equal to the fair
value at the date of grant, no deferred compensation was recognized.

In June 2002, the board of directors approved a grant of options to
purchase approximately 81,000 shares of common stock to employees with exercise
prices of $1.26 per share. Since the exercise price was equal to the fair
value at the date of grant, no deferred compensation was recognized.

In August 2002, the board of directors approved a grant of options to
purchase approximately 120,000 shares of common stock to employees with
exercise prices of $0.69 per share. Since the exercise price was equal to the
fair value at the date of grant, no deferred compensation was recognized.

The 1996 Amended Stock Option Plan was initially adopted by our board of
directors and approved by our shareholders in December 1995 and was last
amended on June 5, 2002. The plan currently provides for the issuance of up to
1,165,000 shares of common stock upon the exercise of options granted
thereunder, subject to adjustment for stock dividends, stock splits, reverse
stock splits and other similar changes in our capitalization.

Preferred stock

In April 2001, 18,917 shares of Series C preferred stock (which converted
automatically into shares of common stock upon the completion of our initial
public offering in May 2001), with an approximate fair value of $155,000, were
issued to two consultants for services to be rendered in connection with
leasehold improvements and food development. This amount will be depreciated
as a leasehold improvement over 5 years.




ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We have no derivative financial instruments or derivative commodity
investments. We invest our excess cash in investment grade, highly liquid
investments, consisting of money market instruments, bank certificates of
deposit and short-term investments in commercial paper. We do not believe
these investments are subject to significant market risk.

Our 14% convertible note is not subject to market risk from changes in
interest rate; however, we will not receive any benefit if interest rates
decline.

All of our transactions are conducted, and our accounts are denominated,
in United States dollars. Accordingly, we are not exposed to foreign currency
risk.

Many of the food products purchased by us are affected by commodity
pricing and are, therefore, subject to price volatility caused by weather,
production problems, delivery difficulties, utility costs and other factors
that are outside our control. We believe that substantially all of our food
and supplies are available from numerous sources, which helps to control food
commodity risk. We believe we have the ability to increase menu prices, or
vary the menu items offered, if needed in response to a food product price
increase.




ITEM 4. CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of the Companys
management, including the Companys Chief Executive Officer and Chief Financial
Officer, the Company evaluated the effectiveness of the design and operation of
the Companys disclosure controls and procedures (as defined in Rule 13a-14(c)
under the Exchange Act as of a date (the Evaluation Date) within 90 days
prior to the filing date of this report. Based upon that evaluation, the Chief
Executive Officer and Chief Financial Officer concluded that, as of the
Evaluation Date, the Companys disclosure controls and procedures were
effective in timely alerting him to the material information relating to the
Company (or its consolidated subsidiaries) required to be included in the
Companys periodic SEC filings and Form 8-K reports.

(b) Changes in Internal Controls

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There were no significant changes made in the Companys internal controls
during the period covered by this report or, to the Companys knowledge, in
other factors that could significantly affect these controls subsequent to the
date of their evaluation.




PART II  OTHER INFORMATION




ITEM 1. LEGAL PROCEEDINGS

BRIAZZ is not currently a party to any material legal proceeding.




ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

(a) Changes in Securities

There have been no changes in our registered securities.

(b) Sales of Unregistered Securities

None.

(c) Use of proceeds

On May 1, 2001, the Securities and Exchange Commission declared effective
our registration statement on Form S-1 (Commission File No. 333-54922). Net
proceeds to BRIAZZ, after deduction of $2.4 million in underwriting discounts,
commissions and other expenses from the initial public offering totaled $13.6
million. In 2001, we spent $3.8 million on capital purchases and $2.0 million
for the repayment of line-of-credit borrowings and scheduled principal
repayments primarily relating to delivery vehicle financing. In 2002, we spent
$1.85 million on capital purchases, including $1.65 million on the build-out of
new cafés and $0.17 million on our new point of sale system, order entry system
and our internet web site, and we spent $4.13 million on working capital
requirements. As of September 29, 2002, we had used all of the net proceeds of
our initial public offering.




ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.




ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.




ITEM 5. OTHER INFORMATION

On August 6, 2002, we were notified by Nasdaq that we were out of
compliance with the Nasdaq National Market rule that requires a Nasdaq National
Market listed company maintain a $5.0 million minimum aggregate value for its
shares held in public float. Nasdaq informed us that, if we were unable to
regain compliance with the rule for a minimum of 10 consecutive trading days
prior to November 5, 2002, unless we had applied and were accepted for listing
on the Nasdaq Small Cap Market, we would be provided with written notification
that our shares would be delisted.

On August 20, 2002, we were notified by Nasdaq that we were out of
compliance with the Nasdaq National Market rule that requires a Nasdaq National
Market listed company maintain a $1.00 minimum bid price for its traded
securities. Nasdaq informed us that if we were unable to regain compliance
with the rule for a minimum of 10 consecutive trading days prior to November
18, 2002, unless we had applied and were accepted for listing on the Nasdaq
Small Cap Market, we would be provided with written notification that our
shares would be delisted.

On November 6, 2002, we were notified by Nasdaq that we had not regained
compliance with the mininum public float requirements and that our shares would
be delisted at the opening of business on November 14, 2002. We have requested
a hearing before a Nasdaq Listing Qualifications Panel to review Nasdaqs
determination. We will continue to trade on the

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Nasdaq National Market pending the outcome of these proceedings. There
can be no assurance that we will be able to regain compliance with Nasdaqs
continued listing requirements or that the panel will grant our request for
continued listing on the National Market. If we are unable to maintain our
National Market position, we expect to apply for quotation on the Nasdaq
SmallCap Market. We do 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. Nasdaq
has informed us that if we began quotation on the SmallCap Market, we 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 we will be
able to regain compliance with this requirement, or that any application made
by us for quotation on the SmallCap Market will be accepted. If we are
delisted from the National Market and are not accepted for quotation on the
SmallCap Market, our shares may continue to trade on the Over-the-Counter
Bulletin Board.

On October 31, 2002, Mr. Alhadeff was appointed as our Chief Financial
Officer and Secretary to succeed Tracy Warner, who has resigned to pursue other
opportunities. Mr. Alhadeff continues to serve as our President, Chief
Executive Officer and Chairman.

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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a)  The following exhibits are filed as part of this report:

|            |  |                                                                                                                                                                               
|----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit     |  |                                                                                                                                                                               
|Number      |  | Description                                                                                                                                                                   
|            |  |                                                                                                                                                                               
|3.1(2)      |  | Amended and Restated Articles of Incorporation.                                                                                                                               
|3.2(2)      |  | Bylaws.                                                                                                                                                                       
|4.1(2)      |  | Specimen Stock Certificate.                                                                                                                                                   
|10.1(1)(2)  |  | 1996 Amended Stock Option Plan.                                                                                                                                               
|10.2(1)(2)  |  | Form of Option Agreement (Fresh Options prior to February
2001)                                                                                                               
|10.3(1)(2)  |  | Form of Option Agreement (other options prior to February
2001)                                                                                                               
|10.4(1)(2)  |  | 2001 Employee Stock Purchase Plan.                                                                                                                                            
|10.5(2)     |  | Form of Warrant.                                                                                                                                                              
|10.6(1)(2)  |  | Employment Agreement between BRIAZZ and Charles William
Vivian dated July 14, 1999.                                                                                           
|10.7(2)     |  | Retail Lease between BRIAZZ and Benaroya Capital Company
regarding 1100 Olive Way, Seattle, WA dated November 6,
1998.                                                        
|10.8(2)     |  | Form of Registration Rights Agreement among BRIAZZ and
certain of our shareholders dated August 15, 1997, as
amended.                                                         
|10.9(2)     |  | Agreement between BRIAZZ and Stusser Realty Group Limited
Partnership dated January 1998.                                                                                     
|10.10(2)    |  | Sublease between BRIAZZ and Stusser Electric Company
regarding 3901 7th Avenue South, Seattle, WA dated February
6, 1998.                                                     
|10.11(2)    |  | Sublease Amendment between BRIAZZ and Stusser Electric
Company regarding 3901 7th Avenue South, Seattle, WA dated
August 28, 2000.                                            
|10.12(2)    |  | Lease between BRIAZZ and Mission-Taylor Properties regarding
225 Mendell St., San Francisco, CA dated June 28 1996.                                                           
|10.13(2)    |  | Amendment to Lease between BRIAZZ and Mission-Taylor
Properties regarding 225 Mendell St., San Francisco, CA
dated May 25, 2000.                                              
|10.14(2)    |  | Lease between BRIAZZ and Time Realty Investments, Inc.
regarding 200 Center St., El Segundo, CA dated December 15,
1997.                                                      
|10.15(2)    |  | Industrial Building Lease between BRIAZZ and Walnut Street
Properties, Inc. regarding 1642 Lake Street, Chicago, IL
dated April 7, 1997.                                      
|10.16(2)    |  | Noncompetition Agreement between BRIAZZ and Victor D.
Alhadeff dated October 18, 1996.                                                                                        
|10.17(1)(2) |  | Form of Option Agreement (all options since February 2001)                                                                                                                    
|10.18(3)    |  | Securities Purchase Agreement dated June 18, 2002 between
BRIAZZ and Laurus Master Fund, Ltd.                                                                                 
|10.19(3)    |  | Convertible Note made by BRIAZZ in favor of Laurus Master
Fund, Ltd. dated June 18, 2002 in the principal amount of
$1,250,000                                                
|10.20(3)    |  | Common Stock Purchase Warrant issued by BRIAZZ to Laurus
Master Fund, Ltd. dated June 18, 2002                                                                                
|10.21(3)    |  | Security Agreement made by BRIAZZ in favor of Laurus Master
Fund, Ltd. dated June 18, 2002                                                                                    
|10.22       |  | Form of Secured Convertible Demand Note                                                                                                                                       
|99.1        |  | Risk Factors                                                                                                                                                                  
|99.2        |  | Certification of Chief Executive Officer and Chief Financial
Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to section 906 of the Sarbanes-Oxley Act of 2002.



|(1) |  | Indicates management contract                                                      
|--- |  | -----------------------------------------------------------------------------------
|   
|   
|   
|   
|(2) |  | Incorporated by reference to our registration statement on Form S-1 (No. 333-54922)
|   
|   
|   
|   
|(3) |  | Incorporated by reference to our Form 8-K filed on July 18, 2002                   

(b)  Form 8-K

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The Company filed a Form 8-K on July 18, 2002 to file certain agreements
related to its $1.25 million convertible debt and warrant financing.

The Company furnished a Form 8-K on September 6, 2002 to report a
reduction in workforce.

The Company furnished a Form 8-K on September 13, 2002 to report a new
revolving credit line secured by its accounts receivable.

Information furnished in a form 8-K pursuant to item 9 shall not be deemed
to be filed under the Securities Exchange Act of 1934 as amended.




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.

|                        |             |                                                                                                   
|----------------------- | ----------- | --------------------------------------------------------------------------------------------------
|                        | BRIAZZ, INC
|                       
|Date: November 18, 2002 | By:         | /s/ Victor D. Alhadeff                                                                            
|                        |             |                                                                                                   
|                        | Name:       | Victor D. Alhadeff                                                                                
|                        | Title:      | Chief Executive Officer, Chief Financial
Officer, Secretary and Chairman of the
Board of Directors

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CERTIFICATIONS

I, Victor D. Alhadeff, Chief Executive Officer, Chief Financial Officer,
Secretary and Chairman of the Board of Directors of BRIAZZ, Inc., certify that:

1. I have reviewed this quarterly report on Form 10-Q of BRIAZZ, Inc.;

2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4. The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:



| | (a) |  | designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
| | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (b) |  | evaluated the effectiveness of the registrants disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the Evaluation Date); and                                                                                                  
|
| | (c) |  | presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        

5. The registrants other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):



| | (a) |  | all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrants
ability to record, process, summarize and report financial data and
have identified for the registrants auditors any material weaknesses
in internal controls; and
| | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (b) |  | any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrants
internal controls; and                                                                                                                                        

6. The registrants other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date: November 18, 2002

| |                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------
| | /s/ Victor D. Alhadeff                                                                                               
| |                                                                                                                      
| | Victor D. Alhadeff
Chief Executive Officer, Chief Financial Officer,
Secretary and Chairman of the Board of Directors

24