##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549

Amendment No. 1 to
FORM 10-Q/A

(MARK ONE)

|    |  |                                                                                                                                    
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------
|[x] |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED July 1, 2001

OR

|      |  |                                                                                         
|----- |  | ----------------------------------------------------------------------------------------
|[   ] |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
|     
|      |  | FOR THE TRANSITION PERIOD FROM ___________________TO ___________________                

COMMISSION FILE NUMBER 000-32527

BRIAZZ, INC.

(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)


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

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 [   ]

The number of outstanding shares of common stock, no par value, of the
Registrant at July 1, 2001 was 5,824,980.





---

TABLE OF CONTENTS



|                               |                                                                                               |                                                                                                    |  |  |  |  |  | 
|------------------------------ | --------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------- |  |  |  |  |  | 
|PART I  FINANCIAL INFORMATION
|                               | ITEM 1. FINANCIAL STATEMENTS                                                                 
|                               |                                                                                               | BALANCE SHEETS                                                                                    
|                               |                                                                                               | STATEMENTS OF OPERATIONS                                                                          
|                               |                                                                                               | STATEMENT OF MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS EQUITY (DEFICIT)
|                               |                                                                                               | 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 DISCLOSURE ABOUT MARKET RISK                            
|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                    



---



##### Table of Contents



BRIAZZ, INC.

INDEX TO THE FORM 10-Q
FOR THE 26-WEEK PERIOD ENDED JULY 1, 2001

|                               |  |         |  |                                                                                       |  |     
|------------------------------ |  | ------- |  | ------------------------------------------------------------------------------------- |  | ----
|                               |  |         |  |                                                                                       |  | PAGE
|                               |  |         |  |                                                                                       |  |     
|PART I  FINANCIAL INFORMATION |  |        
|                               |  | ITEM 1. |  | FINANCIAL STATEMENTS                                                                  |  | 2   
|                               |  |         |  | BALANCE SHEETS                                                                        |  | 2   
|                               |  |         |  | STATEMENTS OF OPERATIONS                                                              |  | 3   
|                               |  |         |  | STATEMENT OF MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED                             |  |     
|                               |  |         |  | STOCK AND 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 |  | 12  
|                               |  | ITEM 3. |  | QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK                             |  | 15  
|PART II  OTHER INFORMATION    |  |        
|                               |  | ITEM 1. |  | LEGAL PROCEEDINGS                                                                     |  | 15  
|                               |  | ITEM 2. |  | CHANGES IN SECURITIES AND USE OF PROCEEDS                                             |  | 15  
|                               |  | ITEM 3. |  | DEFAULTS UPON SENIOR SECURITIES                                                       |  | 16  
|                               |  | ITEM 4. |  | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                   |  | 16  
|                               |  | ITEM 5. |  | OTHER INFORMATION                                                                     |  | 16  
|                               |  | ITEM 6. |  | EXHIBITS AND REPORTS ON FORM 8-K                                                      |  | 17  
|                               |  |         |  | SIGNATURES                                                                            |  | 18  





---



##### Table of Contents









PART I  FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

BRIAZZ, INC.




BALANCE SHEETS


(in thousands, except share data)


|                                                                                                                                                                        |                                                                                                                    |                                                          |        |             |        |              |        |         |         |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------ | -------------------------------------------------------- | ------ | ----------- | ------ | ------------ | ------ | ------- | ------- | -
|                                                                                                                                                                        |                                                                                                                    |                                                          |        | July 1,     |        | December 31,
|                                                                                                                                                                        |                                                                                                                    |                                                          |        | 2001        |        | 2000        
|                                                                                                                                                                        |                                                                                                                    |                                                          |        |             |        |             
|                                                                                                                                                                        |                                                                                                                    |                                                          |        | (unaudited) |        | (unaudited) 
|Assets                                                                                                                                                                  |                                                                                                                    |                                                          |        |             |        |              |        |        
|                                                                                                                                                                        | Current assets                                                                                                     |                                                          |        |             |        |              |        |         |        
|                                                                                                                                                                        | Cash and cash equivalents                                                                                          |                                                          | $      | 10,687      |        |              | $      | 555     |        
|                                                                                                                                                                        | Accounts receivable, net of allowance of $129 and $63                                                              |                                                          |        | 664         |        |              |        | 547     |        
|                                                                                                                                                                        | Inventory                                                                                                          |                                                          |        | 535         |        |              |        | 508     |        
|                                                                                                                                                                        | Prepaid expenses and other current assets                                                                          |                                                          |        | 569         |        |              |        | 490     |        
|                                                                                                                                                                        | Current portion of restricted certificates of deposit                                                              |                                                          |        | 114         |        |              |        | 149     |        
|                                                                                                                                                                        |                                                                                                                    |                                                          |        |             |        |              |        |        
|                                                                                                                                                                        |                                                                                                                    | Total current assets                                     |        |             | 12,569 |              |        |         | 2,249   |  
|                                                                                                                                                                        | Property and equipment, net                                                                                        |                                                          |        | 11,453      |        |              |        | 11,632  |        
|                                                                                                                                                                        | Restricted certificates of deposit, net of current portion                                                         |                                                          |        | 269         |        |              |        | 328     |        
|                                                                                                                                                                        | Deposits and other assets                                                                                          |                                                          |        | 186         |        |              |        | 200     |        
|                                                                                                                                                                        |                                                                                                                    |                                                          |        |             |        |              |        |        
|                                                                                                                                                                        |                                                                                                                    | $                                                        | 24,477 |             |        | $            | 14,409 |        
|                                                                                                                                                                        |                                                                                                                    |                                                          |        |             |        |              |        |        
|Liabilities, Mandatorily Redeemable Convertible Preferred Stock, and Stockholders
Equity (Deficit)                                                                     |                                                                                                                    |                                                          |        |             |        |              |        |        
|Current Liabilities                                                                                                                                                     |                                                                                                                    |                                                          |        |             |        |              |        |        
|                                                                                                                                                                        | Line of credit borrowings, current                                                                                 |                                                          | $      |            |        |              | $      | 160     |        
|                                                                                                                                                                        | Accounts payable                                                                                                   |                                                          |        | 731         |        |              |        | 3,008   |        
|                                                                                                                                                                        | Accrued compensation                                                                                               |                                                          |        | 923         |        |              |        | 904     |        
|                                                                                                                                                                        | Accrued and other liabilities                                                                                      |                                                          |        | 453         |        |              |        | 653     |        
|                                                                                                                                                                        | Current portion of long-term debt                                                                                  |                                                          |        | 72          |        |              |        | 144     |        
|                                                                                                                                                                        |                                                                                                                    |                                                          |        |             |        |              |        |        
|                                                                                                                                                                        |                                                                                                                    | Total current liabilities                                |        |             | 2,179  |              |        |         | 4,869   |  
|                                                                                                                                                                        |                                                                                                                    |                                                          |        |             |        |              |        |        
|                                                                                                                                                                        | Line of credit borrowings, net of current portion                                                                  |                                                          |        |            |        |              |        | 1,840   |        
|                                                                                                                                                                        | Long-term debt, net of current portion                                                                             |                                                          |        |            |        |              |        | 48      |        
|                                                                                                                                                                        |                                                                                                                    |                                                          |        |             |        |              |        |        
|Commitments and contingencies                                                                                                                                           |                                                                                                                    |                                                          |        |             |        |              |        |        
|Mandatorily redeemable convertible preferred stock, no par; 50,000,000 shares authorized                                                                                |                                                                                                                    |                                                          |        |             |        |              |        |        
|Series A, 33,000 designated; 2,061 (2000) and 0 (2001) shares issued and outstanding;
liquidation value of $11,058 and $0 at December 31, 2000 and July 1, 2001         |                                                                                                                    |                                                          |       |             |        |              | 10,984 |        
|Series B, 34,450 designated; 3,211 (2000) and 0 (2001) shares issued and outstanding;
liquidation value of $23,239 and $0 at December 31, 2000 and July 1, 2001         |                                                                                                                    |                                                          |       |             |        |              | 23,104 |        
|Series C, 30,000,000 designated; 3,120,788 (2000) and 0 (2001) shares issued and
outstanding; liquidation value of $19,605 and $0 at December 31, 2000 and July 1, 2001 |                                                                                                                    |                                                          |       |             |        |              | 19,521 |        
|                                                                                                                                                                        |                                                                                                                    |                                                          |        |             |        |              |        |        
|                                                                                                                                                                        |                                                                                                                    | Total mandatorily redeemable convertible preferred stock |        |             |       |              |        |         | 53,609  |  
|                                                                                                                                                                        |                                                                                                                    |                                                          |        |             |        |              |        |        
|Stockholders equity (deficit)                                                                                                                                          |                                                                                                                    |                                                          |        |             |        |              |        |        
|                                                                                                                                                                        | Common stock, no par; 100,000,000 shares authorized; 920 (2000) and
5,824,980 (2001) shares issued and outstanding |                                                          |        | 73,821      |        |              |        | 2,076   |        
|                                                                                                                                                                        | Additional paid-in capital                                                                                         |                                                          |        |            |        |              |        |        |        
|                                                                                                                                                                        | Deferred stock compensation                                                                                        |                                                          |        | (1,097      | )      |              |        | (1,060  | )      
|                                                                                                                                                                        | Accumulated deficit                                                                                                |                                                          |        | (50,426     | )      |              |        | (46,973 | )      
|                                                                                                                                                                        |                                                                                                                    |                                                          |        |             |        |              |        |        
|                                                                                                                                                                        |                                                                                                                    | Total stockholder equity (deficit)                       |        |             | 22,298 |              |        |         | (45,957 | )
|                                                                                                                                                                        |                                                                                                                    |                                                          |        |             |        |              |        |        
|                                                                                                                                                                        |                                                                                                                    | Total liabilities and stockholders equity               |        | $           | 24,477 |              |        | $       | 14,409  |  
|                                                                                                                                                                        |                                                                                                                    |                                                          |        |             |        |              |        |        

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

2



---



##### Table of Contents



BRIAZZ, INC.




STATEMENTS OF OPERATIONS


(in thousands, except share data)


|                                                                                                                                                                                          |                            |   |                      |       |                        |   |             |       |             |   |           |        |   |   |           |        |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------- | - | -------------------- | ----- | ---------------------- | - | ----------- | ----- | ----------- | - | --------- | ------ | - | - | --------- | ------ | -
|                                                                                                                                                                                          |                            |   | Thirteen weeks ended |       | Twenty-six weeks ended
|                                                                                                                                                                                          |                            |   |                      |       |                       
|                                                                                                                                                                                          |                            |   | July 1,              |       | June 25,               |   | July 1,     |       | June 25,   
|                                                                                                                                                                                          |                            |   | 2001                 |       | 2000                   |   | 2001        |       | 2000       
|                                                                                                                                                                                          |                            |   |                      |       |                        |   |             |       |            
|                                                                                                                                                                                          |                            |   | (unaudited)          |       | (unaudited)            |   | (unaudited) |       | (unaudited)
|Sales:                                                                                                                                                                                    |                            |   |                      |       |                        |   |             |       |             |   |           |        |   |   |           |       
|Retail                                                                                                                                                                                    |                            | $ | 7,427                |       |                        | $ | 7,450       |       |             | $ | 14,583    |        |   | $ | 14,015    |       
|Wholesale and other                                                                                                                                                                       |                            |   | 966                  |       |                        |   | 1,222       |       |             |   | 2,073     |        |   |   | 2,164     |       
|                                                                                                                                                                                          |                            |   |                      |       |                        |   |             |       |             |   |           |        |   |   |           |       
|                                                                                                                                                                                          | Total Sales                |   |                      | 8,393 |                        |   |             | 8,672 |             |   |           | 16,656 |   |   |           | 16,179 |  
|Cost of food and packaging                                                                                                                                                                |                            |   | 3,206                |       |                        |   | 3,544       |       |             |   | 6,370     |        |   |   | 6,612     |       
|Occupancy expenses                                                                                                                                                                        |                            |   | 936                  |       |                        |   | 961         |       |             |   | 1,867     |        |   |   | 1,906     |       
|Labor expenses (including amortization of deferred stock compensation
expense for the 13 and 26 weeks expense, respectively, of $46 and
$92 for 2001 and $0 and $0 for 2000)              |                            |   | 2,828                |       |                        |   | 2,756       |       |             |   | 5,591     |        |   |   | 5,286     |       
|Depreciation and amortization                                                                                                                                                             |                            |   | 644                  |       |                        |   | 662         |       |             |   | 1,250     |        |   |   | 1,328     |       
|Other operating expenses                                                                                                                                                                  |                            |   | 549                  |       |                        |   | 458         |       |             |   | 985       |        |   |   | 845       |       
|General and administrative expenses (including amortization of deferred
stock compensation expense for the 13 and 26 weeks, respectively, of
$22 and $44 for 2001 and $0 and $0 for 2000) |                            |   | 1,394                |       |                        |   | 1,551       |       |             |   | 3,045     |        |   |   | 3,139     |       
|Provision for asset impairment and store closure                                                                                                                                          |                            |   |                     |       |                        |   |            |       |             |   |          |        |   |   | 8         |       
|                                                                                                                                                                                          |                            |   |                      |       |                        |   |             |       |             |   |           |        |   |   |           |       
|                                                                                                                                                                                          | Total operating expenses   |   |                      | 9,557 |                        |   |             | 9,932 |             |   |           | 19,108 |   |   |           | 19,124 |  
|                                                                                                                                                                                          |                            |   |                      |       |                        |   |             |       |             |   |           |        |   |   |           |       
|Loss from operations                                                                                                                                                                      |                            |   | (1,1,164             | )     |                        |   | (1,260      | )     |             |   | (2,452    | )      |   |   | (2,945    | )     
|Other (expense) income                                                                                                                                                                    |                            |   |                      |       |                        |   |             |       |             |   |           |        |   |   |           |       
|                                                                                                                                                                                          | Interest and other expense |   |                      | (14   | )                      |   |             | (58   | )           |   |           | (62    | ) |   |           | (113   | )
|                                                                                                                                                                                          | Interest and other income  |   |                      | 126   |                        |   |             | 25    |             |   |           | 151    |   |   |           | 40     |  
|                                                                                                                                                                                          |                            |   |                      |       |                        |   |             |       |             |   |           |        |   |   |           |       
|                                                                                                                                                                                          |                            |   | 112                  |       |                        |   | (33         | )     |             |   | 89        |        |   |   | (73       | )     
|                                                                                                                                                                                          |                            |   |                      |       |                        |   |             |       |             |   |           |        |   |   |           |       
|Net loss                                                                                                                                                                                  |                            |   | (1,052               | )     |                        |   | (1,293      | )     |             |   | (2,363    | )      |   |   | (3,018    | )     
|Accretion of dividends/amortization of discounts on preferred stocks                                                                                                                      |                            |   | 3,264                |       |                        |   | 859         |       |             |   | 4,317     |        |   |   | 1,682     |       
|                                                                                                                                                                                          |                            |   |                      |       |                        |   |             |       |             |   |           |        |   |   |           |       
|Net loss attributable to common shareholders                                                                                                                                              |                            | $ | (4,316               | )     |                        | $ | (2,152      | )     |             | $ | (6,680    | )      |   | $ | (4,700    | )     
|                                                                                                                                                                                          |                            |   |                      |       |                        |   |             |       |             |   |           |        |   |   |           |       
|Basic and diluted net loss per share                                                                                                                                                      |                            | $ | (1.11                | )     |                        | $ | (558.75     | )     |             | $ | (3.40     | )      |   | $ | (1,272.04 | )     
|                                                                                                                                                                                          |                            |   |                      |       |                        |   |             |       |             |   |           |        |   |   |           |       
|Weighted-average shares used in computing basic and diluted net loss
per share                                                                                                            |                            |   | 3,905,373            |       |                        |   | 3,851       |       |             |   | 1,964,744 |        |   |   | 3,695     |       
|                                                                                                                                                                                          |                            |   |                      |       |                        |   |             |       |             |   |           |        |   |   |           |       

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

3



---



##### Table of Contents



BRIAZZ, INC.




STATEMENT OF MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED STOCK

AND STOCKHOLDERS EQUITY (DEFICIT)
(in thousands)
(unaudited)


|                                                                           |  |                                                    |    |          |  |          |         |        |  |        |    |        |  |       |         |   |  |  |        |   |  |   |         |   |  |   |         |  
|-------------------------------------------------------------------------- |  | -------------------------------------------------- | -- | -------- |  | -------- | ------- | ------ |  | ------ | -- | ------ |  | ----- | ------- | - |  |  | ------ | - |  | - | ------- | - |  | - | ------- | -
|                                                                           |  | Mandatorily redeemable convertible preferred stock
|                                                                           |  |                                                   
|                                                                           |  | Series A                                           |    | Series B |  | Series C |         |        |  |       
|                                                                           |  |                                                    |    |          |  |          |         |        |  |       
|                                                                           |  | Shares                                             |    | Amount   |  | Shares   |         | Amount |  | Shares |    | Amount |  | Total
|                                                                           |  |                                                    |    |          |  |          |         |        |  |        |    |        |  |      
|Balance at January 1, 2001                                                 |  |                                                    | 2  |          |  | $        | 10,984  |        |  |        | 3  |        |  | $     | 23,104  |   |  |  | 3,121  |   |  | $ | 19,521  |   |  | $ | 53,609  |  
|Issuance of common stock, net of issue cost                                |  |                                                    |   |          |  |          |        |        |  |        |   |        |  |       |        |   |  |  |       |   |  |   |        |   |  |   |        |  
|Issuance of Series C preferred stock,
net of issue costs                   |  |                                                    |   |          |  |          |        |        |  |        |   |        |  |       |        |   |  |  | 507    |   |  |   | 3,034   |   |  |   | 3,034   |  
|Issuance of Series C preferred stock for services                          |  |                                                    |   |          |  |          |        |        |  |        |   |        |  |       |        |   |  |  | 19     |   |  |   | 155     |   |  |   | 155     |  
|Conversion of preferred stock to common stock                              |  |                                                    | (2 | )        |  |          | (11,210 | )      |  |        | (3 | )      |  |       | (23,596 | ) |  |  | (3,647 | ) |  |   | (23,275 | ) |  |   | (58,081 | )
|Beneficial conversion feature on
Preferred stock                           |  |                                                    |   |          |  |          |        |        |  |        |   |        |  |       |        |   |  |  |       |   |  |   | (3,034  | ) |  |   | (3,034  | )
|Amortization of discount on preferred
Stock                                |  |                                                    |   |          |  |          |        |        |  |        |   |        |  |       |        |   |  |  |       |   |  |   | 3,034   |   |  |   | 3,034   |  
|Accretion of mandatorily redeemable
Preferred stock                        |  |                                                    |   |          |  |          | 226     |        |  |        |   |        |  |       | 492     |   |  |  |       |   |  |   | 565     |   |  |   | 1,283   |  
|Common stock issued upon exercise of
stock options                         |  |                                                    |   |          |  |          |        |        |  |        |   |        |  |       |        |   |  |  |       |   |  |   |        |   |  |   |        |  
|Common stock issued upon exercise of
stock warrants                        |  |                                                    |   |          |  |          |        |        |  |        |   |        |  |       |        |   |  |  |       |   |  |   |        |   |  |   |        |  
|Change in unearned compensation                                            |  |                                                    |   |          |  |          |        |        |  |        |   |        |  |       |        |   |  |  |       |   |  |   |        |   |  |   |        |  
|Deferred compensation related to the
grant of stock options                |  |                                                    |   |          |  |          |        |        |  |        |   |        |  |       |        |   |  |  |       |   |  |   |        |   |  |   |        |  
|Deferred compensation related to the
modification of the Series C warrants |  |                                                    |   |          |  |          |        |        |  |        |   |        |  |       |        |   |  |  |       |   |  |   |        |   |  |   |        |  
|Amortization of deferred compensation                                      |  |                                                    |   |          |  |          |        |        |  |        |   |        |  |       |        |   |  |  |       |   |  |   |        |   |  |   |        |  
|Net loss                                                                   |  |                                                    |   |          |  |          |        |        |  |        |   |        |  |       |        |   |  |  |       |   |  |   |        |   |  |   |        |  
|                                                                           |  |                                                    |    |          |  |          |         |        |  |        |    |        |  |       |         |   |  |  |        |   |  |   |         |   |  |   |         |  
|Balance at July 1, 2001                                                    |  |                                                    | 0  |          |  | $        | 0       |        |  |        | 0  |        |  | $     | 0       |   |  |  | 0      |   |  | $ | 0       |   |  | $ | 0       |  
|                                                                           |  |                                                    |    |          |  |          |         |        |  |        |    |        |  |       |         |   |  |  |        |   |  |   |         |   |  |   |         |  

Stockholders equity (deficit)

|                                                            |  |              |       |         |  |         |        |              |  |            |        |          |  |   |        |   |  |   |         |   |  |   |         |  
|----------------------------------------------------------- |  | ------------ | ----- | ------- |  | ------- | ------ | ------------ |  | ---------- | ------ | -------- |  | - | ------ | - |  | - | ------- | - |  | - | ------- | -
|                                                            |  |              |       |         |  |         |        |              |  | Additional |        | Deferred |  |   |        |   |  |   |         |  
|                                                            |  | Common stock |       | paid-in |  | stock   |        | Accumulated  |  |            |        |         
|                                                            |  | Shares       |       | Amount  |  | capital |        | compensation |  | deficit    |        | Total   
|                                                            |  |              |       |         |  |         |        |              |  |            |        |         
|Balance at January 1, 2001                                  |  |              | 1     |         |  | $       | 2,076  |              |  | $          |       |          |  | $ | (1,060 | ) |  | $ | (46,973 | ) |  | $ | (45,957 | )
|Issuance of common stock, net of issue costs                |  |              | 2,000 |         |  |         | 13,658 |              |  |            |       |          |  |   |       |   |  |   |        |   |  |   | 13,658  |  
|Issuance of Series C preferred stock,
net of issue costs    |  |              |      |         |  |         |       |              |  |            |       |          |  |   |       |   |  |   |        |   |  |   |        |  
|Issuance of Series C preferred stock for services           |  |              |      |         |  |         |       |              |  |            |       |          |  |   |       |   |  |   |        |   |  |   |        |  
|Conversion of preferred stock to common stock               |  |              | 3,816 |         |  |         | 58,081 |              |  |            |       |          |  |   |       |   |  |   |        |   |  |   | 58,081  |  
|Beneficial conversion feature on
Preferred stock            |  |              |      |         |  |         |       |              |  |            | 3,034  |          |  |   |       |   |  |   |        |   |  |   | 3,034   |  
|Amortization of discount on preferred
Stock                 |  |              |      |         |  |         |       |              |  |            | (3,034 | )        |  |   |       |   |  |   |        |   |  |   | (3,034  | )
|Accretion of mandatorily redeemable
preferred stock         |  |              |      |         |  |         |       |              |  |            |       |          |  |   |       |   |  |   | (1,283  | ) |  |   | (1,283  | )
|Common stock issued upon exercise of
stock options          |  |              | 4     |         |  |         | 6      |              |  |            |       |          |  |   |       |   |  |   |        |   |  |   | 6       |  
|Common stock issued upon exercise of
stock warrants         |  |              | 4     |         |  |         |       |              |  |            |       |          |  |   |       |   |  |   |        |   |  |   |        |  
|Change in unearned compensation                             |  |              |      |         |  |         |       |              |  |            |       |          |  |   |       |   |  |   | 20      |   |  |   | 20      |  
|Deferred compensation related to the
grant of stock options |  |              |      |         |  |         |       |              |  |            |       |          |  |   | (173   | ) |  |   | 173     |   |  |   |        |  
|Amortization of deferred compensation                       |  |              |      |         |  |         |       |              |  |            |       |          |  |   | 136    |   |  |   |        |   |  |   | 136     |  
|Net loss                                                    |  |              |      |         |  |         |       |              |  |            |       |          |  |   |       |   |  |   | (2,363  | ) |  |   | (2,363  | )
|                                                            |  |              |       |         |  |         |        |              |  |            |        |          |  |   |        |   |  |   |         |   |  |   |         |  
|Balance at July 1, 2001                                     |  |              | 5,825 |         |  | $       | 73,821 |              |  | $          | 0      |          |  | $ | (1,097 | ) |  | $ | (50,426 | ) |  | $ | 22,298  |  
|                                                            |  |              |       |         |  |         |        |              |  |            |        |          |  |   |        |   |  |   |         |   |  |   |         |  

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

4



---



##### Table of Contents



BRIAZZ, INC.




STATEMENTS OF CASH FLOWS


(in thousands)


|                                                                                                                                                     |                                                              |                                                                            |                                                  |                                                             |                                           |                                           |        |                        |        |          |      |      |        |  
|---------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------ | -------------------------------------------------------------------------- | ------------------------------------------------ | ----------------------------------------------------------- | ----------------------------------------- | ----------------------------------------- | ------ | ---------------------- | ------ | -------- | ---- | ---- | ------ | -
|                                                                                                                                                     |                                                              |                                                                            |                                                  |                                                             |                                           |                                           |        | Twenty-six weeks ended
|                                                                                                                                                     |                                                              |                                                                            |                                                  |                                                             |                                           |                                           |        |                       
|                                                                                                                                                     |                                                              |                                                                            |                                                  |                                                             |                                           |                                           |        | July 1,                |        | June 25,
|                                                                                                                                                     |                                                              |                                                                            |                                                  |                                                             |                                           |                                           |        | 2001                   |        | 2000    
|                                                                                                                                                     |                                                              |                                                                            |                                                  |                                                             |                                           |                                           |        |                        |        |         
|                                                                                                                                                     |                                                              |                                                                            |                                                  |                                                             |                                           |                                           |        | (unaudited)           
|Cash flows from operating activities                                                                                                                 |                                                              |                                                                            |                                                  |                                                             |                                           |                                           |        |                       
|                                                                                                                                                     | Net loss                                                     |                                                                            | $                                                | (2,363                                                      | )                                         |                                           | $      | (3,018                 | )     
|                                                                                                                                                     |                                                              | Adjustments to reconcile net loss to net cash used in operating activities |                                                  |                                                             |                                           |                                           |        |                        |        |         
|                                                                                                                                                     |                                                              |                                                                            | Amortization of deferred compensation            |                                                             |                                           | 136                                       |        |                        |        |         |     
|                                                                                                                                                     |                                                              |                                                                            | Depreciation and amortization                    |                                                             |                                           | 1,250                                     |        |                        |        | 1,328    |     
|                                                                                                                                                     |                                                              |                                                                            | Provision for asset impairment and store closure |                                                             |                                           |                                          |        |                        |        | 8        |     
|                                                                                                                                                     |                                                              |                                                                            |                                                  | Non-cash expense related to issuance of stock-based options |                                           |                                           | 20     |                        |        |          |     |     
|                                                                                                                                                     |                                                              |                                                                            |                                                  | Changes in                                                  |                                           |                                           |        |                        |        |          |      |     
|                                                                                                                                                     |                                                              |                                                                            |                                                  | Accounts receivable                                         |                                           |                                           | (117   | )                      |        |          | (688 | )   
|                                                                                                                                                     |                                                              |                                                                            |                                                  |                                                             | Inventory                                 |                                           |        | (27                    | )      |          |      | (2   | )     
|                                                                                                                                                     |                                                              |                                                                            |                                                  |                                                             | Prepaid expenses and other current assets |                                           |        | (79                    | )      |          |      | (27  | )     
|                                                                                                                                                     |                                                              |                                                                            |                                                  |                                                             | Accounts payable                          |                                           |        | (2,277                 | )      |          |      | (439 | )     
|                                                                                                                                                     |                                                              |                                                                            |                                                  |                                                             | Accrued compensation                      |                                           |        | 19                     |        |          |      | (578 | )     
|                                                                                                                                                     |                                                              |                                                                            |                                                  |                                                             | Accrued and other liabilities             |                                           |        | (200                   | )      |          |      | 109  |       
|                                                                                                                                                     |                                                              |                                                                            |                                                  |                                                             | Deposits and other assets                 |                                           |        | 14                     |        |          |      | (18  | )     
|                                                                                                                                                     |                                                              |                                                                            |                                                  |                                                             |                                           |                                           |        |                       
|                                                                                                                                                     |                                                              |                                                                            |                                                  |                                                             |                                           | Net cash used in operating activities     |        |                        | (3,624 | )        |      |      | (3,325 | )
|                                                                                                                                                     |                                                              |                                                                            |                                                  |                                                             |                                           |                                           |        |                       
|Cash flows from investing activities
Purchases of property and equipment                                                                             |                                                              |                                                                            | (917                                             | )                                                           |                                           |                                           | (229   | )                     
|                                                                                                                                                     |                                                              |                                                                            |                                                  |                                                             |                                           |                                           |        |                       
|                                                                                                                                                     |                                                              |                                                                            |                                                  |                                                             |                                           | Net cash used in investing activities     |        |                        | (917   | )        |      |      | (229   | )
|                                                                                                                                                     |                                                              |                                                                            |                                                  |                                                             |                                           |                                           |        |                       
|Cash flows from financing activities                                                                                                                 |                                                              |                                                                            |                                                  |                                                             |                                           |                                           |        |                       
|                                                                                                                                                     | Proceeds from sale of preferred stock, net of issuance costs |                                                                            |                                                  | 3,034                                                       |                                           |                                           |        | 2,250                  |       
|                                                                                                                                                     | Proceeds from initial public offering, net of issuance costs |                                                                            |                                                  | 13,659                                                      |                                           |                                           |        |                       |       
|                                                                                                                                                     | Repayments of line-of-credit borrowings                      |                                                                            |                                                  | (2,000                                                      | )                                         |                                           |        |                       |       
|                                                                                                                                                     | Proceeds from stock options exercised                        |                                                                            |                                                  | 6                                                           |                                           |                                           |        |                       |       
|                                                                                                                                                     | Expiration of restricted certificate of deposit              |                                                                            |                                                  | 94                                                          |                                           |                                           |        | 34                     |       
|                                                                                                                                                     | Change in bank overdraft                                     |                                                                            |                                                  |                                                            |                                           |                                           |        | (579                   | )     
|                                                                                                                                                     | Repayment of debt                                            |                                                                            |                                                  | (120                                                        | )                                         |                                           |        | (166                   | )     
|                                                                                                                                                     |                                                              |                                                                            |                                                  |                                                             |                                           |                                           |        |                       
|                                                                                                                                                     |                                                              |                                                                            |                                                  |                                                             |                                           | Net cash provided by financing activities |        |                        | 14,673 |          |      |      | 1,539  |  
|                                                                                                                                                     |                                                              |                                                                            |                                                  |                                                             |                                           |                                           |        |                       
|Net (decrease) increase in cash and cash equivalents                                                                                                 |                                                              |                                                                            | 10,132                                           |                                                             |                                           |                                           | (2,015 | )                     
|Cash and cash equivalents                                                                                                                            |                                                              |                                                                            |                                                  |                                                             |                                           |                                           |        |                       
|                                                                                                                                                     | Beginning of year                                            |                                                                            |                                                  | 555                                                         |                                           |                                           |        | 2,153                  |       
|                                                                                                                                                     |                                                              |                                                                            |                                                  |                                                             |                                           |                                           |        |                       
|                                                                                                                                                     | End of year                                                  |                                                                            | $                                                | 10,687                                                      |                                           |                                           | $      | 138                    |       
|                                                                                                                                                     |                                                              |                                                                            |                                                  |                                                             |                                           |                                           |        |                       
|Supplemental disclosure of cash flow information                                                                                                     |                                                              |                                                                            |                                                  |                                                             |                                           |                                           |        |                       
|                                                                                                                                                     | Cash paid for interest                                       |                                                                            | $                                                | 62                                                          |                                           |                                           | $      | 113                    |       
|                                                                                                                                                     |                                                              |                                                                            |                                                  |                                                             |                                           |                                           |        |                       
|Supplemental disclosure of non-cash investing and financing activities
Accretion and discount amortization of mandatorily redeemable preferred stock |                                                              | $                                                                          | 4,317                                            |                                                             |                                           | $                                         | 1,682  |                       
|                                                                                                                                                     |                                                              |                                                                            |                                                  |                                                             |                                           |                                           |        |                       

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

5



---



##### Table of Contents



BRIAZZ, INC.




NOTES TO FINANCIAL STATEMENTS

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
cafes and kiosks, 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.

Fiscal quarters

Through fiscal year 2000 we measured our operational results based on 13 four-
week periods. In fiscal year 2001 we converted to four 13-week periods with a
52-or 53-week fiscal year. Reclassifications were made to 2000 quarterly
results to express such results in four 13-week periods comparable to the
quarter ended July 1, 2001.

Interim financial information

The financial information at July 1, 2001, and for the 13-week and 26-week
periods ended July 1, 2001 and June 25, 2000 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 operation for the 13-week and 26-week periods
ended July 1, 2001 and June 25, 2000 are not necessarily indicative of results
for the entire fiscal year or future periods.

Recent accounting pronouncements

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, Accounting for Derivative Financial
Instruments and for Hedging Activities (SFAS No. 133), which provides a
comprehensive and consistent standard for the recognition and measurement of
derivatives and hedging activities. SFAS No. 133 was amended by SFAS 137,
deferring the effective date to fiscal years beginning after June 15, 2000. In
June 2000, SFAS 138 was issued, which amends provisions of SFAS 133. The
adoption of these standards as of January 1, 2001 did not have a material
impact on the Companys results of operations or financial condition as the
Company holds no derivative financial instruments and does not currently engage
in hedging activities.

In July 2001, the Financial Accounting Standards Board issued SFAS 141,
Business Combinations (FAS 141). FAS 141 addresses financial accounting and
reporting for business combinations. FAS 141 is effective for all business
combinations accounted for by the purchase method for which the date of
acquisition is July 1, 2001 or later. The Company is currently evaluating the
implications of adoption of FAS 141.

In July 2001, the Financial Accounting Standards Board issued SFAS 142,
Goodwill and other intangible assets (FAS 142). FAS 142 addresses financial
accounting and reporting for acquired goodwill and other intangible assets. The
provisions of FAS 142 will effective for fiscal years beginning after December
15, 2001, except that certain provisions of FAS 142 shall be applied to
goodwill and other acquired intangible assets for which the acquisition date is
after June 30, 2001. The Company is currently evaluating the implications of
adoption of FAS 142 and plans to adopt FAS 142 in the fiscal year 2002.

6



---



##### Table of Contents



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 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 warrants are
subject to the anti- dilution provisions discussed in Note 3.

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 |           | 26-week period ended
|                                                                               |  |                      |           |                     
|                                                                               |  | July 1, 2001         |           | June 25, 2000        |  | July 1, 2001 |           | June 25, 2000
|                                                                               |  |                      |           |                      |  |              |           |              
|Net loss attributable to common stockholders                                   |  | $                    | (4,316    | )                    |  | $            | (2,152    | )             |  | $ | (6,680    | ) |  | $ | (4,700    | )
|Weightedaverage shares used in computing basic
and diluted net loss per share |  |                      | 3,905,373 |                      |  |              | 3,851     |               |  |   | 1,964,744 |   |  |   | 3,695     |  
|Basic and diluted net loss per share                                           |  | $                    | (1.11     | )                    |  | $            | (558.75   | )             |  | $ | (3.40     | ) |  | $ | (1,272.04 | )
|Antidilutive securities not included in diluted net loss
per share calculation |  |                      |           |                      |  |              |           |               |  |   |           |   |  |   |           |  
|Options to purchase common stock                                               |  |                      | 874,844   |                      |  |              | 425,354   |               |  |   | 874,844   |   |  |   | 425,354   |  
|Redeemable convertible preferred stock                                         |  |                      | 0         |                      |  |              | 3,125,741 |               |  |   | 0         |   |  |   | 3,125,741 |  
|Warrants to purchase redeemable convertible
preferred stock                    |  |                      | 0         |                      |  |              | 907,240   |               |  |   | 0         |   |  |   | 907,240   |  
|Warrants to purchase common stock                                              |  |                      | 930,404   |                      |  |              | 0         |               |  |   | 930,404   |   |  |   | 0         |  

3. Mandatorily redeemable convertible preferred stock and stockholders
equity (deficit)

At various times throughout fiscal year 2000 and 2001, the Company triggered
the anti-dilution provisions of the Series A, B and C mandatorily redeemable
convertible preferred stock. As a result, in January 2001 the rates at which
preferred stock converts to common stock became 1.0634, 1.0635 and 1.0447 for
Series A, B, and C, respectively.

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
convertible preferred stock, the Company has deemed the fair value of its
common stock to exceed the issue price of the convertible preferred stock. As a
result, the Company recorded a beneficial conversion feature in accordance with
the 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 is 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 is convertible
(intrinsic value). The Company recorded a beneficial conversion feature of
approximately $3 million in the 26-week period ending July 1, 2001. The
beneficial conversion feature is analogous to a dividend and will be 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 $3,304,384 was
fully amortized upon the conversion of preferred stock to common stock (Note
7). This beneficial conversion feature was recognized as a dividend, increasing
net loss attributable to common shareholders.

The warrants outstanding to purchase Series C preferred stock of 907,240
(947,817 as adjusted for anti-dilution) 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 resulted in a
non cash compensation charge of approximately $0.64 million at the time of the
initial public offering. This charge to expense was reversed as of July 1,
2001 when the market price of the Companys common stock dropped to a level
below the exercise price.

7



---



##### Table of Contents



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 operates in two reportable segments: retail and wholesale and
other. Retail store operations consist of sales generated through the Companys
cafes and kiosks, box lunches and catering. Wholesale and other consists of
sales through wholesale and grocery accounts, which are aggregated as they have
similar economic characteristics. Management evaluates segment performance
primarily based on sales and segment gross margins, which excludes costs of
occupancy, labor, depreciation and amortization.

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

|                                                  |  |        |        |           |  |           |       |   |  |   |        |  
|------------------------------------------------- |  | ------ | ------ | --------- |  | --------- | ----- | - |  | - | ------ | -
|                                                  |  |        |        |           |  | Wholesale |       |   |  |  
|                                                  |  | Retail |        | and Other |  | Total    
|                                                  |  |        |        |           |  |          
|13-week period ended July 1, 2001                 |  |        |        |           |  |           |       |   |  |   |        |  
|Net sales                                         |  | $      | 7,427  |           |  | $         | 966   |   |  | $ | 8,393  |  
|Costs of products and packaging                   |  |        | (2,733 | )         |  |           | (473  | ) |  |   | (3,206 | )
|                                                  |  |        |        |           |  |           |       |   |  |   |        |  
|Subtotal                                          |  | $      | 4,694  |           |  | $         | 493   |   |  |   | 5,187  |  
|                                                  |  |        |        |           |  |           |       |   |  |   |        |  
|Other operating expenses not allocated by segment |  |        |        |           |  |           |       |   |  |   | (6,351 | )
|                                                  |  |        |        |           |  |           |       |   |  |   |        |  
|Loss from operations                              |  |        |        |           |  |           |       |   |  | $ | (1,164 | )
|                                                  |  |        |        |           |  |           |       |   |  |   |        |  
|13-week period ended June 25, 2000                |  |        |        |           |  |           |       |   |  |   |        |  
|Net sales                                         |  | $      | 7,450  |           |  | $         | 1,222 |   |  | $ | 8,672  |  
|Costs of products and packaging                   |  |        | (2,911 | )         |  |           | (633  | ) |  |   | (3,544 | )
|                                                  |  |        |        |           |  |           |       |   |  |   |        |  
|Subtotal                                          |  | $      | 4,539  |           |  | $         | 589   |   |  |   | 5,128  |  
|                                                  |  |        |        |           |  |           |       |   |  |   |        |  
|Other operating expenses not allocated by segment |  |        |        |           |  |           |       |   |  |   | (6,388 | )
|                                                  |  |        |        |           |  |           |       |   |  |   |        |  
|Loss from operations                              |  |        |        |           |  |           |       |   |  | $ | (1,260 | )
|                                                  |  |        |        |           |  |           |       |   |  |   |        |  

|                                                  |  |        |        |           |  |           |        |   |  |   |         |  
|------------------------------------------------- |  | ------ | ------ | --------- |  | --------- | ------ | - |  | - | ------- | -
|                                                  |  |        |        |           |  | Wholesale |        |   |  |  
|                                                  |  | Retail |        | and Other |  | Total    
|                                                  |  |        |        |           |  |          
|26-week period ended July 1, 2001                 |  |        |        |           |  |           |        |   |  |   |         |  
|Net sales                                         |  | $      | 14,583 |           |  | $         | 2,073  |   |  | $ | 16,656  |  
|Costs of products and packaging                   |  |        | (5,364 | )         |  |           | (1,006 | ) |  |   | (6,370  | )
|                                                  |  |        |        |           |  |           |        |   |  |   |         |  
|Subtotal                                          |  | $      | 9,219  |           |  | $         | 1,067  |   |  |   | 10,286  |  
|                                                  |  |        |        |           |  |           |        |   |  |   |         |  
|Other operating expenses not allocated by segment |  |        |        |           |  |           |        |   |  |   | (12,738 | )
|                                                  |  |        |        |           |  |           |        |   |  |   |         |  
|Loss from operations                              |  |        |        |           |  |           |        |   |  | $ | (2,452  | )
|                                                  |  |        |        |           |  |           |        |   |  |   |         |  
|26-week period ended June 25, 2000
Net sales      |  | $      | 14,015 |           |  | $         | 2,164  |   |  | $ | 16,179  |  
|Costs of products and packaging                   |  |        | (5,472 | )         |  |           | (1,140 | ) |  |   | (6,612  | )
|                                                  |  |        |        |           |  |           |        |   |  |   |         |  
|Subtotal                                          |  | $      | 8,543  |           |  | $         | 1,024  |   |  |   | 9,567   |  
|                                                  |  |        |        |           |  |           |        |   |  |   |         |  
|Other operating expenses not allocated by segment |  |        |        |           |  |           |        |   |  |   | (12,512 | )
|                                                  |  |        |        |           |  |           |        |   |  |   |         |  
|Loss from operations                              |  |        |        |           |  |           |        |   |  | $ | (2,945  | )
|                                                  |  |        |        |           |  |           |        |   |  |   |         |  

6. Initial Public Offering and stockholders equity

The Companys registration statement with respect to its initial public
offering was declared effective by the Securities and Exchange Commission on
May 1, 2001. The offering closed on May 7, 2001. 2,000,000 shares of common
stock were offered in this initial public offering at a price to the public of
$8.00 per share. Net proceeds after deduction of expenses from the initial
public offering totaled $13.7 million.

8



---



##### Table of Contents



Immediately prior to the closing date of the initial public offering, all of
the redeemable convertible preferred stock outstanding automatically converted
into common stock at their respective conversion rates (Note 3). The effects of
these transactions resulted in a decrease of redeemable preferred stock to $0
and the issuance of approximately 3,816,000 shares of common stock. The
shareholders equity at July 1, 2001 would therefore be $22.3 million.

7. Equity-based compensation

During fiscal 2000 we granted stock options to employees and directors at
exercise prices deemed to be below the fair value of the underlying stock on
the date of grant. As a result of these grants we recorded deferred
compensation of approximately $1.2 million during fiscal year 2000, of which
$122,000 was amortized in 2000. The remaining $1.1 million as of December 31,
2000 will be amortized in future periods, generally over a four-year vesting
period. On January 31, 2001, the Company issued approximately 27,000 stock
options to employees with exercise prices of $6.00. The grant of these options
resulted in a deferred stock compensation charge of approximately $173,000 in
the first quarter of fiscal year 2001. Deferred stock compensation will be
amortized in future periods beginning in the year of the grant, generally over
a four-year vesting period. During the 26-week period ended July 1, 2001,
$136,000 of deferred stock compensation was amortized. On June 7, 2001, the
board of directors approved a grant of approximately 337,000 stock options to
employees with exercise price of $4.70. Since the exercise price was also the
fair value at the date of grant, no deferred compensation is recognized.

On April 18, 2001, we issued 18,917 shares of Series C preferred stock to two
consultants for services to be rendered in connection with leasehold
improvements and food development at an approximate fair value of $155,000,
which will be expensed or amortized over future periods.

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 resulted in a non cash compensation charge of
approximately $0.64 million at the time of the initial public offering. This
charge to expense was reversed as of July 1, 2001 when the market price of the
Companys common stock dropped to a level below the exercise price.

In January 2001, the board of directors approved an amendment to the Companys
1996 stock option plan to increase the number of shares of common stock
reserved for issuance under the plan to one million shares. The amendment was
approved by the Companys shareholders in March 2001.




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

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 and the factors listed on Exhibit
99 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.

9



---



##### Table of Contents



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 cafes, 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 42 cafes in Seattle, San Francisco, Chicago and Los
Angeles. Our growth strategy is to open new cafes in our existing markets and,
when appropriate, enter into new markets by concurrently opening a central
kitchen and at least four to six cafes and initiating delivery of box lunch and
catering services.

Through fiscal year 2000 we measured our operational results based on 13
four-week periods. In fiscal year 2001 we converted to four 13-week periods
with a 52- or 53-week fiscal year. Adjustments were made to 2000 results to
express the results in four 13-week periods comparable to 2001.

RESULTS OF OPERATIONS  13-WEEK PERIOD ENDED JULY 1, 2001 COMPARED WITH 13-WEEK PERIOD ENDED JUNE 25, 2000

Sales

Total sales decreased by $0.28 million, or 3.2%, from $8.67 million to
$8.39 million.

Retail sales decreased by $0.02 million, or 0.3%, from $7.45 million to
$7.43 million. Of this decrease, $0.55 million was attributable to the one-time
catering sales to Charles Schwab in May 2000 and $0.17 million of discontinued
sales due to the closure of University Village store in late August 2000.
Despite the economic downturn, retail sales in Los Angeles and Chicago
increased $0.47 million, or 20.8% from $2.26 million to $2.73 million. Retail
sales in Seattle and San Francisco decreased by $0.49 million, or 9.4%, from
$5.19 million to $4.70 million. This decrease was primarily due to lower office
occupancy rates. The increases were due in part to our new food introduction
program beginning on January 16, 2001 where we update our product offerings
approximately every six to eight weeks. Our new inventory system also enhanced
same-store sales growth by allowing us to manage the availability of items for
sale in our cafes in a more efficient manner. Same-store sales increased by
$0.07 million, or 1.2%, from $5.71 million to $5.78 million. Same-store sales
consist only of sales from cafes, and do not include sales from box lunches or
catered meals. In addition, as our brand awareness has matured in each
geographic region, we have been able to grow our box lunch and catering sales.

Wholesale and other sales decreased by $0.25 million, or 20.5%, from $1.22
million to $0.97 million. This decrease was primarily due to the
discontinuation of sales to Safeway, Costco and Kozmo.com.

Operating expenses

Operating expenses consist of costs 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 decreased by $0.38 million, or 3.8%, from $9.93 million to
$9.56 million. As a percentage of sales, our operating expenses decreased from
114.5% to 113.8%. This decrease was primarily due to the implementation of cost
saving strategies in the 2nd quarter.

Cost of food and packaging decreased by $0.34 million, or 9.6%, from $3.54
million to $3.20 million. Cost of food and packaging decreased as a percentage
of sales from 40.8% to 38.1%.

Cost of food and packaging for retail sales decreased by $0.18 million, or
6.1%, from $2.91 million to $2.73 million. Cost of food and packaging for
wholesale and other sales decreased by $0.16 million, or 25.3%, from $0.63
million to $0.47 million. This decrease was primarily due to the establishment
of national purchasing programs and vendor consolidations for better pricing.

Cost of food and packaging as a percentage of total sales for each of
retail sales and wholesale and other sales decreased by $0.33 million, or 9.3%,
from $3.54 million to $3.21 million. The decrease was primarily due to
implementation of an improved purchasing process, which improved our ability to
source low cost ingredients. As part of the new purchasing process, we entered
into a relationship with Marriott Distribution Services, under which they
procure and deliver to our central kitchens approximately 43% of our
ingredients and packaging products.

10



---



##### Table of Contents



Occupancy expense consists of costs related to the leasing of retail space
for our cafes and our central kitchens. Occupancy expense decreased by $0.02
million, or 2.0%, from $0.96 million to $0.94 million. This decrease was due to
the closure of a Seattle cafe in mid-2000. This Seattle cafe had higher
occupancy expenses than the total of four new cafes opened in 2001. As a
percentage of sales, occupancy expense increased from 11.1% to 11.2%, primarily
due to decreased sales. Our rents are fixed or variable determined as a
percentage of sales, or a combination of both.

Labor expense consists of wages and salaries paid to employees. Labor
expense increased by $0.07 million, or 2.5%, from $2.76 million to $2.83
million. This increase was primarily due to increased wage rates, to the
opening of five additional cafes since the first period of fiscal 2000 and to
the amortization of deferred compensation of $46,000 in the thirteen week
period ended July 1, 2001. There was no amortization of deferred compensation
in the comparable period in fiscal year 2000. As a percentage of sales, labor
expense increased from 31.8% to 33.7%. This increase was primarily due to
decreased sales.

Depreciation and amortization consists of the periodic expensing of
leasehold improvements, equipment and vehicles. Depreciation and amortization
expense decreased by $0.02 million or 3.0% from $0.66 million to $0.64 million.
As a percentage of sales, depreciation and amortization increased from 7.6% to
7.7%. This increase was primarily due to decreased sales.

Other operating expense consists of direct operating, marketing, repair
and maintenance expense. Other operating expense increased by $0.09 million, or
19.6%, from $0.46 million to $0.55 million. As a percentage of sales, other
operating expense increased from 5.3% to 6.5%. This increase was primarily due
to decreased sales.

General and administrative expense relates 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 offices lease and related office expenses. General and administrative
expense decreased by $0.16 million, or 10.1%, from $1.55 million to $1.39
million, primarily due to increased efficiencies at the corporate level offset
by wage and salary increases. As a percentage of sales, general and
administrative expense decreased from 17.9% to 16.6%.

Other (Expense) Income

Other (expense) income includes interest and other expense and interest
and other income. Other (expense) income increased by $0.14 million, or 466.6%,
from ($0.03) million to $0.11 million. This increase was primarily due to the
interest income generated from the proceeds associated with our Series C
financing which closed February 1, 2001 and the initial public offering which
closed on May 7, 2001. As a percentage of sales, other (expense) income
increased (0.4%) to 1.3%.

Net Loss

Net loss decreased by $0.24 million, or 18.6%, from $1.29 million to
$1.05 million. This decrease was primarily due to the implementation of cost
saving strategies and improved efficiency. As a percentage of sales, net loss
decreased from 14.9% to 12.5%. Net loss attributable to common shareholders,
after the amortization of beneficial conversion feature of $2.95 million in the
13-week period ending July 1, 2001, increased by $2.16 million, or 100.6% from
$2.15 million to $4.32 million, and as a percentage of sales, net loss
attributable to common shareholders increased from 24.8% to 51.4%.

11



---



##### Table of Contents



RESULTS OF OPERATIONS  26-WEEK PERIOD ENDED JULY 1, 2001 COMPARED WITH 26-WEEK PERIOD ENDED JUNE 25, 2000

Sales

Total sales increased by $0.48 million, or 3.0%, from $16.18 million to
$16.66 million.

Retail sales increased by $0.56 million, or 4.0%, from $14.02 million to
$14.58 million. Of this increase, $0.22 million was attributable to the four
new cafes which were opened in late 2000 or early 2001. The reminder of this
increase was primarily due to our new food introduction program, in which we
update our product offerings approximately every six to eight weeks, and our
new inventory system, which enhanced same-store sales growth by allowing us to
manage the availability of items for sale in our cafes in a more efficient
manner. In addition, as our brand awareness has matured in each geographic
region, we have been able to grow our box lunch and catering sales. Same-store
sales increased by $0.50 million, or 4.6%, from $10.93 million to $11.43
million. Same-store sales consist only of sales from cafes, and do not include
sales from box lunches or catered meals. The increase in same-store sales was
primarily due to our new food introduction program and our new inventory
system.

Wholesale and other sales decreased by $0.09 million, or 4.1%, from $2.16
million to $2.07 million. This decrease was primarily due to the
discontinuation of sales to Safeway, Costco and Kozmo.com.

Operating expenses

Operating expenses consist of costs 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 decreased by $0.01 million, or 0.1%, from $19.12 million to
$19.11 million. As a percentage of sales, our operating expenses decreased from
118.2% to 114.7%. This decrease was primarily due to the improved operational
efficiency and implementation of cost saving strategies.

Cost of food and packaging decreased by $0.24 million, or 3.6%, from $6.61
million to $6.37 million. Cost of food and packaging decreased as a percentage
of sales from 40.9% to 38.2%.

Cost of food and packaging for retail sales decreased by $0.11 million, or
2.0%, from $5.47 million to $5.36 million. Cost of food and packaging for
wholesale and other sales decreased by $0.13 million, or 11.4%, from $1.14
million to $1.01 million. The establishment of this national purchasing
programs and vendor consolidations resulted in better pricing and lower costs
of food and packaging.

Cost of food and packaging as a percentage of total sales for each of
retail sales and wholesale and other sales decreased primarily due to
implementation of an improved purchasing process, which improved our ability to
source low cost ingredients. As part of the new purchasing process, we entered
into a relationship with Marriott Distribution Services, under which they
procure and deliver to our central kitchens approximately 43% of our
ingredients and packaging products.

Occupancy expense consists of costs related to the leasing of retail space
for our cafes and our central kitchens. Occupancy expense decreased by $0.04
million, or 2.1%, from $1.91 million to $1.87 million. This decrease was due to
the closure of a Seattle cafe in mid-2000. This Seattle cafe had higher
occupancy expenses than the total of four new cafes opened in 2001. As a
percentage of sales, occupancy expense decreased from 11.8% to 11.2%, primarily
due to decreased sales. Our rents are fixed or variable determined as a
percentage of sales, or a combination of both.

Labor expense consists of wages, salaries and certain equity-based
compensation amounts paid to employees. Labor expense increased by $0.30
million, or 5.7 %, from $5.29 million to $5.59 million. As a percentage of
sales, labor expense increased from 32.6% to 33.5%. This increase was primarily
due to increased wage rates, to the opening of four additional cafes since the
first period of fiscal 2001 and to the amortization of deferred compensation of
$92,000 in the twenty-six week period ended July 1, 2001. There was no
amortization of deferred compensation in the comparable period in fiscal year
2000. This increase was also due to decreased sales.

12



---



##### Table of Contents



Depreciation and amortization consists of the periodic expensing of
leasehold improvements, equipment and vehicles. Depreciation and amortization
expense decreased by $0.08 million or 6.0% from $1.33 million to $1.25 million.
As a percentage of sales, depreciation and amortization decreased from 8.2% to
7.5%. This decrease was primarily due to increased sales and aged fixed assets.

Other operating expense consists of direct operating, marketing, repair
and maintenance expense. Other operating expense increased by $0.14 million, or
16.5%, from $0.85 million to $0.99 million. As a percentage of sales, other
operating expense increased from 5.2% to 5.9%. This increase was primarily due
to higher energy costs in 2001.

General and administrative expense relates 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 offices lease and related office expenses. General and administrative
expense decreased by $0.94 million, or 3.0%, from $3.14 million to $3.05
million. As a percentage of sales, general and administrative expense decreased
from 19.4% to 18.3%. This decrease was primarily due to increased efficiencies
at the corporate level offset by wage and salary increases.

Provision for asset impairment and store closure relates to the writedown
of leasehold improvements at some cafe locations. Provision for asset
impairment and store closure decreased by $8,000, or 100%, from $8,000 to zero.
Based on the facts surrounding an assets impairment, we recorded either a loss
in the amount of the remaining book value or of the excess of the remaining net
book value over discounted projected cash flows.

Other (Expense) Income

Other (expense) income includes interest and other expense and interest
and other income. Other (expense) income increased by $0.16 million, or 228.6%,
from ($0.07) million to $0.09 million. As a percentage of sales, other
(expense) income increased from (0.5%) to 0.5%. This increase was primarily due
to the interest income generated from the proceeds associated with our Series C
financing which closed February 1, 2001 and the initial public offering which
closed on May 7, 2001.

Net Loss

Net loss decreased by $0.66 million, or 21.7%, from $3.02 million to
$2.36 million. This decrease was primarily due to the establishment of a
national purchase program, vendor consolidation and improved operational
efficiencies. As a percentage of sales, net loss decreased from 18.7% to 14.2%.
Net loss attributable to common shareholders, after the amortization of the
beneficial conversion feature of $3.03 million, increased by $1.98 million, or
42.1% from $4.70 million to $6.68 million. As a percentage of sales, net loss
attributable to common shareholders increased from 29.1% to 40.1%.

LIQUIDITY AND CAPITAL RESOURCES

Since inception we have financed our operations primarily through the
issuance of capital stock and debt. Through July 1, 2001 have raised cash of
approximately $62.9 million from the sales of mandatorily redeemable
convertible preferred stock, convertible debt and common stock. In addition to
funding capital expenditures, which through July 1, 2001 have totaled
approximately $22.8 million since inception, net cash provided by financing
activities has funded our investments in business and market development and
related operating losses.

During the period from inception through July 1, 2001, we reported net
losses of approximately $44.26 million. In the near term, operating losses may
continue despite actions taken to reduce negative cash flow from operations.

Net cash used in operating activities during the 26-week periods ended
July 1, 2001 and June 25, 2000 was $3.62 million and $3.30 million,
respectively. Net cash used in operating activities in each period resulted
primarily from net loss before non-cash charges in addition to decreases in
accounts payable or accrued expenses and increases in accounts receivable.

13



---



##### Table of Contents



Net cash used in investing activities for the 26-week periods ended July
1, 2001 and June 25, 2000 was approximately $0.92 million and $0.23 million,
respectively. Net cash used in investing activities resulted from capital
additions primarily related to opening additional cafes and central kitchens.

Net cash provided by financing activities for the 26-week periods ended
July 1, 2001 and June 25, 2000 was $14.67 million and $1.54 million,
respectively. Net cash provided by financing activities 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.

EBITDA represents earnings (loss) before interest expense, income taxes,
and depreciation and amortization. EBITDA for the 13-week periods ended July 1,
2001 and June 25, 2000 was ($.52) million and ($0.60) million, respectively,
and ($1.20) million and ($1.62) million for the 26-week periods ended July 1,
2001 and June 25, 2000, respectively.

At July 1, 2001, we had cash and cash equivalents of $10.69 million,
working capital of $10.39 million and shareholders equity of $22.3 million.
Historically, our annual financial statements have contained an explanatory
paragraph relating to our ability to continue as a going concern. During the
26- week period ended July 1, 2001, we sold additional shares of Series C
preferred stock for an aggregate price of $3.0 million. In May we received net
proceeds of $13.7 million from our initial public offering. As a result, we
believe that our current resources, together with the net proceeds from our
initial public offering, provide us with sufficient resources to operate our
business and meet our obligations as they come due.

We have opened four cafes in 2001 and plan to open six additional cafes
during 2001. These cafes will require approximately $3.0 million in leasehold
improvements and equipment.

We believe our current cash and cash equivalents, including the net
proceeds from our initial public offering, will be sufficient to meet our
anticipated cash needs for working capital and capital expenditures for at
least the next 24 months. Thereafter, we may need to raise additional capital
to finance our operations, as well as to enhance our operations, fund our
expansion and respond to competitive pressures. We may be unable to obtain
financing on terms favorable to us, if at all. 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

During fiscal 2000 we granted stock options to employees and directors at
exercise prices deemed to be below the fair value of the underlying stock on
the date of grant. As a result of these grants we recorded deferred
compensation of approximately $1.2 million during fiscal year 2000, of which
$122,000 was amortized in 2000. The remaining $1.1 million as of December 31,
2000 will be amortized in future periods, generally over a four-year vesting
period. On January 31, 2001, the Company issued approximately 27,000 stock
options to employees with exercise prices of $6.00. The grant of these options
resulted in a deferred stock compensation charge of approximately $173,000 in
the first quarter of fiscal year 2001. Deferred stock compensation will be
amortized in future periods beginning in the year of the grant, generally over
a four-year vesting period. During the 26-week period ended July 1, 2001,
$136,000 of deferred stock compensation was amortized. On June 7, 2001, the
board of directors approved a grant of approximately 337,000 stock options to
employees with exercise price of $4.70. Since the exercise price was also the
fair value at the date of grant, no deferred compensation is recognized.

On April 18, 2001, we issued 18,917 shares of Series C preferred stock to
two consultants for services to be rendered in connection with leasehold
improvements and food development at an approximate fair value of $155,000,
which will be expensed or amortized over future periods.

On May 7, 2001, the modification of the Series C warrants to extend their
expiration dates resulted in a deferred stock compensation charge of
approximately $0.64 million in the second quarter of 2001. This deferred stock
compensation was fully expensed upon completion of the initial public offering.
This charge to expense was reversed as of July 1, 2001 when the market price
of the Companys common stock dropped to a level below the exercise price.

14



---



##### Table of Contents






ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURE 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 invested the net
proceeds from our initial public offering in similar investment grade and
highly liquid investments pending their use. We do not believe these
investments are subject to significant market risk.

Under our revolving credit facility, we could be exposed to market risk
from changes in interest rates on borrowings which bear interest at the lending
banks prime rate plus a fixed percentage or LIBOR plus a fixed percentage.
Because we have used a portion of the net proceeds of our initial public
offering to repay our borrowings under the revolving line of credit and we do
not anticipate that our subsequent borrowings will be material to our
operations, we do not believe this risk will be material.

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 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.




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)  Use of proceeds

On May 1, 2001, the Securities and Exchange Commission declared effective
our registration statement on Form S-1 (No. 333-54922). On May 7, 2001 we
closed our initial public offering of 2,000,000 shares of our common stock at
an initial public offering price of $8.00 per share. The managing underwriter
in the initial public offering was WR Hambrecht+Co, LLC. Net proceeds to
BRIAZZ, after deduction of $2.3 million in underwriting discounts, commissions
and other expenses from the initial public offering totaled $13.7 million. Our
expenses for the offering consist of approximately $0.96 million in
underwriting discounts and commissions and $1.34 million in other expenses.
None of the expenses incurred in the offering were direct or indirect payments
to affiliates, directors, officers or persons owning ten percent or more of any
class of our equity securities. In the period from the closing of the initial
public offering through July 1, 2001, we used $2.0 million for the repayment of
line-of-credit borrowings. Until the proceeds are used they are invested in
short-term paper.

(c)  Sales of Unregistered Securities

In June 2001, we granted options to purchase an aggregate of 337,070
shares of common stock, at an exercise price of $4.70, to employees under our
stock option plan, subject to the filing of a Form S-8 registration statement.
All of these options are outstanding. The issuance of such options was exempt
from Securities Act registration pursuant to Section 4(2) under the Securities
Act, on the basis that these options were granted to our employees or directors
for compensatory purpose and not in a public offering.

15



---



##### Table of Contents



In April 2001, we issued 18,917 shares of Series C preferred stock to two
consultants for services rendered at an aggregate fair value of $155,000. The
sale and issuance of such securities were exempt from Securities Act
registration pursuant to Rule 701 under the Securities Act, on the basis that
these securities were offered and sold in accordance with a written
compensatory contract. All investors received historical and projected
financial data and had the opportunity to ask questions of our officers. No
underwriters were used in connection with these sales and issuances.

On May 7, 2001, immediately prior to the closing of our initial public
offering, all shares of our preferred stock converted into an aggregate of
3,815,851 shares of common stock.




ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.




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

None.




ITEM 5. OTHER INFORMATION

On July 2, 2001, John Carlton, one of the Companys directors, resigned
from the Board of Directors due to personal commitments.

16



---



##### Table of Contents






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+    |  | Amended and Restated Articles of Incorporation.                                                                                                             
|3.2+    |  | Bylaws.                                                                                                                                                     
|4.1+    |  | Specimen Stock Certificate.                                                                                                                                 
|*10.1+  |  | 1996 Amended Stock Option Plan.                                                                                                                             
|*10.2+  |  | Form of Option Agreement (Fresh Options prior to February 2001)                                                                                             
|*10.3+  |  | Form of Option Agreement (other options prior to February 2001)                                                                                             
|*10.4+  |  | 2001 Employee Stock Purchase Plan.                                                                                                                          
|10.5+   |  | Form of Warrant.                                                                                                                                            
|*10.6+  |  | Employment Agreement between BRIAZZ and Charles William Vivian dated July 14, 1999.                                                                         
|10.7+   |  | Retail Lease between BRIAZZ and Benaroya Capital Company regarding 1100 Olive Way,
Seattle, WA dated November 6, 1998.                                      
|10.8+   |  | Form of Registration Rights Agreement among BRIAZZ and certain of our shareholders dated
August 15, 1997, as amended.                                       
|10.9+   |  | Agreement between BRIAZZ and Stusser Realty Group Limited Partnership dated January 1998.                                                                   
|10.10+  |  | Sublease between BRIAZZ and Stusser Electric Company regarding 3901 7th Avenue South,
Seattle, WA dated February 6, 1998.                                   
|10.11+  |  | Sublease Amendment between BRIAZZ and Stusser Electric Company regarding 3901 7th Avenue
South, Seattle, WA dated August 28, 2000.                          
|10.12+  |  | Lease between BRIAZZ and Mission-Taylor Properties regarding 225 Mendell St., San
Francisco, CA dated June 28 1996.                                         
|10.13+  |  | Amendment to Lease between BRIAZZ and Mission-Taylor Properties regarding 225 Mendell
St., San Francisco, CA dated May 25, 2000.                            
|10.14+  |  | Lease between BRIAZZ and Time Realty Investments, Inc. regarding 200 Center St., El
Segundo, CA dated December 15, 1997.                                    
|10.15+  |  | Industrial Building Lease between BRIAZZ and Walnut Street Properties, Inc. regarding
1642 Lake Street, Chicago, IL dated April 7, 1997.                    
|10.16+  |  | Promissory Note made by BRIAZZ and Victor Alhadeff in favor of U.S. Bank National
Association in the principal amount of $2,000,000 dated December 30, 1999.
|10.17+  |  | Commercial Security Agreement among BRIAZZ, Victor Alhadeff and U.S.Bank National
Association dated December 30, 1999.                                      
|10.18+  |  | Noncompetition Agreement between BRIAZZ and Victor D. Alhadeff dated October 18, 1996.                                                                      
|*10.19+ |  | Form of Option Agreement (all options since February 2001)                                                                                                  
|10.20+  |  | Extension or Revision Agreement between BRIAZZ and Victor Alhadeff and U.S. Bank
National Association dated March 26, 2001.                                 
|99.1   |  | Risk Factors                                                                                                                                                



---

|* |  | Indicates management contract                                                                           
|- |  | --------------------------------------------------------------------------------------------------------
| 
| 
| 
| 
|+ |  | Incorporated by reference to the Companys registration statement on Form S-1
(No. 333-54922)           
| 
| 
| 
| 
| |  | Incorporated by reference to
the Companys Form 10-Q, for the Quarterly Period ended
September 30, 2001.

(b)  Reports on Form 8-K:

None.

17



---



##### Table of Contents






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: May 14, 2001 |  | By:          |  | /s/ Victor D. Alhadeff                                                           
|                   |  |              |  |                                                                                  
|                   |  | Name:
Title: |  | Victor D. Alhadeff
Chief Executive Officer and
Chairman of the Board of Directors

18