##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549


FORM 10-Q

(MARK ONE)

|  |  |                                                                                        
|- |  | ---------------------------------------------------------------------------------------
|x |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
| 
|  |  | FOR THE QUARTERLY PERIOD ENDED March 30, 2003                                          

OR

|  |  |                                                                                         
|- |  | ----------------------------------------------------------------------------------------
|o |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
| 
|  |  | FOR THE TRANSITION PERIOD FROM     
TO           .                                      

COMMISSION FILE NUMBER 000-32527

BRIAZZ, INC.

(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)


|                                                                          |  |                                                
|------------------------------------------------------------------------- |  | -----------------------------------------------
|WASHINGTON
(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
o

The number of outstanding shares of common stock, no par value, of the
Registrant at April 30, 2003 was 5,990,916.

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





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TABLE OF CONTENTS



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



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##### Table of Contents



BRIAZZ, INC.

INDEX TO THE FORM 10-Q
FOR THE 13-WEEK PERIOD ENDED March 30, 2003

|                               |  |                                                                                       |  |     
|------------------------------ |  | ------------------------------------------------------------------------------------- |  | ----
|                               |  |                                                                                       |  | PAGE
|                               |  |                                                                                       |  |     
|PART I  FINANCIAL INFORMATION |  |                                                                                      
|ITEM 1.                        |  | Financial Statements                                                                  |  | 2   
|                               |  | Balance Sheets                                                                        |  | 2   
|                               |  | Statements of Operations                                                              |  | 3   
|                               |  | Statement of Stockholders Equity                                                     |  | 4   
|                               |  | Statements of Cash Flows                                                              |  | 5   
|                               |  | Notes to Financial Statements                                                         |  | 6   
|ITEM 2.                        |  | Managements Discussion and Analysis of Financial Condition and
Results of Operations |  | 12  
|ITEM 3.                        |  | Quantitative and Qualitative Disclosures About Market Risk                            |  | 21  
|ITEM 4.                        |  | Controls and Procedures                                                               |  | 22  
|PART II  OTHER INFORMATION    |  |                                                                                      
|ITEM 1.                        |  | Legal Proceedings                                                                     |  | 22  
|ITEM 2.                        |  | Changes in Securities and Use of Proceeds                                             |  | 22  
|ITEM 3.                        |  | Defaults Upon Senior Securities                                                       |  | 22  
|ITEM 4.                        |  | Submission of Matters to a Vote of Security Holders                                   |  | 22  
|ITEM 5.                        |  | Other Information                                                                     |  | 22  
|ITEM 6.                        |  | Exhibits and Reports on Form 8-K                                                      |  | 23  
|SIGNATURES                     |  | 25                                                                                   
|CERTIFICATIONS                 |  | 26                                                                                   





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##### Table of Contents






PART I  FINANCIAL INFORMATION




ITEM 1. FINANCIAL STATEMENTS




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

|                                                           |  |                                                                                                                                                               |       |                                            |         |           |        |              |         |       |        | 
|---------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----- | ------------------------------------------ | ------- | --------- | ------ | ------------ | ------- | ----- | ------ | 
|                                                           |  |                                                                                                                                                               |       |                                            |         | March 30, |        | December 29,
|                                                           |  |                                                                                                                                                               |       |                                            |         | 2003      |        | 2002        
|                                                           |  |                                                                                                                                                               |       |                                            |         |           |        |             
|Assets                                                     |  |                                                                                                                                                               |       |                                            |         |           |        |             
|Current assets                                             |  |                                                                                                                                                               |       |                                            |         |           |        |             
|                                                           |  | Cash and cash equivalents                                                                                                                                     |       | $                                          | 667     |           |        | $            | 491     |      
|                                                           |  | Current portion of restricted certificates of deposit                                                                                                         |       |                                            | 65      |           |        |              | 40      |      
|                                                           |  | Accounts receivable, net of allowance of $125 (2003) and $135 (2002)                                                                                          |       |                                            | 248     |           |        |              | 428     |      
|                                                           |  | Inventory                                                                                                                                                     |       |                                            | 430     |           |        |              | 409     |      
|                                                           |  | Prepaid expenses                                                                                                                                              |       |                                            | 305     |           |        |              | 611     |      
|                                                           |  | Other current assets                                                                                                                                          |       |                                            | 206     |           |        |              | 154     |      
|                                                           |  |                                                                                                                                                               |       |                                            |         |           |        |              |         |      
|                                                           |  |                                                                                                                                                               |       | Total current assets                       |         |           | 1,921  |              |         |       | 2,133  | 
|Property and equipment, net                                |  |                                                                                                                                                               | 7,111 |                                            |         |           | 7,897  |             
|Restricted certificates of deposit, net of current portion |  |                                                                                                                                                               | 398   |                                            |         |           | 423    |             
|Deferred debt issue cost, deposits and other assets        |  |                                                                                                                                                               | 578   |                                            |         |           | 252    |             
|                                                           |  |                                                                                                                                                               |       |                                            |         |           |        |             
|                                                           |  |                                                                                                                                                               |       | Total assets                               |         | $         | 10,008 |              |         | $     | 10,705 | 
|                                                           |  |                                                                                                                                                               |       |                                            |         |           |        |             
|Liabilities and Stockholders Equity                       |  |                                                                                                                                                               |       |                                            |         |           |        |             
|Current liabilities                                        |  |                                                                                                                                                               |       |                                            |         |           |        |             
|                                                           |  | Line of credit borrowings                                                                                                                                     |       | $                                          |        |           |        | $            | 129     |      
|                                                           |  | Accounts payable, including amounts due to related party                                                                                                      |       |                                            | 3,264   |           |        |              | 2,737   |      
|                                                           |  | Accrued compensation                                                                                                                                          |       |                                            | 767     |           |        |              | 758     |      
|                                                           |  | Other accrued liabilities                                                                                                                                     |       |                                            | 1,116   |           |        |              | 894     |      
|                                                           |  | Notes payable                                                                                                                                                 |       |                                            | 1,303   |           |        |              | 1,390   |      
|                                                           |  | Notes payable to related party (Note 3)                                                                                                                       |       |                                            | 2,000   |           |        |              | 1,025   |      
|                                                           |  | Current portion of capital lease obligations                                                                                                                  |       |                                            | 122     |           |        |              | 109     |      
|                                                           |  |                                                                                                                                                               |       |                                            |         |           |        |             
|                                                           |  |                                                                                                                                                               |       | Total current liabilities                  |         |           | 8,572  |              |         |       | 7,042  | 
|Capital lease obligations, net of current portion          |  |                                                                                                                                                               | 194   |                                            |         |           | 234    |             
|                                                           |  |                                                                                                                                                               |       |                                            |         |           |        |             
|                                                           |  |                                                                                                                                                               |       | Total liabilities                          |         |           | 8,766  |              |         |       | 7,276  | 
|                                                           |  |                                                                                                                                                               |       |                                            |         |           |        |             
|Commitments and contingencies (Notes 2 and 8)              |  |                                                                                                                                                               |       |                                            |         |           |        |             
|Stockholders equity                                       |  |                                                                                                                                                               |       |                                            |         |           |        |             
|                                                           |  | Perfered stock, Series D, no par value; 100 shares authorized and 100 issued (2003)
and 0 (2002) shares issued and outstanding                                |       |                                            |        |           |        |              |        |      
|                                                           |  | Common stock and additional paid in capital, no par value; 100,000,000 shares
authorized; 5,990,916 (2003) and 5,880,173 (2002) shares issued and outstanding |       |                                            | 73,972  |           |        |              | 73,819  |      
|                                                           |  | Deferred stock compensation                                                                                                                                   |       |                                           |         |           |        | (203         | )      
|                                                           |  | Accumulated deficit                                                                                                                                           |       |                                            | (72,730 | )         |        |              | (70,187 | )    
|                                                           |  |                                                                                                                                                               |       |                                            |         |           |        |             
|                                                           |  |                                                                                                                                                               |       | Total stockholders equity                 |         | 1,242     |        |              |         | 3,429 |       
|                                                           |  |                                                                                                                                                               |       |                                            |         |           |        |             
|                                                           |  |                                                                                                                                                               |       | Total liabilities and stockholders equity |         | $         | 10,008 |              |         | $     | 10,705 | 
|                                                           |  |                                                                                                                                                               |       |                                            |         |           |        |              |         |      

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

2



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##### Table of Contents






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

|                                                                               |                                                  |   |                          |       |                      |       |           |       |   |       | 
|------------------------------------------------------------------------------ | ------------------------------------------------ | - | ------------------------ | ----- | -------------------- | ----- | --------- | ----- | - | ----- | 
|                                                                               |                                                  |   |                          |       | Thirteen weeks ended
|                                                                               |                                                  |   |                          |       |                     
|                                                                               |                                                  |   |                          |       | March 30,            |       | March 31,
|                                                                               |                                                  |   |                          |       | 2003                 |       | 2002     
|                                                                               |                                                  |   |                          |       |                      |       |          
|Sales                                                                          |                                                  |   |                          |       |                      |       |           |      
|                                                                               | Retail                                           |   | $                        | 5,116 |                      |       | $         | 5,294 |  
|                                                                               | Branded Sales                                    |   |                          | 1,676 |                      |       |           | 2,062 |  
|                                                                               |                                                  |   |                          |       |                      |       |           |      
|                                                                               |                                                  |   | Total Sales              |       |                      | 6,792 |           |       |   | 7,356 | 
|                                                                               |                                                  |   |                          |       |                      |       |           |      
|Operating Expenses                                                             |                                                  |   |                          |       |                      |       |           |      
|                                                                               | Cost of food and packaging                       |   |                          | 3,194 |                      |       |           | 2,813 |  
|                                                                               | Occupancy expenses                               |   |                          | 1,114 |                      |       |           | 996   |  
|                                                                               | Labor expenses                                   |   |                          | 2,020 |                      |       |           | 2,726 |  
|                                                                               | Depreciation and amortization                    |   |                          | 794   |                      |       |           | 788   |  
|                                                                               | Other operating expenses                         |   |                          | 289   |                      |       |           | 371   |  
|                                                                               | General and administrative expenses              |   |                          | 1,609 |                      |       |           | 1,851 |  
|                                                                               | Loss on disposal of assets                       |   |                          | 163   |                      |       |           | 2     |  
|                                                                               | Provision for asset impairment and store closure |   |                          |      |                      |       |           | 16    |  
|                                                                               |                                                  |   |                          |       |                      |       |           |      
|                                                                               |                                                  |   | Total operating expenses |       |                      | 9,183 |           |       |   | 9,563 | 
|                                                                               |                                                  |   |                          |       |                      |       |           |      
|Loss from operations                                                           |                                                  |   | (2,391                   | )     |                      |       | (2,207    | )    
|                                                                               |                                                  |   |                          |       |                      |       |           |      
|Other (expense) income                                                         |                                                  |   |                          |       |                      |       |           |      
|                                                                               | Interest and other expense                       |   |                          | (155  | )                    |       |           | (10   | )
|                                                                               | Interest and other income                        |   |                          | 3     |                      |       |           | 32    |  
|                                                                               |                                                  |   |                          |       |                      |       |           |      
|                                                                               |                                                  |   | (152                     | )     |                      |       | 22        |      
|                                                                               |                                                  |   |                          |       |                      |       |           |      
|Net loss                                                                       |                                                  | $ | (2,543                   | )     |                      | $     | (2,185    | )    
|                                                                               |                                                  |   |                          |       |                      |       |           |      
|Basic and diluted net loss per share                                           |                                                  | $ | (0.43                    | )     |                      | $     | (0.37     | )    
|                                                                               |                                                  |   |                          |       |                      |       |           |      
|Weighted-average shares used in computing basic and diluted
net loss per share |                                                  |   | 5,977,291                |       |                      |       | 5,831,370 |      
|                                                                               |                                                  |   |                          |       |                      |       |           |      

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

3



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##### Table of Contents






BRIAZZ, INC.
Statement of Stockholders Equity
(in thousands)
(unaudited)

|                                                                                                                              |  |              |       |          |  |              |        |         |  |       |      |   |  |   |         |   |  |   |        |  
|----------------------------------------------------------------------------------------------------------------------------- |  | ------------ | ----- | -------- |  | ------------ | ------ | ------- |  | ----- | ---- | - |  | - | ------- | - |  | - | ------ | -
|                                                                                                                              |  | Common Stock |       | Deferred |  |              |        |         |  |       |      |  
|                                                                                                                              |  |              |       | stock    |  | Accumulated  |        |         |  |      
|                                                                                                                              |  | Shares       |       | Amount   |  | compensation |        | deficit |  | Total
|                                                                                                                              |  |              |       |          |  |              |        |         |  |      
|Balance at December 29, 2002                                                                                                  |  |              | 5,880 |          |  | $            | 73,819 |         |  | $     | (203 | ) |  | $ | (70,187 | ) |  | $ | 3,429  |  
|Issuance of shares for convertible debt                                                                                       |  |              | 40    |          |  |              | 8      |         |  |       |     |   |  |   |        |   |  |   | 8      |  
|Issuances of stock warrants and modifications of stock warrants
and convertible notes to reduce exercise and conversion price |  |              |      |          |  |              | 128    |         |  |       |     |   |  |   |        |   |  |   | 128    |  
|Amortization of deferred compensation                                                                                         |  |              |      |          |  |              |       |         |  |       | 203  |   |  |   |        |   |  |   | 203    |  
|Employee stock purchase plan                                                                                                  |  |              | 71    |          |  |              | 17     |         |  |       |     |   |  |   |        |   |  |   | 17     |  
|Net loss                                                                                                                      |  |              |      |          |  |              |       |         |  |       |     |   |  |   | (2,543  | ) |  |   | (2,543 | )
|                                                                                                                              |  |              |       |          |  |              |        |         |  |       |      |   |  |   |         |   |  |   |        |  
|Balance at March 30, 2003                                                                                                     |  |              | 5,991 |          |  | $            | 73,972 |         |  | $     |     |   |  | $ | (72,730 | ) |  | $ | 1,242  |  
|                                                                                                                              |  |              |       |          |  |              |        |         |  |       |      |   |  |   |         |   |  |   |        |  

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

4



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##### Table of Contents






BRIAZZ, INC.
STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)

|                                                                       |                                                                                                                                                                    |                                                  |                                           |                                                  |      |                   |        |           |     |      |        |  
|---------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ------------------------------------------------ | ----------------------------------------- | ------------------------------------------------ | ---- | ----------------- | ------ | --------- | --- | ---- | ------ | -
|                                                                       |                                                                                                                                                                    |                                                  |                                           |                                                  |      | Three weeks ended
|                                                                       |                                                                                                                                                                    |                                                  |                                           |                                                  |      |                  
|                                                                       |                                                                                                                                                                    |                                                  |                                           |                                                  |      | March 30,         |        | March 31,
|                                                                       |                                                                                                                                                                    |                                                  |                                           |                                                  |      | 2003              |        | 2002     
|                                                                       |                                                                                                                                                                    |                                                  |                                           |                                                  |      |                   |        |          
|Cash flows from operating activities                                   |                                                                                                                                                                    |                                                  |                                           |                                                  |      |                   |        |          
|                                                                       | Net loss                                                                                                                                                           |                                                  | $                                         | (2,543                                           | )    |                   | $      | (2,185    | )  
|                                                                       | Adjustments to reconcile net loss to net cash used in operating activities                                                                                         |                                                  |                                           |                                                  |      |                   |        |           |    
|                                                                       |                                                                                                                                                                    | Amortization of deferred compensation            |                                           |                                                  | 203  |                   |        |           | 87  |     
|                                                                       |                                                                                                                                                                    | Non-cash interest expense                        |                                           |                                                  | 119  |                   |        |           |    |     
|                                                                       |                                                                                                                                                                    | Depreciation and amortization                    |                                           |                                                  | 794  |                   |        |           | 788 |     
|                                                                       |                                                                                                                                                                    | Loss on disposal of assets                       |                                           |                                                  | 163  |                   |        |           | 2   |     
|                                                                       |                                                                                                                                                                    | Provision for asset impairment and store closure |                                           |                                                  |     |                   |        |           | 16  |     
|                                                                       |                                                                                                                                                                    | Changes in operating assets and liabilities:     |                                           |                                                  |      |                   |        |           |     |     
|                                                                       |                                                                                                                                                                    |                                                  | Accounts receivable                       |                                                  |      | 180               |        |           |     | (184 | )     
|                                                                       |                                                                                                                                                                    |                                                  | Inventory                                 |                                                  |      | (21               | )      |           |     | (13  | )     
|                                                                       |                                                                                                                                                                    |                                                  | Prepaid expenses and other current assets |                                                  |      | 254               |        |           |     | (299 | )     
|                                                                       |                                                                                                                                                                    |                                                  | Accounts payable                          |                                                  |      | 498               |        |           |     | 252  |       
|                                                                       |                                                                                                                                                                    |                                                  | Accrued compensation                      |                                                  |      | 9                 |        |           |     | (241 | )     
|                                                                       |                                                                                                                                                                    |                                                  | Other accrued liabilities                 |                                                  |      | 221               |        |           |     | (17  | )     
|                                                                       |                                                                                                                                                                    | Other                                            |                                           |                                                  | (159 | )                 |        |           | (4  | )   
|                                                                       |                                                                                                                                                                    |                                                  |                                           |                                                  |      |                   |        |          
|                                                                       |                                                                                                                                                                    |                                                  |                                           | Net cash used in operating activities            |      |                   | (282   | )         |     |      | (1,798 | )
|                                                                       |                                                                                                                                                                    |                                                  |                                           |                                                  |      |                   |        |          
|Cash flows from investing activities                                   |                                                                                                                                                                    |                                                  |                                           |                                                  |      |                   |        |          
|                                                                       | Purchases of property and equipment                                                                                                                                |                                                  |                                           | (10                                              | )    |                   |        | (643      | )  
|                                                                       | Other                                                                                                                                                              |                                                  |                                           |                                                 |      |                   |        | 8         |    
|                                                                       |                                                                                                                                                                    |                                                  |                                           |                                                  |      |                   |        |          
|                                                                       |                                                                                                                                                                    |                                                  |                                           | Net cash used in investing activities            |      |                   | (10    | )         |     |      | (635   | )
|                                                                       |                                                                                                                                                                    |                                                  |                                           |                                                  |      |                   |        |          
|Cash flows from financing activities                                   |                                                                                                                                                                    |                                                  |                                           |                                                  |      |                   |        |          
|                                                                       | Change in checks issued in excess of bank deposits                                                                                                                 |                                                  |                                           | 30                                               |      |                   |        | (227      | )  
|                                                                       | Repayment of line-of-credit borrowings                                                                                                                             |                                                  |                                           | (129                                             | )    |                   |        |          |    
|                                                                       | Repayment of notes payable                                                                                                                                         |                                                  |                                           |                                                 |      |                   |        | (40       | )  
|                                                                       | Proceeds from notes payable, preferred stock and warrants                                                                                                          |                                                  |                                           | 975                                              |      |                   |        |          |    
|                                                                       | Debt and preferred stock issuance costs                                                                                                                            |                                                  |                                           | (398                                             | )    |                   |        |          |    
|                                                                       | Decrease in restricted certificates of deposit                                                                                                                     |                                                  |                                           |                                                 |      |                   |        | 79        |    
|                                                                       | Proceeds from employee stock purchase plan                                                                                                                         |                                                  |                                           | 17                                               |      |                   |        | 19        |    
|                                                                       | Repayment of capital lease obligation                                                                                                                              |                                                  |                                           | (27                                              | )    |                   |        |          |    
|                                                                       |                                                                                                                                                                    |                                                  |                                           |                                                  |      |                   |        |          
|                                                                       |                                                                                                                                                                    |                                                  |                                           | Net cash provided (used) by financing activities |      |                   | 468    |           |     |      | (169   | )
|                                                                       |                                                                                                                                                                    |                                                  |                                           |                                                  |      |                   |        |          
|Net increase (decrease) in cash and cash equivalents                   |                                                                                                                                                                    |                                                  | 176                                       |                                                  |      |                   | (2,602 | )        
|Cash and cash equivalents                                              |                                                                                                                                                                    |                                                  |                                           |                                                  |      |                   |        |          
|                                                                       | Beginning of period                                                                                                                                                |                                                  |                                           | 491                                              |      |                   |        | 6,193     |    
|                                                                       |                                                                                                                                                                    |                                                  |                                           |                                                  |      |                   |        |          
|                                                                       | End of period                                                                                                                                                      |                                                  | $                                         | 667                                              |      |                   | $      | 3,591     |    
|                                                                       |                                                                                                                                                                    |                                                  |                                           |                                                  |      |                   |        |          
|Supplemental disclosure of cash flow information                       |                                                                                                                                                                    |                                                  |                                           |                                                  |      |                   |        |          
|                                                                       | Cash paid for interest                                                                                                                                             |                                                  | $                                         | 36                                               |      |                   | $      | 10        |    
|                                                                       |                                                                                                                                                                    |                                                  |                                           |                                                  |      |                   |        |          
|Supplemental disclosure of non-cash investing and financing activities |                                                                                                                                                                    |                                                  |                                           |                                                  |      |                   |        |          
|                                                                       | Addition to additional paid-in-capital relating to issuance of warrants and
modification of warrants and convertible notes to reduce exercise and
conversion price |                                                  | $                                         | 128                                              |      |                   | $      |          |    
|                                                                       |                                                                                                                                                                    |                                                  |                                           |                                                  |      |                   |        |          
|                                                                       | Notes payable converted to common stock                                                                                                                            |                                                  | $                                         | 8                                                |      |                   | $      |          |    
|                                                                       |                                                                                                                                                                    |                                                  |                                           |                                                  |      |                   |        |          

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

5



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##### Table of Contents



BRIAZZ, INC.




NOTES TO FINANCIAL STATEMENTS
(unaudited)

Note 1. Summary of operations and significant accounting policies

Operations BRIAZZ, INC. (BRIAZZ or the Company) 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 its current markets and
as funding becomes available, build BRIAZZ into a national brand by expanding
in major metropolitan areas across the United States. The Companys retail
distribution network includes BRIAZZ cafés, as well as box lunch and catered
platter delivery. The Company also distributes its products through select
wholesale accounts. Each market obtains products from a central kitchen; which
prepares meals daily. Until December 2002 the Company operated a central
kitchen in each market. The Companys Chicago and Los Angeles central kitchens
were closed in late 2002 and the Seattle central kitchen was closed in February
2003. It is expected the San Francisco central kitchen will close by the end
of the second quarter of 2003. Upon closure of the central kitchens, the
Company has contracted for the production of its products.

At March 30, 2003, the Company operated 12 cafés in Seattle, 15 cafés in San
Francisco, 8 cafés in Chicago and 10 cafés in Los Angeles.

Interim financial information The financial information at March 30, 2003,
and for the 13-week periods ended March 30, 2003 and March 31, 2002 is
unaudited but includes all adjustments, consisting only of normal recurring
adjustments, that the Company considers necessary for a fair presentation, in
all material respects, of its financial position, operating results and cash
flows for the interim dates and periods presented. The results of operations
for the 13-week period ended March 30, 2003 are not necessarily indicative of
results to be expected for the entire fiscal year or future periods.

Use of estimates  The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.

Impairment of long-lived assets The Company reviews its long-lived assets for
impairment, whenever events or changes in circumstances indicate that the
carrying amount of an asset might not be recoverable. When such an event
occurs, management determines whether there has been an impairment by comparing
the anticipated undiscounted future net cash flows at the lowest level for
which there are identifiable cash flows, which is at the store level, to the
related assets carrying value. If an asset is considered impaired, the asset
is written down to fair value, which is determined based either on discounted
cash flows or appraised values, depending on the nature of the asset.

Accounts Payable  The Companys banking system provides for the daily
replenishment of disbursement bank accounts as checks are presented. Included
in accounts payable at March 30, 2003 and December 29, 2002 is $187,000 and
$157,000, respectively, representing the excess of outstanding checks over cash
on deposit at the bank on which the checks were drawn.

Stock-based compensation  The Company accounts for stock-based employee
compensation arrangements in accordance with the provisions of Accounting
Principles Board Opinion No. 25 (APB No. 25), Accounting for Stock Issued to
Employees and complies with the disclosure provisions of Statement of
Financial Accounting Standards (SFAS) No. 123 (SFAS No. 123), Accounting
for Stock-Based Compensation. As amended by SFAS No. 148, Accounting for
Stock-Based Compensation Transition and Disclosure. Under APB No. 25,
compensation expense is based on the difference, if any, on the date of grant,
between the deemed fair value of the Companys stock and the exercise price of
the option. Unearned compensation is amortized on a straight-line basis over
the vesting period of the individual options. Certain warrants owned by
employees contain provisions which result in the application of variable plan
accounting in accordance with the provisions of FASB Interpretation No. 44
(FIN No. 44). For those warrants, compensation expense is adjusted quarterly
as the market price of the Companys common stock changes at prices in excess
of the exercise price.

Had the Company applied the provisions of SFAS No. 123 to all stock option
grants, the Companys net loss would have been increased to the pro forma amounts indicated below (in thousands except share data):

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|                                                          |                                                                                                         |   |                      |       |           |   |        |       |  
|--------------------------------------------------------- | ------------------------------------------------------------------------------------------------------- | - | -------------------- | ----- | --------- | - | ------ | ----- | -
|                                                          |                                                                                                         |   | Thirteen-weeks ended
|                                                          |                                                                                                         |   |                     
|                                                          |                                                                                                         |   | March 30,            |       | March 31,
|                                                          |                                                                                                         |   | 2003                 |       | 2002     
|                                                          |                                                                                                         |   |                      |       |          
|Net loss attributable to common stockholders, as reported |                                                                                                         | $ | (2,543               | )     |           | $ | (2,185 | )    
|Add:                                                      |                                                                                                         |   |                      |       |           |   |        |      
|                                                          | Total compensation cost included in net loss                                                            |   |                      | 203   |           |   |        | 87    |  
|Deduct:                                                   |                                                                                                         |   |                      |       |           |   |        |      
|                                                          | Total stock-based employee compensation expense determined
under fair value based method for all awards |   |                      | (603  | )         |   |        | (175  | )
|                                                          |                                                                                                         |   |                      |       |           |   |        |      
|Proforma net loss                                         |                                                                                                         | $ | (2,943               | )     |           | $ | (2,273 | )    
|                                                          |                                                                                                         |   |                      |       |           |   |        |      
|Net loss per share:                                       |                                                                                                         |   |                      |       |           |   |        |      
|                                                          | Basic and diluted - as reported                                                                         |   | $                    | (0.43 | )         |   | $      | (0.37 | )
|                                                          | Basic and diluted - pro forma                                                                           |   | $                    | (0.49 | )         |   | $      | (0.39 | )

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, and excludes 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 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
|                                                                               |                                   |                       |           |                     
|                                                                               |                                   |                       |           | March 30, 2003       |           | March 31, 2002
|                                                                               |                                   |                       |           |                      |           |               
|Net loss                                                                       |                                   | $                     | (2,543    | )                    |           | $              | (2,185    | )      
|                                                                               |                                   |                       |           |                      |           |                |           |        
|Weighted-average shares used in computing basic
and diluted net loss per share |                                   |                       | 5,977,291 |                      |           |                | 5,831,370 |        
|                                                                               |                                   |                       |           |                      |           |                |           |        
|Basic and diluted net loss per share                                           |                                   | $                     | (0.43     | )                    |           | $              | (0.37     | )      
|                                                                               |                                   |                       |           |                      |           |                |           |        
|Shares excluded from loss per share calculation:                               |                                   |                       |           |                      |           |                |           |        
|                                                                               | Options to purchase common stock  |                       |           | 788,004              |           |                |           | 920,176 |          
|                                                                               | Convertible debt                  |                       |           | 1,113,414            |           |                |           |        |          
|                                                                               | Warrants to purchase common stock |                       |           | 2,523,950            |           |                |           | 930,404 |          
|                                                                               |                                   |                       |           |                      |           |                |           |        
|                                                                               |                                   | Total shares excluded |           |                      | 4,425,368 |                |           |         | 1,850,580 | 
|                                                                               |                                   |                       |           |                      |           |                |           |        

Reclassifications Certain components of prior year revenues and expenses have
been reclassified to conform to current year classifications. The
reclassifications have no effect on stockholders equity or net loss.

Recent accounting pronouncements  In July 2001, the Financial Accounting
Standards Board (FASB) issued SFAS No. 143, Accounting for Asset Retirement
Obligations (SFAS No. 143). SFAS No. 143 addresses financial accounting and
reporting for obligations associated with the retirement of tangible long-lived
assets and the associated asset retirement costs. It applies to legal
obligations associated with the retirement of long-lived assets that result
from the acquisition, construction, development, and (or) the normal operation
of a long-lived asset, except for certain obligations of lessees. At adoption
of SFAS No. 143 the Company did not have any asset retirement obligations.

In June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated
with Exit or Disposal Activities (SFAS No. 146). SFAS No. 146 addresses
financial accounting and reporting for costs associated with exit or disposal
activities and nullifies Emerging Issues Task Force (EITF) Issue No. 94-3,
Liability Recognition for Certain Employee Termination Benefits and Other
Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring). The adoption of SFAS No 146 did not have a material impact on
the Companys financial position or results of operation.

Note 2. Financial condition and basis of presentation

The Company has incurred substantial operating losses and negative cash flows
from operations since inception and had an accumulated deficit of $72.7 million
and a working capital deficit of $6.7 million at March 30, 2003. These matters
raise substantial doubt about the Companys ability to continue as a going
concern. The Company has financed its operations principally through the net
proceeds from debt and equity offerings. The Companys ability to continue as
a going concern is dependant upon numerous factors, including its ability to
obtain additional financing, its ability to increase its level of future

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revenues and its ability to reduce operating expenses. The accompanying
financial statements have been prepared on the basis that the Company will
continue as a going concern and do not include any adjustments to reflect the
possible future effects on the recoverability of assets and liquidation of
liabilities that may result from this uncertainty.

As described in Note 8, subsequent to March 30, 2003, the Company has raised
additional cash from the sale of its debt and equity securities, and as
previously disclosed has entered into a letter of intent to sell additional
securities. There can be no assurance that the Company will be able to obtain
additional financing, increase revenues, reduce expenses or successfully
complete other steps to continue as a going concern. If the Company is unable
to obtain sufficient funds to satisfy its cash requirements, it may be forced
to curtail operations, dispose of assets, seek extended payment terms from its
vendors, or consider other alternatives. Such events would materially and
adversely affect the Companys financial position and results of operations.

Note 3. Notes payable and other borrowings

In June 2002, the Company entered into a Securities Purchase Agreement with
Laurus Master Fund, Ltd. (Laurus) in connection with the issuance of a $1.25
million 14% convertible note (the 14% convertible note) to Laurus and a
warrant to purchase 250,000 shares of common stock. The 14% convertible note
is collateralized by all of the Companys assets. During the fiscal quarter
ended March 30, 2003, convertible notes of approximately $8,000 were converted
into 40,200 shares of company stock. During the fiscal quarter ended March 30,
2003, the 14% convertible note was amended to among other things, change the
Fixed Conversion Price to $0.10 per share and defer principal payments, under
certain conditions, to July 2003. Additionally, in March 2003, terms of the
250,000 warrants issued in June 2002 were amended to, among other things,
change the exercise price to $0.10 per share and suspend the right of Laurus to
exercise the warrant until the earlier of June 30, 2003 or the closing on an
investment by Deutsche Bank or any of its affiliates. As a result of the
amended conversion price for the notes and exercise price for the warrants
being less than the market price of the common stock on the amendment date, the
Company recorded the related beneficial conversion features estimated fair
value of $107,000 as original issue discount and an increase in common stock
and additional paid-in capital during the fiscal quarter ended March 30, 2003.

In March 2003, the Company issued $2 million of promissory notes, 100 shares of
series D preferred stock, and warrants to purchase 1,193,546 shares of common
stock at a price per share of $0.50 to Briazz Venture L.L.C. (Briazz Venture)
an affiliate of Flying Food Group, Inc. (FFG) in consideration for
approximately $550,000 cash and conversion of $1.45 million of outstanding
demand notes. The Company recorded a debt discount of approximately $21,000
relating to the issuance of warrants. All Company assets are pledged as
collateral for the notes. The notes bear interest at 10% per year, payable
monthly, and are due March 6, 2004, subject to earlier maturity under certain
conditions. Terms of the notes include certain covenants, including, among
others, restrictions on the payment of dividends, limitation on additional
indebtedness, and compliance with financial covenants, including minimum future
EBITDA and maximum accounts payable. The Company has complied with or obtained
waivers relating to such covenants. The warrants are immediately exercisable
and have a five year term, subject to shareholder approval of conversion of
series D preferred stock into common stock at which time, the warrants are
cancelled. Subject to shareholder approval, series D preferred stock would be
convertible, for a term of five years, at the option of the holder, into
approximately 66.7% of the Companys outstanding common stock on a
fully-diluted post-conversion basis, such percentage being adjustable under
certain conditions. Upon the occurrence of any event of default under this 10%
note, the amount due and owing under the note shall be increased to 130% of the
then outstanding aggregate principal amount of the note together with any
accrued and unpaid interest and fees. While any event of default is
continuing, a default rate of 14% will apply and FFG may declare all amounts
owing under the note immediately due and payable.

Note 4. Stock Options

The Company maintains the BRIAZZ 1996 Stock Option Plan (the Plan) to provide
for granting of incentive stock options and nonqualified stock options to
employees, directors, consultants and certain other non-employees as determined
by the Plan Administrator. The Company has authorized 1,165,000 shares of
common stock for issuance under the Plan. The date of grant,

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option price,
vesting period and other terms specific to options granted under the Plan are
determined by the Plan Administrator. Options granted under the Plan generally
expire ten years from date of grant and vest over periods ranging from date of
grant to five years. In March 2003, the Company Board of Directors accelerated
vesting on stock options such that all outstanding options became fully vested.
The following summarizes stock option activity from December 29, 2002 to March
30, 2003 (shares in thousands, except exercise price):

|                                       |                   |  |        |      |                |   |           |      | 
|-------------------------------------- | ----------------- |  | ------ | ---- | -------------- | - | --------- | ---- | 
|                                       |                   |  |        |      |                |   | Weighted-
|                                       |                   |  |        |      |                |   | average  
|                                       |                   |  | Shares |      | exercise price
|                                       |                   |  |        |      |               
|Options outstanding, December 29, 2002 |                   |  | 1,050  |      |                | $ | 5.96      |     
|                                       | Options granted   |  |        |     |                |   |           | N/A  | 
|                                       | Options
forfeited |  |        | (262 | )              |   | $         | 2.76 | 
|                                       |                   |  |        |      |                |   |           |     
|Options outstanding, March 30, 2003    |                   |  | 788    |      |                | $ | 7.02      |     
|                                       |                   |  |        |      |                |   |           |     

Prior to 2002, the Company granted stock options to employees (which vested
over four years) and directors at exercise prices deemed to be below the fair
value of the underlying stock on the date of grant. Related deferred stock
compensation is being amortized generally over a four-year vesting period. As
a result of these grants and acceleration of vesting in March 2003, the Company
recorded deferred stock compensation of approximately $203,000 and $87,000 in
thirteen week periods ended March 30, 2003 and March 31, 2002, respectively.

Note 5. Segment information

The Company manages its business through four reportable segments: Retail,
Branded Sales, Kitchens and General and Administrative. Retail consists of
sales generated through the Companys cafés. Branded Sales consists of two
subgroups: 1) box lunch, catering and vending and 2) wholesale and grocery.
Branded Sales subgroups consist of sales which are aggregated because they have
similar economic characteristics. Kitchens consist of unallocated cost of
products and packaging, along with unallocated costs of kitchen operations.
General and Administrative consists of costs incurred by the corporate office
as well as those administrative costs incurred by Retail. Management evaluates
segment performance primarily based on sales and segment operating income
(loss). Information regarding the Companys assets is not disaggregated by
segment or otherwise. The following table presents certain financial
information for each segment (amounts in thousands):

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|                                                                   |                                 |   |                |       |           |   |        |        |  
|------------------------------------------------------------------ | ------------------------------- | - | -------------- | ----- | --------- | - | ------ | ------ | -
|                                                                   |                                 |   | 13-Weeks Ended
|                                                                   |                                 |   |               
|                                                                   |                                 |   | March 30,      |       | March 31,
|                                                                   |                                 |   | 2003           |       | 2002     
|                                                                   |                                 |   |                |       |          
|Retail                                                             |                                 |   |                |       |           |   |        |       
|Net Sales                                                          |                                 | $ | 5,116          |       |           | $ | 5,294  |       
|Cost of food and packaging                                         |                                 |   | (2,299         | )     |           |   | (1,953 | )     
|                                                                   |                                 |   |                |       |           |   |        |       
|                                                                   |                                 |   | 2,817          |       |           |   | 3,341  |       
|Cost of operations                                                 |                                 |   | (3,217         | )     |           |   | (3,030 | )     
|Provision for asset impairment, store closure and loss on disposal |                                 |   |               |       |           |   | (17    | )     
|                                                                   |                                 |   |                |       |           |   |        |       
|Income (loss) from operations                                      |                                 | $ | (400           | )     |           | $ | 294    |       
|                                                                   |                                 |   |                |       |           |   |        |       
|EBITDA                                                             |                                 | $ | 164            |       |           | $ | 764    |       
|                                                                   |                                 |   |                |       |           |   |        |       
|Branded Sales                                                      |                                 |   |                |       |           |   |        |       
|                                                                   | Box Lunch, Catering and Vending |   |                |       |           |   |        |        |  
|                                                                   | Net Sales                       |   | $              | 967   |           |   | $      | 1,337  |  
|                                                                   | Cost of food and packaging      |   |                | (365  | )         |   |        | (405   | )
|                                                                   |                                 |   |                |       |           |   |        |       
|                                                                   |                                 |   | 602            |       |           |   | 932    |       
|                                                                   |                                 |   |                |       |           |   |        |       
|                                                                   | Wholesale and Grocery           |   |                |       |           |   |        |        |  
|                                                                   | Net Sales                       |   |                | 709   |           |   |        | 725    |  
|                                                                   | Cost of food and packaging      |   |                | (443  | )         |   |        | (395   | )
|                                                                   |                                 |   |                |       |           |   |        |       
|                                                                   |                                 |   | 266            |       |           |   | 330    |       
|                                                                   |                                 |   |                |       |           |   |        |       
|                                                                   | Total Branded Sales             |   |                |       |           |   |        |        |  
|                                                                   | Net Sales                       |   |                | 1,676 |           |   |        | 2,062  |  
|                                                                   | Cost of food and packaging      |   |                | (808  | )         |   |        | (800   | )
|                                                                   |                                 |   |                |       |           |   |        |       
|                                                                   |                                 |   | 868            |       |           |   | 1,262  |       
|                                                                   | Cost of operations              |   |                | (745  | )         |   |        | (1,054 | )
|                                                                   |                                 |   |                |       |           |   |        |       
|                                                                   | Income from operations          |   | $              | 123   |           |   | $      | 208    |  
|                                                                   |                                 |   |                |       |           |   |        |       
|                                                                   | EBITDA                          |   | $              | 197   |           |   | $      | 269    |  
|                                                                   |                                 |   |                |       |           |   |        |       
|Kitchens                                                           |                                 |   |                |       |           |   |        |       
|Unallocated cost of food and packaging                             |                                 | $ | (87            | )     |           | $ | (60    | )     
|Unallocated cost of operations                                     |                                 |   | (427           | )     |           |   | (856   | )     
|Provision for asset impairment, store closure and loss on disposal |                                 |   | (163           | )     |           |   | (1     | )     
|                                                                   |                                 |   |                |       |           |   |        |       
|Loss from operations                                               |                                 | $ | (677           | )     |           | $ | (917   | )     
|                                                                   |                                 |   |                |       |           |   |        |       
|EBITDA                                                             |                                 | $ | (482           | )     |           | $ | (760   | )     
|                                                                   |                                 |   |                |       |           |   |        |       
|General and Administrative                                         |                                 |   |                |       |           |   |        |       
|Loss from operations                                               |                                 | $ | (1,437         | )     |           | $ | (1,792 | )     
|                                                                   |                                 |   |                |       |           |   |        |       
|EBITDA                                                             |                                 | $ | (1,313         | )     |           | $ | (1,674 | )     
|                                                                   |                                 |   |                |       |           |   |        |       
|Total                                                              |                                 |   |                |       |           |   |        |       
|Net Sales                                                          |                                 | $ | 6,792          |       |           | $ | 7,356  |       
|Cost of food and packaging                                         |                                 |   | (3,194         | )     |           |   | (2,813 | )     
|                                                                   |                                 |   |                |       |           |   |        |       
|                                                                   |                                 |   | 3,598          |       |           |   | 4,543  |       
|Cost of operations                                                 |                                 |   | (5,826         | )     |           |   | (6,732 | )     
|Provision for asset impairment, store closure and loss on disposal |                                 |   | (163           | )     |           |   | (18    | )     
|                                                                   |                                 |   |                |       |           |   |        |       
|Loss from operations                                               |                                 | $ | (2,391         | )     |           | $ | (2,207 | )     
|                                                                   |                                 |   |                |       |           |   |        |       
|EBITDA                                                             |                                 | $ | (1,434         | )     |           | $ | (1,401 | )     
|                                                                   |                                 |   |                |       |           |   |        |       

In the table above, EBITDA represents earnings before interest expense,
interest income, income taxes, depreciation, amortization loss on disposal of
assets, and provision for asset impairment and store closure. EBITDA data is
included because management understands that such information is considered by
certain investors as an additional basis on which to evaluate a companys
ability to pay interest, repay debt and make capital expenditures. Because all
companies do not calculate EBITDA identically, the above presentation of EBITDA
is not necessarily comparable to similarly entitled measures of other
companies. EBITDA is not intended to represent and should not be considered
more meaningful than, or an alternative to, measures of operating performance
as determined in accordance with generally accepted accounting principles. A
reconciliation of net loss to EBITDA is as follows:

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|          |                                                  |   |                      |     |           |   |        |     |  
|--------- | ------------------------------------------------ | - | -------------------- | --- | --------- | - | ------ | --- | -
|          |                                                  |   | Thirteen
weeks ended
|          |                                                  |   |                     
|          |                                                  |   | March 30,            |     | March 31,
|          |                                                  |   | 2003                 |     | 2002     
|          |                                                  |   |                      |     |          
|Net loss  |                                                  | $ | (2,543               | )   |           | $ | (2,185 | )  
|Add back: |                                                  |   |                      |     |           |   |        |    
|          | Depreciation and amortization                    |   |                      | 794 |           |   |        | 788 |  
|          | Loss (gain) on disposal of assets                |   |                      | 163 |           |   |        | 2   |  
|          | Provision for asset impairment and store closure |   |                      |    |           |   |        | 16  |  
|          | Interest and other expense                       |   |                      | 155 |           |   |        | 10  |  
|          | Interest and other income                        |   |                      | (3  | )         |   |        | (32 | )
|          |                                                  |   |                      |     |           |   |        |    
|EBITDA    |                                                  |   | $(1,434              | )   |           | $ | (1,401 | )  
|          |                                                  |   |                      |     |           |   |        |    

Note 6. 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.

The Company is party to an agreement entered into in 2002 with an investment
banking firm to become the Companys exclusive financial advisor with respect
to raising capital or otherwise assisting with financing transactions.
Pursuant to the agreement, among other things, the Company owes the financial
advisor a financing fee of 7% of gross financing proceeds, or 5% in certain
financings. In addition, in the event of a transaction, as defined in the
agreement, a transaction fee of $750,000 is payable to the financial advisor.
In April 2003, the Company received an invoice from the financial advisor for
approximately $751,000. The Company, the financial advisor and existing and
prospective investors are in the process of negotiations regarding the timing
and amounts to be paid with respect to this invoice. Based upon an
understanding with the financial advisor and prospective investors,
if the proposed financing closes as presently proposed, the
transaction fee would be significantly reduced.

Note 7. Related Parties

The Companys $500,000 note payable to a bank is collateralized by the pledge
of a certificate of deposit in such amount owned by the Companys founder.

As further described in Note 3, in March 2003, the Company issued securities to
FFG, such that, subject to shareholder approval, FFG could own approximately
66.7% of the Companys common stock on a fully-diluted, post conversion basis.

In December 2002, the Company entered into a Food Production Agreement,
pursuant to which the Company now purchases its food products from FFG in the
Chicago, Los Angeles and Seattle markets. The agreement has a term of ten years
subject to earlier termination (i) by FFG upon 180-days notice if the Company
fails to obtain shareholder approval for the issuance of common stock upon the
conversion of shares of Series D Preferred Stock held by FFGs affiliate or
(ii) by either party if the other party becomes insolvent. Purchases from FFG
approximated $1.47 million during the fiscal quarter ended March 30, 2003.
Included in accounts payable at March 30, 2003 is $820,000 due to FFG.

Note 8. Subsequent events

On April 10, 2003, the Company completed the offer and sale of $550,000 in
secured promissory notes, warrants, and series E preferred stock to Spinnaker
Investment Partners, L.P. (Spinnaker), a fund managed by Spinnaker Capital
Partners, LLC (Spinnaker Capital). One of the Companys directors is a director
of Spinnaker Capital. Spinnaker anticipates converting these securities into
the proposed financing with DB Advisors, LLC, as previously announced and
discussed below. In consideration for $550,000 in cash, Spinnaker was issued a
$550,000 secured promissory note, a five-year warrant exercisable for 1,193,546
shares of the Companys common stock at a price per share of $0.50, and 25
shares of series E preferred stock. The terms of the note, warrant and series E
preferred stock are substantially similar to the terms of the note, warrant and
series D preferred stock issued to Briazz Venture in March 2003. Spinnaker was
granted registration rights covering the shares of common stock issuable upon
conversion of the series preferred stock and exercise of the warrant. The
Company also agreed to cause up to one person designated by Spinnaker to be
appointed to the Companys Board of Directors. Proceeds of the financing will
be used for working capital, after deduction of expenses and a $50,000
management fee payable to Spinnaker Capital. In connection with the financing,
Spinnaker Capital, Laurus and FFG and its affiliates, including Briazz Venture,
entered into an inter-creditor agreement in which they agreed that their
respective security interests in the Companys assets would rank equally in
priority.

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The $550,000 secured promissory note bears interest at 10% per year. Interest
is payable monthly in arrears, in cash. The note matures, and all principal and
accrued and unpaid interest becomes due, on March 6, 2004. The note may,
however, become due prior to March 6, 2004 if the Company fails to meet
financial covenants set forth in the note.

If shareholders approve the conversion of series D and series E preferred
stock, the series E preferred stock will be convertible at the option of the
holder, for an aggregate conversion price of up to $500,000 for a period of
five years, into approximately one quarter (1/4) of the number of shares of
common stock into which the series D preferred stock is convertible. The number
of shares of common stock into which series E preferred stock may be converted
and the conversion price per share of common stock will initially be fixed on
the date that the series E preferred stock first becomes convertible. If the
Companys shareholders approve the conversion of preferred stock, then based
upon outstanding securities as of April 10, 2003, assuming that the Company
does not issue, cancel or modify any of its securities prior to the date of
shareholder approval and assuming that Briazz Venture and Spinnaker do not
exercise their warrants prior to the date of shareholder approval, the series D
preferred stock would initially be convertible into a total of approximately
33,171,900 shares of common stock at a conversion price of approximately $0.06
per share of common stock, and the series E preferred stock would initially be
convertible into a total of approximately 8,292,975 shares of common stock at a
conversion price of approximately $0.06 per share. The exact number of shares
of common stock that may be issued on conversion of the series D and series E
preferred stock and the exact conversion price of the series D and series E
preferred stock cannot be determined until the date shareholder approval is
received.

If series E preferred stock becomes convertible, then so long as the secured
promissory note issued to Spinnaker remains outstanding, such preferred stock
will be entitled to vote, with certain exceptions, together with common stock
on an as-converted basis. If the conversion of series D and E preferred stock
is not approved by the Companys shareholders, such preferred stock will not
become convertible at the option of the holder and will not be entitled to vote
on an as-converted basis. Any shares of series D and E preferred stock
outstanding on the fifth anniversary of the initial issuance of such preferred
stock will be automatically converted into shares of common stock at a rate of
1/25th of a share of common stock per share of such preferred stock.

Subject to certain exceptions, if any additional shares of common stock or any
securities convertible or exercisable for shares of common stock at an
effective price that is less than the conversion price of the series D and E
preferred stock or exercise price of the warrant are issued, the conversion or
exercise price will be adjusted to equal the effective price at which the new
securities were issued. Upon the series D and E preferred stock becoming
convertible, the warrants automatically terminate. Any exercise of the warrant
prior to such time will reduce the aggregate conversion price and number of
shares issuable upon conversion of such preferred stock.

As previously disclosed, the Company entered into a letter of intent to sell
senior secured notes and warrants to purchase common stock (the DB
securities) to DB Advisors, LLC, an affiliate of Deutsche Bank, and other
investors, which would result in additional cash proceeds of $3.9million.
Briazz Venture has agreed to participate in the proposed financing with DB
Advisors if the financing is substantially on the same terms as set forth in
the letter of intent and if the agreements and related documentation are
satisfactory to Briazz Venture. Spinnaker has agreed to participate in the
proposed financing with DB Advisors if the financing is substantially on the
same terms as set forth in the letter of intent. If Spinnaker and Briazz
Venture were to participate in the proposed financing with DB Advisors, their
secured promissory notes, warrants and preferred stock would be cancelled as
payment for the DB securities.




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

This report contains statements that may constitute forward-looking
statements within the meaning of the Securities Act of 1933 and the Securities
Exchange Act of 1934, as amended by the Private Securities Litigation Reform
Act of 1995. Such statements include comments regarding our ability to comply
with the financial covenants set forth in note agreements, the number of shares
of our common stock into which the shares of our series D and series E
preferred stock may become convertible, the conversion price at which the
shares of our series D and series E preferred stock may become convertible, our
proposed financing with DB Advisors, LLC and other investors, and the expected
outsourcing of our food production in San Francisco. Our actual results and the
timing of certain events could differ materially from those contemplated by
such forward-looking statements. Important factors currently known to
management that could cause actual results to differ materially from those in
forward-looking statements include, without limitation, fluctuation of our
operating results, our ability to obtain additional financing on terms
favorable to us, or at all, our ability to compete successfully, our ability to
successfully transition food production to third parties, our reliance upon
FFG, our ability to meet our obligations, actions of our debt holders,
landlords and suppliers, office occupancy, our ability to maintain current cafe
locations and secure new ones, food and labor

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costs, and operation in only four
geographic areas. For additional factors that may cause actual results to
differ materially from those contemplated by such forward-looking statements,
please see the section entitled Risk Factors in Item 1 of December 29, 2002
Annual Report on Form 10-K, and in other filings on file with the SEC, which
risk factors are incorporated herein as though fully set forth.

Forward-looking statements can be identified by use of words such as may,
will, should, could, expect, plan, intend, anticipate, believe,
estimate, predict, potential or continue or the negative or other
variations of these words, or other comparable words or phrases. Although we
believe the expectations reflected in our forward-looking statements are
reasonable, we cannot guarantee future results, levels of activity, performance
or achievements or other future events. Moreover, neither we nor anyone else
assumes responsibility for the accuracy and completeness of forward-looking
statements. We are under no duty to update any of our forward-looking
statements after the date of this filing. You should not place undue reliance
on forward-looking statements.

Overview BRIAZZ prepares and sells high-quality, branded lunch and breakfast
foods for the on-the-go consumer. We sell our products primarily through our
company-operated 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.

As of May 2003, we currently operate a total of 44 cafés in Seattle, San
Francisco, Chicago and Los Angeles. Our growth strategy is to open new cafés in
our existing markets and, when appropriate, enter into new markets served by
one of the central kitchens of FFG or another suitable supplier. The two café
decrease since year end is due to the closure of two under-performing
locations, one in each of the first and second quarters of 2003. Due to, among
other things, capital restrictions, we do not currently plan to open any cafés
in 2003. Our growth strategy is to open new cafés in our existing markets and,
when appropriate, enter into new markets.

In December 2002, we contracted with FFG to assemble and package substantially
all of our food products used at our café locations and in our branded sales.
Pursuant to this agreement we closed our central kitchens and transferred our
food production to FFG in the Chicago and Los Angeles markets in December 2002
and in the Seattle market at the end of February 2003. Due to FFGs
insufficient capacity in San Francisco, we intend to outsource our food
production in San Francisco to another company and to close our remaining central kitchen in San
Francisco by the end of the second quarter of 2003. We believe that
contracting our food production to another party, such as FFG, will allow us to
reduce our overhead in our existing markets and may allow us to lower the costs
of entry into new markets served by their central kitchens. There can be no
assurance that the transition to third-party central kitchens for food
preparation will be successful or that the Company will be able to realize
anticipated cost savings.

We have evaluated the grocery segment of our wholesale business and decided to
withdraw from this distribution channel. We remain committed to growing
profitable wholesale accounts. We are working with FFG in Chicago and New York
markets to supply Starbucks branded sandwiches and salads to Starbucks Stores
in the future.

As a result of central kitchen closures and reductions in corporate personnel,
there was a decrease of 64 employees from the beginning of the year, or 17%, to
307 employees at March 30, 2003, 55 full-time salaried and 252 hourly. These
employee reductions will result in decreases in labor expenses in 2003.

Our common stock was transferred to the Nasdaq SmallCap Market on January 27,
2003, because we failed to meet the requirements for listing on the Nasdaq
National Market. There are a number of continuing requirements that must be met
in order for our common stock to remain eligible for quotation on the Nasdaq
SmallCap Market. We do not currently meet the SmallCap Market requirements that
a company maintain a minimum bid price of $1.00 and a minimum market value of
publicly held shares of $1 million. Nasdaq has provided us with a temporary
exemption from these requirements provided that, among other things, we
evidence compliance with the $2.5 million shareholders equity requirement, we
come into compliance with the requirement for a market value of publicly held
shares of $1 million by June 5, 2003 and we come into compliance with the
requirement for a minimum bid price of $1.00 by August 25, 2003. We are not
currently in compliance with the $2.5 million shareholders equity requirement.
We may therefore be delisted, after which our common stock may continue to be
quoted on the OTC Bulletin Board. If we are delisted from the Nasdaq SmallCap
Market, it may be more difficult for our shareholders to sell their shares and
the market price of our common stock may be depressed. We are discussing the
possibility of extensions of time to come into compliance with Nasdaq.

Geographic Markets We currently operate in four markets: Seattle, San
Francisco, Chicago and Los Angeles. We have presented our sales results here
by geographic market to help you understand our business, but we do not operate
our business

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in geographic segments. We manage our business through four
reportable segments: Retail, Branded Sales, Kitchens, and General &
Administrative. Retail consists of sales generated through the Companys cafés.
Branded Sales consists of two subgroups: 1) box lunch, catering and vending
and 2), wholesale and grocery. Branded Sales consists of sales which are
aggregated because they have similar economic characteristics. Kitchens consist
of unallocated cost of products and packaging, along with unallocated costs of
kitchen operations. General and Administrative consists of costs incurred by
the corporate office as well as those administrative costs incurred by Retail.
Management evaluates segment performance primarily based on sales and segment
operating income (loss).

Below is a comparison of sales in each market for the thirteen weeks ended
March 30, 2003 and March 31, 2002. Market pre-tax profit (loss) consists of
sales less expenses related to each market other than corporate general and
administrative expense. Sales include sales from cafés, box lunches, catering,
vending, wholesale, grocery and other accounts. Expenses for each market
consist of occupancy expense, labor expense, general and administrative
expense, other operating expense, depreciation and amortization and provision
for asset impairment and store closure. Each of these items are described in
more detail in Results of Operations. Because corporate general and
administrative included depreciation and amortization related to corporate
assets corporate general and administrative totals will differ from the General
and Administrative segment financial information.

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Geographic Markets

|              |                                                        |                                            |                                  |  |  |                |   |        |                      |        |           |        |        |        |  
|------------- | ------------------------------------------------------ | ------------------------------------------ | -------------------------------- |  |  | -------------- | - | ------ | -------------------- | ------ | --------- | ------ | ------ | ------ | -
|              |                                                        |                                            |                                  |  |  |                |   |        | Thirteen weeks ended
|              |                                                        |                                            |                                  |  |  |                |   |        |                     
|              |                                                        |                                            |                                  |  |  |                |   |        | March 30,            |        | March 31,
|              |                                                        |                                            |                                  |  |  |                |   |        | 2003                 |        | 2002     
|              |                                                        |                                            |                                  |  |  |                |   |        |                      |        |          
|              |                                                        |                                            |                                  |  |  | (in thousands)
|Seattle       |                                                        |                                            |                                  |  |  |               
|              | Sales:                                                 |                                            |                                  |  |  |                |   |        |                      |        |           |        |       
|              |                                                        | Retail                                     |                                  |  |  |                |   | $      | 1,319                |        |           | $      | 1,429  |       
|              |                                                        | Branded Sales                              |                                  |  |  |                |   |        | 787                  |        |           |        | 1,151  |       
|              |                                                        |                                            |                                  |  |  |                |   |        |                      |        |           |       
|              |                                                        |                                            | Total sales                      |  |  |                |   |        | $                    | 2,106  |           |        | $      | 2,580  |  
|              |                                                        |                                            |                                  |  |  |                |   |        |                      |        |           |       
|              | Cost of food and packaging:                            |                                            |                                  |  |  |                |   |        |                      |        |           |        |       
|              |                                                        | Retail                                     |                                  |  |  |                |   | $      | (587                 | )      |           | $      | (529   | )     
|              |                                                        | Branded Sales                              |                                  |  |  |                |   |        | (348                 | )      |           |        | (498   | )     
|              |                                                        | Unallocated cost of products and packaging |                                  |  |  |                |   |        | (40                  | )      |           |        | (2     | )     
|              |                                                        |                                            |                                  |  |  |                |   |        |                      |        |           |       
|              |                                                        |                                            | Total cost of food and packaging |  |  |                |   |        | $                    | (975   | )         |        | $      | (1,029 | )
|              |                                                        |                                            |                                  |  |  |                |   |        |                      |        |           |       
|              | Income (loss) from operations                          |                                            |                                  |  |  |                | $ | (180   | )                    |        | $         | (14    | )     
|              |                                                        |                                            |                                  |  |  |                |   |        |                      |        |           |       
|              | Cafes                                                  |                                            |                                  |  |  |                |   | 12     |                      |        |           | 13     |       
|San Francisco |                                                        |                                            |                                  |  |  |                |   |        |                      |        |           |       
|              | Sales:                                                 |                                            |                                  |  |  |                |   |        |                      |        |           |        |       
|              |                                                        | Retail                                     |                                  |  |  |                |   | $      | 1,773                |        |           | $      | 1,780  |       
|              |                                                        | Branded Sales                              |                                  |  |  |                |   |        | 294                  |        |           |        | 329    |       
|              |                                                        |                                            |                                  |  |  |                |   |        |                      |        |           |       
|              |                                                        |                                            | Total sales                      |  |  |                |   |        | $                    | 2,067  |           |        | $      | 2,109  |  
|              |                                                        |                                            |                                  |  |  |                |   |        |                      |        |           |       
|              | Cost of food and packaging:                            |                                            |                                  |  |  |                |   |        |                      |        |           |        |       
|              |                                                        | Retail                                     |                                  |  |  |                |   | $      | (661                 | )      |           | $      | (644   | )     
|              |                                                        | Branded Sales                              |                                  |  |  |                |   |        | (95                  | )      |           |        | (103   | )     
|              |                                                        | Unallocated cost of products and packaging |                                  |  |  |                |   |        | (47                  | )      |           |        | (45    | )     
|              |                                                        |                                            |                                  |  |  |                |   |        |                      |        |           |       
|              |                                                        |                                            | Total cost of food and packaging |  |  |                |   |        | $                    | (803   | )         |        | $      | (792   | )
|              |                                                        |                                            |                                  |  |  |                |   |        |                      |        |           |       
|              | Income (loss) from operations                          |                                            |                                  |  |  |                | $ | (327   | )                    |        | $         | (132   | )     
|              |                                                        |                                            |                                  |  |  |                |   |        |                      |        |           |       
|              | Cafes                                                  |                                            |                                  |  |  |                |   | 15     |                      |        |           | 12     |       
|Chicago       |                                                        |                                            |                                  |  |  |                |   |        |                      |        |           |       
|              | Sales:                                                 |                                            |                                  |  |  |                |   |        |                      |        |           |        |       
|              |                                                        | Retail                                     |                                  |  |  |                |   | $      | 915                  |        |           | $      | 1,094  |       
|              |                                                        | Branded Sales                              |                                  |  |  |                |   |        | 313                  |        |           |        | 281    |       
|              |                                                        |                                            |                                  |  |  |                |   |        |                      |        |           |       
|              |                                                        |                                            | Total sales                      |  |  |                |   |        | $                    | 1,228  |           |        | $      | 1,375  |  
|              |                                                        |                                            |                                  |  |  |                |   |        |                      |        |           |       
|              | Cost of food and packaging:                            |                                            |                                  |  |  |                |   |        |                      |        |           |        |       
|              |                                                        | Retail                                     |                                  |  |  |                |   | $      | (481                 | )      |           | $      | (413   | )     
|              |                                                        | Branded Sales                              |                                  |  |  |                |   |        | (205                 | )      |           |        | (93    | )     
|              |                                                        | Unallocated cost of products and packaging |                                  |  |  |                |   |        |                     |        |           |        | 3      |       
|              |                                                        |                                            |                                  |  |  |                |   |        |                      |        |           |       
|              |                                                        |                                            | Total cost of food and packaging |  |  |                |   |        | $                    | (686   | )         |        | $      | (503   | )
|              |                                                        |                                            |                                  |  |  |                |   |        |                      |        |           |       
|              | Income (loss) from operations                          |                                            |                                  |  |  |                | $ | (311   | )                    |        | $         | (146   | )     
|              |                                                        |                                            |                                  |  |  |                |   |        |                      |        |           |       
|              | Cafes                                                  |                                            |                                  |  |  |                |   | 8      |                      |        |           | 10     |       
|Los Angeles   |                                                        |                                            |                                  |  |  |                |   |        |                      |        |           |       
|              | Sales:                                                 |                                            |                                  |  |  |                |   |        |                      |        |           |        |       
|              |                                                        | Retail                                     |                                  |  |  |                |   | $      | 1,109                |        |           | $      | 991    |       
|              |                                                        | Branded Sales                              |                                  |  |  |                |   |        | 282                  |        |           |        | 301    |       
|              |                                                        |                                            |                                  |  |  |                |   |        |                      |        |           |       
|              |                                                        |                                            | Total sales                      |  |  |                |   |        | $                    | 1,391  |           |        | $      | 1,292  |  
|              |                                                        |                                            |                                  |  |  |                |   |        |                      |        |           |       
|              | Cost of food and packaging:                            |                                            |                                  |  |  |                |   |        |                      |        |           |        |       
|              |                                                        | Retail                                     |                                  |  |  |                |   | $      | (570                 | )      |           | $      | (367   | )     
|              |                                                        | Branded Sales                              |                                  |  |  |                |   |        | (160                 | )      |           |        | (107   | )     
|              |                                                        | Unallocated cost of products and packaging |                                  |  |  |                |   |        |                     |        |           |        | (15    | )     
|              |                                                        |                                            |                                  |  |  |                |   |        |                      |        |           |       
|              |                                                        |                                            | Total cost of food and packaging |  |  |                |   |        | $                    | (730   | )         |        | $      | (489   | )
|              |                                                        |                                            |                                  |  |  |                |   |        |                      |        |           |       
|              | Income (loss) from operations                          |                                            |                                  |  |  |                | $ | (136   | )                    |        | $         | (123   | )     
|              |                                                        |                                            |                                  |  |  |                |   |        |                      |        |           |       
|              | Cafes                                                  |                                            |                                  |  |  |                |   | 10     |                      |        |           | 8      |       
|All Markets   |                                                        |                                            |                                  |  |  |                |   |        |                      |        |           |       
|              | Sales:                                                 |                                            |                                  |  |  |                |   |        |                      |        |           |        |       
|              |                                                        | Retail                                     |                                  |  |  |                |   | $      | 5,116                |        |           | $      | 5,294  |       
|              |                                                        | Branded Sales                              |                                  |  |  |                |   |        | 1,676                |        |           |        | 2,062  |       
|              |                                                        |                                            |                                  |  |  |                |   |        |                      |        |           |       
|              |                                                        |                                            | Total sales                      |  |  |                |   |        | $                    | 6,792  |           |        | $      | 7,356  |  
|              |                                                        |                                            |                                  |  |  |                |   |        |                      |        |           |       
|              | Cost of food and packaging:                            |                                            |                                  |  |  |                |   |        |                      |        |           |        |       
|              |                                                        | Retail                                     |                                  |  |  |                |   |        | (2,299               | )      |           |        | (1,953 | )     
|              |                                                        | Branded Sales                              |                                  |  |  |                |   |        | (808                 | )      |           |        | (801   | )     
|              |                                                        | Unallocated cost of products and packaging |                                  |  |  |                |   |        | (87                  | )      |           |        | (59    | )     
|              |                                                        |                                            |                                  |  |  |                |   |        |                      |        |           |       
|              |                                                        |                                            | Total cost of food and packaging |  |  |                |   |        | $                    | (3,194 | )         |        | $      | (2,813 | )
|              |                                                        |                                            |                                  |  |  |                |   |        |                      |        |           |       
|              | Loss from operations before general and administrative |                                            |                                  |  |  |                | $ | (954   | )                    |        | $         | (415   | )     
|              | Corporate general and administrative                   |                                            |                                  |  |  |                |   | (1,437 | )                    |        |           | (1,792 | )     
|              |                                                        |                                            |                                  |  |  |                |   |        |                      |        |           |       
|              | Loss from operations                                   |                                            |                                  |  |  |                | $ | (2,391 | )                    |        | $         | (2,207 | )     
|              |                                                        |                                            |                                  |  |  |                |   |        |                      |        |           |       
|              | Total cafes                                            |                                            |                                  |  |  |                |   | 45     |                      |        |           | 43     |       

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The following table sets forth statement of operations data for the periods
indicated as a percentage of net sales:

|                             |  |                                                  |                          |  |  |  |  |                            |  |  |       |    |                      |       |           |    |      |       |  
|---------------------------- |  | ------------------------------------------------ | ------------------------ |  |  |  |  | -------------------------- |  |  | ----- | -- | -------------------- | ----- | --------- | -- | ---- | ----- | -
|                             |  |                                                  |                          |  |  |  |  |                            |  |  |       |    | Thirteen weeks ended
|                             |  |                                                  |                          |  |  |  |  |                            |  |  |       |    |                     
|                             |  |                                                  |                          |  |  |  |  |                            |  |  |       |    | March 30,            |       | March 31,
|                             |  |                                                  |                          |  |  |  |  |                            |  |  |       |    | 2003                 |       | 2002     
|                             |  |                                                  |                          |  |  |  |  |                            |  |  |       |    |                      |       |          
|                             |  |                                                  |                          |  |  |  |  | (As a percentage of sales)
|Statement
of Operations Data |  |                                                  |                          |  |  |  |  |                           
|Sales:                       |  |                                                  |                          |  |  |  |  |                            |  |  |       |    |                      |       |           |   
|                             |  | Retail                                           |                          |  |  |  |  |                            |  |  |       |    | 75.3                 | %     |           |    | 72.0 | %    
|                             |  | Branded Sales                                    |                          |  |  |  |  |                            |  |  |       |    | 24.7                 | %     |           |    | 28.0 | %    
|                             |  |                                                  |                          |  |  |  |  |                            |  |  |       |    |                      |       |           |   
|                             |  |                                                  | Total Sales              |  |  |  |  |                            |  |  |       |    |                      | 100.0 | %         |    |      | 100.0 | %
|Operating Expenses:          |  |                                                  |                          |  |  |  |  |                            |  |  |       |    |                      |       |           |   
|                             |  | Cost of food and packaging                       |                          |  |  |  |  |                            |  |  |       |    | 47.0                 | %     |           |    | 38.2 | %    
|                             |  | Occupancy expenses                               |                          |  |  |  |  |                            |  |  |       |    | 16.4                 | %     |           |    | 13.5 | %    
|                             |  | Labor expenses                                   |                          |  |  |  |  |                            |  |  |       |    | 29.7                 | %     |           |    | 37.0 | %    
|                             |  | Depreciation and amortization                    |                          |  |  |  |  |                            |  |  |       |    | 11.7                 | %     |           |    | 10.7 | %    
|                             |  | Other operating expenses                         |                          |  |  |  |  |                            |  |  |       |    | 4.3                  | %     |           |    | 5.0  | %    
|                             |  | General and administrative expenses              |                          |  |  |  |  |                            |  |  |       |    | 23.7                 | %     |           |    | 25.2 | %    
|                             |  | (Gain)/Loss on Sale of Assets                    |                          |  |  |  |  |                            |  |  |       |    | 2.4                  | %     |           |    | 0.0  | %    
|                             |  | Provision for asset impairment and store closure |                          |  |  |  |  |                            |  |  |       |    | 0.0                  | %     |           |    | 0.2  | %    
|                             |  |                                                  |                          |  |  |  |  |                            |  |  |       |    |                      |       |           |   
|                             |  |                                                  | Total operating expenses |  |  |  |  |                            |  |  |       |    |                      | 135.2 | %         |    |      | 130.0 | %
|                             |  |                                                  |                          |  |  |  |  |                            |  |  |       |    |                      |       |           |   
|Loss from operations         |  |                                                  |                          |  |  |  |  |                            |  |  | (35.2 | )% |                      |       | (30.0     | )%
|Other (expense) income       |  |                                                  |                          |  |  |  |  |                            |  |  | (2.2  | )% |                      |       | 0.3       | % 
|                             |  |                                                  |                          |  |  |  |  |                            |  |  |       |    |                      |       |           |   
|Net loss                     |  |                                                  |                          |  |  |  |  |                            |  |  | (37.4 | )% |                      |       | (29.7     | )%
|                             |  |                                                  |                          |  |  |  |  |                            |  |  |       |    |                      |       |           |   

RESULTS OF OPERATIONS 13-WEEK PERIOD ENDED MARCH 30, 2003 COMPARED WITH 13-WEEK
PERIOD ENDED MARCH 31, 2002

Sales Total sales decreased by $0.57 million, or 7.7%, from $7.36 million to
$6.79 million.

Retail sales decreased by $0.17 million, or 3.4%, from $5.29 million to $5.12
million. Same-store sales decreased by $0.57 million, or 11.6%, from $4.91
million to $4.34 million. The decrease in sales was primarily due to the
continued decrease in
occupancy rates of many of the buildings in which we are located.

Branded sales decreased by $0.38 million, or 18.7%, from $2.06 million to $1.68
million. This decrease was primarily due to a continued decrease in Tullys
sales and the discontinuation of sales to Quality Food Centers (QFC). QFC
was discontinued due to unprofitable sales.

The wholesale and grocery subgroup of Branded sales, which generally has lower
margins than our other distribution channels, had provided us with an
opportunity to more fully utilize the excess capacity of our central kitchens.
The Company has evaluated the grocery segment of our wholesale business and
decided to withdraw from this distribution channel. The Company remains
committed to growing profitable wholesale accounts.

Operating expenses Operating expenses consist of costs of food and packaging,
occupancy, labor, depreciation and amortization, other operating, general and
administrative, loss on disposal of assets, and provision for asset impairment
and store closure. Total operating expenses decreased by $0.38 million, or
4.0%, from $9.56 million to $9.18 million. As a percentage of sales, our
operating expenses increased from 130.0% to 135.2%. The increase in percentage
of sales was primarily due to the decrease in sales.

Cost of food and packaging increased by $0.38 million, or 13.5%, from $2.81
million to $3.19 million and as a percentage of sales from 38.2% to 47.0%.
Cost of food and packaging increased due to our food production being
outsourced, which to a certain extent, are offset by decreases in labor,
depreciation and other operation expenses.

Cost of food and packaging for retail sales increased by $0.35 million, or
17.7%, from $1.95 million to $2.30 million. Cost of food and packaging for
branded sales decreased by $10,000, from $0.80 million to $0.81 million. Cost
of food and packaging for retail increased due to our food production being
outsourced, which to a certain extent, are offset by decreases in labor,
depreciation and other operation expenses. The decrease for branded sales was
due to the lower sales volumes, offset by increased cost due to having
outsourced food production. Unallocated cost of food and packaging for
kitchens increased by $27,000 due to decreased sales.

Occupancy expenses consists of costs related to the leasing of retail space for
our cafes and our central kitchens. Occupancy

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expense increased by $0.11
million, or 11.8%, from $1.0 million to $1.11 million, the decreases from
central kitchen closures being more than offset by rents for cafés opened in
2002 after the first quarter. As a percentage of sales, occupancy expense
increased from 13.5% to 16.4%, primarily due to decreased sales. Our rents are
fixed or variable determined as a percentage of sales, or a combination of
both.

Labor expenses consist of wages and salaries paid to employees. Labor expenses
decreased by $0.71 million, or 25.9%, from $2.73 million to $2.02 million. As
a percentage of sales, labor expenses decreased from 37.0% to 29.7%. These
decreases were primarily due to decreased labor expenses from outsourcing food
production and thus eliminating central kitchen labor.

Depreciation and amortization relates to leasehold improvements, equipment and
vehicles. Depreciation and amortization expense remained constant at $0.79
million. As a percentage of sales, depreciation and amortization increased
from 10.7% to 11.7%. This increases was due to the decrease in sales.

Other operating expenses consist of direct operating, marketing, repair and
maintenance expense. Other operating expenses decreased by $80,000, from $0.37
million to $0.29 million. As a percentage of sales, other operating expenses
decreased from 5.0% to 4.3%. These decreases were primarily due to realization
of certain cost control actions and efficiencies.

General and administrative expenses relate to the support functions performed
by our corporate office, such as finance, human resources, marketing, food
development and information systems. This expense primarily consists of
salaries of senior management and staff, and our corporate office lease and
related office expenses. General and administrative expenses decreased by
$0.24 million, or 13.1%, from $1.85 million to $1.61 million. Primarily the
decrease was due to layoffs. As a percentage of sales, general and
administrative expenses decreased from 25.2% to 23.7%.

Pursuant to a plan to close its four company owned central kitchens and
outsource production of the Companys branded food products, the Los Angeles
and Chicago central kitchens were closed in late 2002. During the fiscal
quarter ended March 30, 2003, the Company closed its Seattle central kitchen.
The Company recorded a net loss on disposal of assets of $163,000 from the
central kitchen closures relating to the Seattle central kitchen and
adjustments to previously recorded losses on the Chicago and Los Angeles
central kitchens.

Other (Expense) Income Other (expense) income includes interest and other
expense and interest and other income. Other expense increased by $0.17
million from $20,000 income to $0.15 million in expense. This increase was due
to the interest expense from the new notes payable. As a percentage of sales,
other (expense) income increased from 0.3% to (2.2%).

Net Loss  Net loss increased by $0.35 million, or 10.8%, from $2.19 million to
$2.54 million. This increase was primarily due to decreased sales. As a
percentage of sales, net loss increased from 29.7% to 37.4%.

EBITDA represents earnings before interest expense, interest income, income
taxes, depreciation, amortization, loss on disposal of assets, and provision
for asset impairment and store closure. EBITDA data is included because
management understands that such information is considered by certain investors
as an additional basis on which to evaluate a companys ability to pay
interest, repay debt and make capital expenditures. Because all companies do
not calculate EBITDA identically, the presentation of EBITDA in this
Quarterly Report is not necessarily comparable to similarly entitled measures of other
companies. EBITDA is not intended to represent and should not be considered
more meaningful than, or an alternative to, measures of operating performance
as determined in accordance with generally accepted accounting principles.
EBITDA for the thirteen-week periods ended March 30, 2003 and March 31, 2002
was ($1.43) million and ($1.4) million, respectively. The decrease in EBITDA
was primarily due to decreased sales.

LIQUIDITY AND CAPITAL RESOURCES

Net cash used in operating activities during the 13-weeks ended March 30, 2003
and March 31, 2002 was $0.28 million and $1.8 million, respectively. Net cash
used in operating activities in each period resulted primarily from net loss
before non-cash charges and changes in working capital.

Net cash used in investing activities for the 13-weeks ended March 30, 2003 and
March 31, 2002 was approximately $0.01 million and $0.64 million, respectively.
Net cash used in investing activities resulted from capital additions
primarily related to opening additional cafés during the13-weeks ended March
31, 2002.

Net cash provided (used) by financing activities for the 13-weeks ended March
30, 2003 and March 31, 2002 was $0.47 million and ($0.17) million,
respectively. The financing activities during 2003 consisted primarily of cash
received from the net

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proceeds of $0.98 million in debt financing from FFG,
which was offset by debt issue costs and $0.13 million in repayment of the line
of credit.

Since inception we have financed our operations primarily through the issuance
of capital stock and debt. Since inception through March 30, 2003, we have
raised cash of approximately $67 million from sales of debt and equity
securities. In addition to funding capital expenditures, which have
approximated $28 million since inception, cash provided by financing activities
has funded our initiatives in business and market development and related
operating losses. Since inception through March 30, 2003, we have incurred net
losses of approximately $65.7 million. In the near term, operating losses may
continue despite actions taken to reduce negative cash flow from operations.
Actions taken to reduce negative cash flow from operations, including improving
operational efficiencies, cost controls and cutbacks, workforce reductions and
closing of certain under-performing cafés, continued during 2003.

In March 2003, certain terms of the note with Laurus Master Fund, Ltd.
(Laurus) were amended to, among other things, change the Fixed Conversion
Price to $0.10 per share. The amendment to the note suspends our obligation to
make monthly payments of principal until the first business day of the month
following the earlier of June 30, 2003 or the closing on an investment by
Deutsche Bank or any of its affiliates, suspends the right of Laurus to demand
conversion under the note until the earlier of June 30, 2003 or the closing on
an investment by Deutsche Bank or any of its affiliates, and restructures the
repayment schedule for the remaining payments over a seven month period
following the resumption of principal payments. Additionally, in March 2003,
terms of the 250,000 warrants issued in June 2002 were amended to, among other
things, change the exercise price to $0.10 per share and suspend the right of
Laurus to exercise the warrant until the earlier of June 30, 2003 or the
closing on an investment by Deutsche Bank or any of its affiliates. As a
result of the amended conversion price for the notes and exercise price for the
warrants being less than the market price of the common stock on the amendment
date, the Company recorded the estimated fair value of $107,000 feature as
original issue discount and an increase in common stock and additional
paid-in capital.

In August 2002, we entered into a one-year $1.0 million revolving credit line
based upon and collateralized by our accounts receivable. We pay daily fees of
0.0667% computed on the outstanding daily balance. As of March 30, 2003,
approximately $152,000 was available for borrowing, none of which had been drawn. As a
result of lock box deposits being swept to the lender exceeding Company
draw-down on the line, at March 30, 2003, the Company had a receivable balance
due from the lender of approximately $137,000, most of which was subsequently
drawn. We expect that our accounts receivable and the amounts available to us
under this facility will be reduced during 2003, primarily due a reduction in
our sales to wholesale accounts.

In September 2002, we entered into a $500,000 note payable borrowing from U.S.
Bank. The note is secured by a certificate of deposit owned by the Companys
Chief Executive Officer and bears interest, payable monthly, at an annual rate
of 3.59%. The note was initially due March 31, 2003, which has since been
extended to March 31, 2004.

In March 2003, we completed the offer and sale of $2.0 million in secured
promissory notes, series D preferred stock and warrants to purchase common
stock to Briazz Venture, L.L.C., an affiliate of FFG (Briazz Venture),
pursuant to which we issued a $2.0 million secured promissory note in
consideration for approximately $0.55 million in cash and conversion of the
$1.45 million principal amount of outstanding demand notes issued to FFG and
its affiliates, $450,000 of which was borrowed by the Company during January
and February 2003. We also issued a five-year warrant exercisable for
1,193,546 shares of our common stock at a price per share of $0.50, and 100
shares of series D preferred stock, and granted registration rights covering
the shares of common stock issuable upon conversion of the preferred stock and
exercise of the warrant. We agreed to cause up to one person designated by FFG
to be appointed to our Board of Directors, subject to increase if we receive
shareholder approval. We agreed that, if we receive shareholder approval, we
will cause up to five persons designated by Briazz Venture to be appointed to
our Board of Directors, in accordance with the rules and regulations of Nasdaq
or any exchange on which our common stock is listed. The promissory note is
secured by all of our assets and bears interest at 10% per year. Interest is
payable monthly in arrears, in cash. The note matures, and all principal and
accrued and unpaid interest becomes due, on March 6, 2004. The note may,
however, become due prior to March 6, 2004 if we fail to meet financial
covenants set forth in the note. Terms of the notes include certain covenants,
including, among others, restrictions on the payment of dividends, limitation
on additional indebtedness, and compliance with financial covenants, including
minimum future EBITDA and maximum accounts payable. The Company has complied
with or obtained waivers relating to such covenants.

The maturity date of the note is dependent upon our financial performance. The
note requires that as of the end of each fiscal quarter beginning with the
second fiscal quarter of 2003, we will have either generated positive EBITDA
for such fiscal quarter or we will have generated positive EBITDA for the
cumulative period beginning on the first day of the second fiscal quarter of
2003 through the end of the fiscal quarter in question. In the event we do not
achieve at least one of these goals in any fiscal

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quarter, the note will mature
on the 45th day after the end of the fiscal quarter. For example, if we do not
generate positive EBITDA for our second fiscal quarter of 2003, which ends on
June 29, 2003, the note will be due on August 13, 2003. For purposes of the
note, EBITDA means net income before extraordinary items, income taxes,
interest expense, investment income, non-recurring expenses, depreciation and
amortization, plus any losses incurred by us because of FFGs failure to comply
with certain of its obligations under the food production agreement. In each of
the last five completed fiscal years, we have generated negative EBITDA. We are
not currently able to determine whether we will generate positive EBITDA during
the second, third or fourth fiscal quarters of 2003.

If our shareholders approve the conversion of the series D preferred stock, the
series D preferred stock will be convertible at the option of the holder, for
an aggregate conversion price of up to $2.0 million for a period of five years,
into that number of shares of our common stock as is equal to 66.7% (the
Applicable Percentage) of our outstanding shares of common stock, on a
post-conversion, fully-diluted basis as measured on the date of shareholder
approval (but excluding from the calculation of our fully-diluted share capital
the Series E preferred stock and, subject to certain limitations, shares
subject to our outstanding stock options and other shares reserved for issuance
under our stock incentive plans). The number of shares of our common stock into
which our series D preferred stock may be converted and the conversion price
per share of common stock will initially be fixed on the date that the series D
preferred stock first becomes convertible in accordance with the foregoing
formula.

On April 10, 2003, the Company completed the offer and sale of $550,000 in
secured promissory notes, warrants, and series E preferred stock to Spinnaker
Investment Partners, L.P. (Spinnaker), a fund managed by Spinnaker Capital
Partners, LLC. In consideration for $550,000 in cash, Spinnaker was issued a
$550,000 secured promissory note, a five-year warrant exercisable for 1,193,546
shares of the Companys common stock at a price per share of $0.50, and 25
shares of series E preferred stock. The terms of the note, warrant and series E
preferred stock are substantially similar to the terms of the note, warrant and
series D preferred stock issued to Briazz Venture on March 6, 2003. The
$550,000 secured promissory note bears interest at 10% per year. Interest is
payable monthly in arrears, in cash. The note matures, and all principal and
accrued and unpaid interest becomes due, on March 6, 2004. The note may, however,
become due prior to March 6, 2004 if the Company fails to meet financial
covenants set forth in the note. Spinnaker was granted registration rights
covering the shares of common stock issuable upon conversion of the series
preferred stock and exercise of the warrant. The Company also agreed to cause
up to one person designated by Spinnaker to be appointed to the Companys Board
of Directors. Proceeds of the financing will be used for working capital, after
deduction of expenses and a $50,000 management fee payable to Spinnaker Capital
Partners, LLC. In connection with the financing, Spinnaker, Laurus Master Fund,
Ltd. and Flying Food Group, L.L.C. and its affiliates, including Briazz
Venture, entered into an inter-creditor agreement in which they agreed that
their respective security interests in the Companys assets would rank equally
in priority.

If shareholders approve the conversion of series D and series E preferred
stock, the series E preferred stock will be convertible at the option of the
holder, for an aggregate conversion price of up to $500,000 for a period of
five years, into one quarter (1/4) of the number of shares of common stock into
which the series D preferred stock is convertible. The number of shares of
common stock into which series E preferred stock may be converted and the
conversion price per share of common stock will initially be fixed on the date
that the series E preferred stock first becomes convertible. If the Companys
shareholders approve the conversion of preferred stock, then based upon
outstanding securities as of April 10, 2003, assuming that the company does not
issue, cancel or modify any of its securities prior to the date of shareholder
approval and assuming that Briazz Venture and Spinnaker do not exercise their
warrants prior to the date of shareholder approval, the series D preferred
stock would initially be convertible into a total of approximately 33,171,900
shares of common stock at a conversion price of approximately $0.06 per share
of common stock, and the series E preferred stock would initially be
convertible into a total of approximately 8,292,975 shares of common stock at a
conversion price of approximately $0.06 per share of common stock. The exact
number of shares of common stock that may be issued on conversion of the series
D and series E preferred stock and the exact conversion price of the series D
and series E preferred stock cannot be determined until the date shareholder
approval is received.

If series D and E preferred stock becomes convertible, then so long as the
secured promissory note issued to Briazz Venture and Spinnaker remains
outstanding, such preferred stock will be entitled to vote, with certain
exceptions, together with common stock on an as-converted basis. If the
conversion of series D and E preferred stock is not approved by the Companys
shareholders, such preferred stock will not become convertible at the option of
the holder and will not be entitled to vote on an as-converted basis. Any
shares of series D and E preferred stock outstanding on the fifth anniversary
of the initial issuance of such stock will be automatically converted into
shares of common stock at a rate of 1/100th and
1/25th of a share of common
stock per share of series D and E preferred stock, respectively.

Subject to certain exceptions, if any additional shares of common stock or any
securities convertible or exercisable for shares of common stock at an
effective price that is less than the conversion price of the series D and E
preferred stock or exercise price of the warrants are issued, the conversion or
exercise price will be adjusted to equal the effective price at which the new

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securities were issued. Upon the series D and E preferred stock becoming
convertible, the warrants will automatically terminate. Any exercise of the
warrants prior to such time will reduce the aggregate conversion price and
number of shares issuable upon conversion of the series D and E preferred
stock.

As previously announced, the Company entered into a letter of intent to sell
senior secured notes and warrants to purchase common stock (the DB
securities) to DB Advisors, LLC, an affiliate of Deutsche Bank (DB), and
other investors. If completed, this financing would result in additional cash
proceeds of approximately $3.9 million and conversion of securities issued to
FFG and Spinnaker into DB securities, and their secured promissory notes,
warrants and preferred stock would be cancelled. The notes would bear interest
at Libor plus 1%, mature two years from date of closing and be collateralized
by a pledge of all Company assets. In addition to notes, investors would
receive warrants equal to approximately 78% of the common shares of BRIAZZ on a
fully-diluted, post-exercise basis with an exercise price of $0.10 per share
and members of management would receive warrants to purchase 12% of the common
shares of BRIAZZ on a fully-diluted, post-exercise basis on the same terms as
the investors. Additionally, the investors would be entitled to designate four
of the five directors serving on the BRIAZZ board of directors. The closing of
the financing is subject to, among other things, negotiation and execution of
definitive documents and satisfaction of conditions to closing, including the
receipt of BRIAZZ shareholder approval and the conversion by FFG of its
investment securities as described above. There can be no assurance that the
negotiations with the investors will be successful or that the offering will be
completed. The Company anticipates using the additional cash proceeds from
this financing to repay a portion of the Companys current outstanding debt
with the remainder used for working capital.

The Company is party to an agreement entered into in 2002 with an investment
banking firm to become the Companys exclusive financial advisor with respect
to raising capital or otherwise assisting with financing transactions.
Pursuant to the agreement, among other things, the Company owes the financial advisor a
financing fee of 7% of gross financing proceeds, or 5% in certain financings.
In addition, in the event of a transaction, as defined in the agreement, a
transaction fee of $750,000 is payable to the financial advisor. In April
2003, the Company received an invoice from the financial advisor for
approximately $751,000. The Company, the financial advisor and existing and
prospective investors are in the process of negotiations regarding the timing
and amount of any payment with respect to this invoice. Based upon an
understanding with the financial advisor and prospective investors,
if the proposed financing closes as presently proposed, the
transaction fee would be significantly reduced.

At March 30, 2003, we had cash and cash equivalents of approximately $0.5
million. Since March 30, 2003, we have used a combination of cash and cash
equivalents, operating revenues and the proceeds of additional borrowings to
meet our immediate cash needs; however, we will need additional capital in the
immediate future by the end of the second quarter of 2003 in order to continue
operating our business. We are attempting to conserve cash by reducing
expenses and by delaying or deferring payments to some of our suppliers and on
some of our leases. We will need to raise additional capital to finance our
operations, as well as to enhance our operations, fund our expansion, respond
to competitive pressures and repay our borrowings when they become due. There
can be no assurance that we will be able to obtain additional financing at
terms favorable to us, or at all, reduce expenses or successfully complete
other steps to continue as a going concern. If we are unable to obtain
sufficient funds to satisfy our cash requirements within the required timeframe
on terms favorable to us, we may be forced to curtail operations, dispose of
assets, or seek extended payment terms from our vendors. Such events would
materially and adversely affect our financial position and results of
operations. In the event that such steps are not sufficient, or we believe
that they will not be sufficient, we may be required to discontinue our
operations.

Poor financial results, inability to comply with the terms of our borrowings,
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 or discontinue our operations.

The accompanying financial statements have been prepared on the basis that we
will continue as a going concern and do not include any adjustments to reflect
the possible future effects on the recoverability of assets and liquidation of
liabilities that may result from this uncertainty. We have incurred
substantial operating losses and negative cash flows from operations since
inception and had an accumulated deficit of $72.7 million at March 30, 2003.
As disclosed in the report of independent accountants on our annual financial
statements and included in our Annual Report on Form 10-K, these matters raise
substantial doubt about our ability to continue as a going concern. To date,
we have financed operations principally through the net proceeds from debt and
equity offerings. Our ability to continue as a going concern is dependent upon
numerous factors, including our ability to obtain additional financing, our
ability to increase our level of future revenues or our ability to reduce
operating expenses.

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Recent accounting
pronouncements In July 2001, the Financial Accounting
Standards Board (FASB) issued SFAS No. 143, Accounting for Asset Retirement
Obligations (SFAS No. 143). SFAS No. 143 addresses financial accounting and
reporting for obligations associated with the retirement of tangible long-lived
assets and the associated asset retirement costs. It applies to legal
obligations associated with the retirement of long-lived assets that result
from the acquisition, construction, development, and (or) the normal operation
of a long-lived asset, except for certain obligations of lessees. The adoption
of SFAS No. 143 did not have a material impact on the Companys results of
operation or financial position.

In June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated
with Exit or Disposal Activities (SFAS No. 146). SFAS No. 146 addresses
financial accounting and reporting for costs associated with exit or disposal
activities and nullifies Emerging Issues Task Force (EITF) Issue No. 94-3,
Liability Recognition for Certain Employee Termination Benefits and Other
Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring). The adoption of SFAS No 146 did not have a material impact on
the Companys financial position or results of operation.

Critical Accounting Policies We have identified the policies below as
critical to our business operations and the understanding of our results of
included in operations. The impact and any associated risks related to these
policies on our business operations is discussed throughout Managements
Discussion and Analysis of Financial Condition and Results of Operations where
such policies affect our reported and expected financial results. For a
detailed discussion on the application of these and other accounting policies,
see Note 1 in the Notes to the Consolidated Financial Statements included in
this Quarterly Report on Form 10-Q and in our December 29, 2002 Annual Report
on Form 10-K. Preparation of financial statements requires us to make estimates
and assumptions that affect the reported amount of assets and liabilities,
disclosure
of contingent assets and liabilities at the date of our financial statements,
and the reported amounts of revenue and expenses during the reporting period.
There can be no assurance that actual results will not differ from those
estimates.

Revenue Recognition The Company recognizes revenue in accordance with SEC
Staff Accounting Bulletin No. 101, Revenue Recognition in Financial Statements
(SAB 101), as amended by SAB 101A and 101B. SAB 101 requires that four basic
criteria must be met before revenue can be recognized: (1) persuasive evidence
of an arrangement exists; (2) delivery has occurred or services rendered; (3)
the fee is fixed and determinable; and (4) collectibility is reasonably
assured. Determination of criteria (3) and (4) are based on managements
judgments regarding the fixed nature of the fee charged for services rendered
and products delivered and the collectibility of those fees. Should changes in
conditions cause management to determine these criteria are not met for certain
future transactions, revenue recognized for any reporting period could be
adversely affected. The Company has concluded that its revenue recognition
policy is appropriate and in accordance with generally accepted accounting
principles and SAB No. 101.

Valuation of Long-Lived Assets We periodically review the carrying value of
our long-lived assets for continued appropriateness. This review is based upon
our projections of anticipated future cash flows. We record impairment losses
on long-lived assets used in operations when events and circumstances indicate
that the assets might be impaired and the undiscounted cash flows estimated to
be generated by those assets are less than the carrying amount of those items.
Our cash flow estimates are based on historical results adjusted to reflect our
best estimate of future market and operating conditions. While we believe that
our estimates of future cash flows are reasonable, different assumptions
regarding such cash flows could materially affect our evaluations. The net
carrying value of assets not recoverable are reduced to their fair value. Our
estimates of fair value represent our best estimate based on either discounted
cash flows or appraised values, depending on the nature of the asset.




ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

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

Many of the food products purchased by us are affected by commodity pricing and
are, therefore, subject to price volatility caused by weather, production
problems, delivery difficulties, utility costs and other factors that are
outside our control. We believe that substantially all of our food and
supplies are available from numerous sources, which helps to control food
commodity risk; however we will be reliant upon FFG to control food commodity
risk for those products we purchase from FFG. 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.

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ITEM 4. CONTROLS AND PROCEDURES

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

Changes in Internal Controls During the fourth quarter of fiscal 2002, the Companys
chief financial officer resigned. During the first quarter of fiscal
2003, the Companys controller and president resigned. Due to
the impact of these resignations, the Company hired consultants to
assist with the preparation of its financial statements and Exchange
Act reports. The Company will continue to utilize consultants until
it has hired a full-time chief financial officer. Other than these
changes, there were no significant changes made in the Companys
internal controls during the period covered by this report or, to the
Companys knowledge, in other factors that could significantly
affect these controls subsequent to the Evaluation Date.




PART II  OTHER INFORMATION




ITEM 1. LEGAL PROCEEDINGS

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.




ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

Changes in Constituent Instruments and Rights- Information regarding the

Companys Series D and Series E Preferred Stock, and the terms thereof, has
been previously reported by the Company in Companys December 29, 2002 Annual
Report on Form 10-K and a Form 8-K dated April 10, 2003

Recent Sales  We issued demand notes to an affiliate of FFG in the following
principal amounts, for the face amount in cash: $100,000 on December 30, 2002,
$100,000 on January 6, 2003 and $225,000 on January 6, 2003. The demand notes
were issued to an accredited investor and, if deemed to be securities, in
reliance upon Section 4(2) and Rule 506 of Regulation D under the Securities
Act.

We issued $2.0 million principle amount of senior secured promissory notes, 100
shares of Series D Preferred Stock and a warrant to purchase 1,193,546 shares
of common stock at an exercise price of $0.50 per share to an affiliate of FFG
on March 6, 2003, for approximately $0.55 million in cash and conversion of
$1.45 million in demand notes. The securities were issued to an accredited
investor in reliance upon Section 4(2) and Rule 506 of Regulation D under the
Securities Act. The terms of the securities are more fully described elsewhere
in this report.

We issued 40,200 shares of common stock to Laurus upon conversion of $8,260 of
the amount outstanding under the Laurus convertible note. The securities were
issued to an accredited investor in reliance upon Section 4(2) and Rule 506 of
Regulation D under the Securities Act.




ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.




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

None.




ITEM 5. OTHER INFORMATION

None.

22



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##### Table of Contents






ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits.

| |  |         |             |  |             |                                                                                                                                                                                                                    
| |  | ------- | ----------- |  | ----------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Exhibit |             | 
| |  | Number  |             |  | Description
| |  |         |             |  |            
| |  |         | 3.1(2)      |  |             | Amended and Restated Articles of Incorporation.                                                                                                                                                                    
| |  |         |             |  |             |                                                                                                                                                                                                                    
| |  |         | 3.1.1(5)    |  |             | Articles of
Amendment filed March 5, 2003 (including designation of Series D Convertible Preferred Stock).                                                                                                         
| |  |         |             |  |            
| |  |         | 3.1.2(6)    |  |             | Articles of
Amendment filed April 10, 2003 (including designation of Series E Convertible Preferred Stock).                                                                                                        
| |  |         |             |  |            
| |  |         | 3.2(5)      |  |             | Amended and Restated Bylaws.                                                                                                                                                                                       
| |  |         |             |  |            
| |  |         | 4.1(2)      |  |             | Specimen Stock Certificate for Common Stock.                                                                                                                                                                       
| |  |         |             |  |             |                                                                                                                                                                                                                    
| |  |         | 4.2(5)      |  |             | Specimen Stock Certificate for Series D Convertible Preferred Stock                                                                                                                                                
| |  |         |             |  |            
| |  |         | 4.3(6)      |  |             | Specimen Stock Certificate for Series E Convertible Preferred Stock.                                                                                                                                               
| |  |         |             |  |            
| |  |         | 10.1(1)(2)  |  |             | 1996 Amended Stock Option Plan.                                                                                                                                                                                    
| |  |         |             |  |            
| |  |         | 10.2(1)(2)  |  |             | Form of Option
Agreement (1996 Plan - Fresh Options prior to February 2001).                                                                                                                                       
| |  |         |             |  |            
| |  |         | 10.3(1)(2)  |  |             | Form of Option
Agreement (1996 Plan - other options prior to February 2001).                                                                                                                                       
| |  |         |             |  |            
| |  |         | 10.4(1)(2)  |  |             | 2001 Employee Stock Purchase Plan.                                                                                                                                                                                 
| |  |         |             |  |            
| |  |         | 10.5(2)     |  |             | Form of Warrant (Series C Convertible Preferred Stock financing).                                                                                                                                                  
| |  |         |             |  |            
| |  |         | 10.6(1)(2)  |  |             | Employment Agreement between BRIAZZ and Charles William Vivian dated July 14,
1999.                                                                                                                                
| |  |         | 10.7(2)     |  |             | Form of Registration Rights Agreement among BRIAZZ and certain of our
shareholders dated August 15, 1997, as amended.                                                                                              
| |  |         |             |  |             |                                                                                                                                                                                                                    
| |  |         | 10.8(2)     |  |             | Agreement between BRIAZZ and Stusser Realty Group Limited Partnership dated
January 1998.                                                                                                                          
| |  |         |             |  |             |                                                                                                                                                                                                                    
| |  |         | 10.9(2)     |  |             | Sublease between BRIAZZ and Stusser Electric Company regarding 3901 7th Avenue
South, Seattle, WA dated February 6, 1998.                                                                                          
| |  |         |             |  |             |                                                                                                                                                                                                                    
| |  |         | 10.10(2)    |  |             | Sublease Amendment between BRIAZZ and Stusser Electric Company regarding 3901
7th Avenue South, Seattle, WA dated August 28, 2000.                                                                                 
| |  |         |             |  |             |                                                                                                                                                                                                                    
| |  |         | 10.12(2)    |  |             | Lease between BRIAZZ and Mission-Taylor Properties regarding 225 Mendell St.,
San Francisco, CA dated June 28 1996.                                                                                                
| |  |         |             |  |             |                                                                                                                                                                                                                    
| |  |         | 10.13(2)    |  |             | Amendment to Lease between BRIAZZ and Mission-Taylor Properties regarding 225
Mendell St., San Francisco, CA dated May 25, 2000.                                                                                   
| |  |         |             |  |             |                                                                                                                                                                                                                    
| |  |         | 10.14(2)    |  |             | Lease between BRIAZZ and Time Realty Investments, Inc. regarding 200 Center
St., El Segundo, CA dated December 15, 1997.                                                                                           
| |  |         |             |  |             |                                                                                                                                                                                                                    
| |  |         | 10.15(5)    |  |             | Surrender of Possession and Termination of Lease Agreement dated December ,
2002 regarding lease between BRIAZZ and Time Realty Investments, Inc.
regarding 200 Center St., El Segundo, CA dated December 15, 1997.
| |  |         |             |  |             |                                                                                                                                                                                                                    
| |  |         | 10.16(2)    |  |             | Industrial Building Lease between BRIAZZ and Walnut Street Properties, Inc.
regarding 1642 Lake Street, Chicago, IL dated April 7, 1997.                                                                           
| |  |         |             |  |             |                                                                                                                                                                                                                    
| |  |         | 10.17(1)(2) |  |             | Form of Option
Agreement (1996 Plan - all options since February 2001).                                                                                                                                            
| |  |         |             |  |             |                                                                                                                                                                                                                    
| |  |         | 10.18(2)    |  |             | Noncompetition Agreement between BRIAZZ and Victor D. Alhadeff dated October
18, 1996.                                                                                                                             
| |  |         |             |  |             |                                                                                                                                                                                                                    
| |  |         | 10.19(3)    |  |             | Convertible Note made by BRIAZZ in favor of Laurus Master Fund, Ltd. dated
June 18, 2002 in the principal amount of $1,250,000.                                                                                    
| |  |         |             |  |             |                                                                                                                                                                                                                    
| |  |         | 10.20(3)    |  |             | Common Stock Purchase Warrant issued by BRIAZZ to Laurus Master Fund, Ltd.
dated June 18, 2002.                                                                                                                    
| |  |         |             |  |             |                                                                                                                                                                                                                    
| |  |         | 10.21(3)    |  |             | Security Agreement made by BRIAZZ in favor of Laurus Master Fund, Ltd. dated
June 18, 2002.                                                                                                                        
| |  |         |             |  |             |                                                                                                                                                                                                                    
| |  |         | 10.22(5)    |  |             | Allonge dated December 2, 2002 to the Convertible Note issued by the Company
to Laurus Master Fund, Ltd. on June 18, 2002.                                                                                         
| |  |         |             |  |             |                                                                                                                                                                                                                    
| |  |         | 10.24(5)    |  |             | Common Stock Purchase Warrant issued by BRIAZZ to Laurus Master Fund, Ltd.
dated December 2, 2002.                                                                                                                 
| |  |         |             |  |             |                                                                                                                                                                                                                    
| |  |         | 10.25(5)    |  |             | Allonge dated January , 2003 to the Convertible Note issued by BRIAZZ to
Laurus Master Fund, Ltd. on June 18, 2002.                                                                                                
| |  |         | 10.26(5)    |  |             | Allonge dated as of February 26, 2003 to the Convertible Note dated June 18,
2002 issued by BRIAZZ to Laurus Master Fund, Ltd. on June 18, 2002.                                                                   

23



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##### Table of Contents



|        |  |             |       |     |  |                                                                                                                                                                                                                                                                      
|------- |  | ----------- | ----- | --- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |            
|Number  |  | Description
|        |  |            
|        |  |             | 10.27 | (5) |  | Allonge dated as of February 26, 2003 to the Warrant issued by BRIAZZ to
Laurus Master Fund, Ltd. on June 18, 2002.                                                                                                                                                  
|        |  |             |       |     |  |                                                                                                                                                                                                                                                                      
|        |  |             | 10.28 | (4) |  | Form of Secured Convertible Demand Note used in October 2002.                                                                                                                                                                                                        
|        |  |             |       |     |  |                                                                                                                                                                                                                                                                      
|        |  |             | 10.29 | (5) |  | Form of Secured Convertible Demand Note used in December 2002 and January 2003.                                                                                                                                                                                      
|        |  |             |       |     |  |                                                                                                                                                                                                                                                                      
|        |  |             | 10.30 | (5) |  | Food Production Agreement between BRIAZZ and Flying Food Group, L.L.C. dated
December 1, 2002                                                                                                                                                                        
|        |  |             |       |     |  |                                                                                                                                                                                                                                                                      
|        |  |             | 10.31 | (5) |  | Amended Security Agreement between BRIAZZ, Flying Food Group, L.L.C. and New
Management, Ltd., dated December 3, 2002.                                                                                                                                               
|        |  |             |       |     |  |                                                                                                                                                                                                                                                                      
|        |  |             | 10.32 | (5) |  | Amended and Restated Purchase Agreement between BRIAZZ and Briazz Venture,
L.L.C., dated March 5, 2003.                                                                                                                                                              
|        |  |             |       |     |  |                                                                                                                                                                                                                                                                      
|        |  |             | 10.33 | (5) |  | $2,000,000 Senior Secured Note issued by BRIAZZ in favor of Briazz Venture,
L.L.C., dated March 6, 2003.                                                                                                                                                             
|        |  |             |       |     |  |                                                                                                                                                                                                                                                                      
|        |  |             | 10.34 | (5) |  | Warrant to purchase 1,193,546 shares of Common Stock issued by BRIAZZ to
Briazz Venture, L.L.C. dated March 6, 2003.                                                                                                                                                 
|        |  |             |       |     |  |                                                                                                                                                                                                                                                                      
|        |  |             | 10.35 | (5) |  | Amendment dated March 6, 2003 between BRIAZZ and Briazz Venture, L.L.C. to
Security Agreement dated December 3, 2002.                                                                                                                                                
|        |  |             |       |     |  |                                                                                                                                                                                                                                                                      
|        |  |             | 10.36 | (5) |  | Voting Agreement between Briazz Venture, L.L.C. and Victor D. Alhadeff, dated
as of March 6, 2003.                                                                                                                                                                   
|        |  |             |       |     |  |                                                                                                                                                                                                                                                                      
|        |  |             | 10.37 | (5) |  | Registration Rights Agreement between BRIAZZ and Briazz Venture, L.L.C., dated
March 6, 2003.                                                                                                                                                                        
|        |  |             |       |     |  |                                                                                                                                                                                                                                                                      
|        |  |             | 10.38 | (6) |  | Purchase agreement between BRIAZZ and Spinnaker Investment Partners, L.P.,
dated April 10, 2003                                                                                                                                                                      
|        |  |             |       |     |  |                                                                                                                                                                                                                                                                      
|        |  |             | 10.39 | (6) |  | $550,000 Senior Secured Note issued by BRIAZZ in favor of Spinnaker
Investment, L.P., dated April 10, 2003                                                                                                                                                           
|        |  |             |       |     |  |                                                                                                                                                                                                                                                                      
|        |  |             | 10.40 | (6) |  | Warrant to purchase 1,193,546 shares of Common Stock issued by BRIAZZ to
Spinnaker Investment Partners, L.P., dated April 10, 2003                                                                                                                                   
|        |  |             |       |     |  |                                                                                                                                                                                                                                                                      
|        |  |             | 10.41 | (6) |  | Amended and Restated Security Agreement by and among BRIAZZ, Briazz Venture,
L.L.C. and Spinnaker Investment Partners, L.P., dated April 10, 2003                                                                                                                    
|        |  |             |       |     |  |                                                                                                                                                                                                                                                                      
|        |  |             | 10.42 | (6) |  | Amended and Restated Agreement Between Creditors by and among BRIAZZ, Laurus
Master Fund, Ltd., Spinnaker Investment Partners, L.P. and Flying Food Group
L.L.C. and any of its affiliates, including but not limited to Briazz Venture,
L.L.C., dated April 10, 2003
|        |  |             |       |     |  |                                                                                                                                                                                                                                                                      
|        |  |             | 10.43 | (6) |  | Amended and Restated Registration Rights Agreement by and among BRIAZZ,
Spinnaker Investment Partners, L.P. and Flying Food Group L.L.C. and any of
its affiliates, including but not limited to Briazz Venture, L.L.C., dated
April 10, 2003                        
|        |  |             |       |     |  |                                                                                                                                                                                                                                                                      
|        |  |             | 99.1  |     |  | Risk Factors                                                                                                                                                                                                                                                         
|        |  |             |       |     |  |                                                                                                                                                                                                                                                                      
|        |  |             | 99.2  |     |  | Certification of Chief Executive Officer and Chief Financial Officer pursuant
to 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the
Sarbanes-Oxley Act of 2002.                                                                                       






|    |  |                                                                                     
|--- |  | ------------------------------------------------------------------------------------
|(1) |  | Indicates management contract.                                                      
|   
|(2) |  | Incorporated by reference to our registration statement on Form S-1 (No. 333-54922).
|   
|(3) |  | Incorporated by reference to our Form 8-K filed on July 20, 2002.                   
|   
|(4) |  | Incorporated by reference to our Form 10-Q for the quarter ended September 29, 2002.
|   
|(5) |  | Incorporated by reference to our Form 10-K for the year ended December 29, 2002.    
|   
|(6) |  | Incorporated by reference to our Form 8-K dated April 10, 2003.                     

(b)  Reports on Form 8-K

The Company filed a Form 8-K dated December 30, 2002 to report the issuance of
a demand note, entering into the food production agreement, and a repayment
election under the Laurus note.

The Company filed a Form 8-K dated January 24, 2003 to disclose that the
Companys common stock was transferred to the Nasdaq SmallCap Market.

The Company filed a Form 8-K dated February 21, 2003 to report entering into a
letter of intent to sell securities to DB Advisors, LLC and other investors.

The Company filed a Form 8-K dated March 4, 2003 to report the closing of the
Briazz Venture $2.0 million financing transaction.

24



---



##### Table of Contents






(a) SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, BRIAZZ, INC. has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

|                    |  |                                                                                                          |  | 
|------------------- |  | -------------------------------------------------------------------------------------------------------- |  | 
|                    |  | BRIAZZ, INC.                                                                                            
|                   
|Date: May 14, 2003. |  | By: /s/ Victor D. Alhadeff                                                                               |  | 
|                    |  | Victor D. Alhadeff
Chief Executive Officer, Chief Financial Officer,
Secretary and Chairman of the Board |  | 

25



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##### Table of Contents






CERTIFICATIONS

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

1      I have
reviewed this Quarterly Report on Form 10-Q of BRIAZZ, INC.;

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

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

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



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

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



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

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

|                   |  |                                                                                                                      
|------------------ |  | ---------------------------------------------------------------------------------------------------------------------
|Date: May 14, 2003 |  |                                                                                                                      
|                   |  | /s/ Victor D. Alhadeff                                                                                               
|                   |  | Victor D. Alhadeff
Chief Executive Officer, Chief Financial Officer, Secretary and
Chairman of the Board of Directors

26