##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549


FORM 10-Q

(MARK ONE)x
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 28, 2003ORo
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934FOR 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

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

The number of outstanding shares of common stock, no par value, of the
Registrant at November 1, 2003 was 5,990,916.





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TABLE OF CONTENTS



|                               |                                                                                               |                                             |  |  |  |  |  | 
|------------------------------ | --------------------------------------------------------------------------------------------- | ------------------------------------------- |  |  |  |  |  | 
|PART I  FINANCIAL INFORMATION
|                               | ITEM 1. FINANCIAL STATEMENTS                                                                 
|                               |                                                                                               | BALANCE SHEETS                             
|                               |                                                                                               | STATEMENTS OF OPERATIONS                   
|                               |                                                                                               | Statement of Stockholders Equity (Deficit)
|                               |                                                                                               | STATEMENTS OF CASH FLOWS                   
|                               |                                                                                               | NOTES TO FINANCIAL STATEMENTS              
|                               | ITEM 2: MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|                               | ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                           
|                               | ITEM 4. CONTROLS AND PROCEDURES                                                              
|PART II  OTHER INFORMATION   
|                               | ITEM 1. LEGAL PROCEEDINGS                                                                    
|                               | ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS                                            
|                               | ITEM 3. DEFAULTS UPON SENIOR SECURITIES                                                      
|                               | ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                  
|                               | ITEM 5. OTHER INFORMATION                                                                    
|                               | ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K                                                     
|SIGNATURES                    
|EXHIBIT 31.1                  
|EXHIBIT 32.1                  
|EXHIBIT 99.1                  



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##### Table of Contents



BRIAZZ, INC.

INDEX TO THE FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 28, 2003

PAGEPART I  FINANCIAL INFORMATIONITEM 1.
    
    Financial Statements
    
    
    2Balance Sheets
    
    
    2Statements of Operations
    
    
    3Statement of Stockholders' Equity (Deficit)
    
    
    4Statements of Cash Flows
    
    
    5Notes to Financial Statements
    
    
    6ITEM 2.
    
    Management's Discussion and
Analysis of Financial Condition and Results of Operations
    
    
    13ITEM 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    21ITEM 4.
    
    Controls and Procedures
    
    
    22PART II  OTHER INFORMATIONITEM 1.
    
    Legal Proceedings
    
    
    22ITEM 2.
    
    Changes in Securities and Use of Proceeds
    
    
    22ITEM 3.
    
    Defaults Upon Senior Securities
    
    
    22ITEM 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    22ITEM 5.
    
    Other Information
    
    
    23ITEM 6.
    
    Exhibits and Reports on Form 8-K
    
    
    23SIGNATURES
    
    
    26






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PART I  FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS







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

September 28,
    
    December 29,2003
    
    2002AssetsCurrent assetsCash and cash equivalents
    
    $
    830
    
    
    $
    491Current portion of restricted certificates of deposit
    
    
    16
    
    
    
    40Accounts receivable, net of allowance of $145 (2003) and $135 (2002)
    
    
    303
    
    
    
    428Inventory
    
    
    299
    
    
    
    409Prepaid expenses
    
    
    379
    
    
    
    611Other current assets
    
    
    54
    
    
    
    154Total current assets
    
    
    1,881
    
    
    
    2,133Property and equipment, net
    
    
    4,689
    
    
    
    7,897Restricted certificates of deposit, net of current portion
    
    
    458
    
    
    
    423Deposits and other assets
    
    
    152
    
    
    
    252Total assets
    
    $
    7,180
    
    
    $
    10,705Liabilities and Stockholders EquityCurrent liabilitiesLine of credit borrowings
    
    $
    
    
    
    $
    129Accounts payable, including amounts due to related party
    
    
    2,457
    
    
    
    2,737Accrued compensation
    
    
    741
    
    
    
    758Other accrued liabilities
    
    
    1,557
    
    
    
    894Notes payable
    
    
    1,142
    
    
    
    1,390Notes payable to related parties
    
    
    
    
    
    
    1,025Current portion of capital lease obligations
    
    
    72
    
    
    
    109Total current liabilities
    
    
    5,969
    
    
    
    7,042Senior Notes payable, including amounts due to related parties, net of debt discount
    
    
    4,048
    
    
    
    Capital lease obligations, net of current portion
    
    
    194
    
    
    
    234Total liabilities
    
    
    10,211
    
    
    
    7,276Commitments and contingencies (Note 6)Stockholders equity (deficit)Series F Convertible Preferred Stock, no par value, 10,000,000 shares
authorized, 7,643,841 shares issued and outstanding (2003)
    
    
    1,309
    
    
    
    Common stock and additional paid in capital, no par value; 250,000,000 shares
authorized; 5,990,916 (2003) and 5,880,173 (2002) shares issued and outstanding
    
    
    75,489
    
    
    
    73,819Deferred stock compensation
    
    
    
    
    
    
    (203
    )Accumulated deficit
    
    
    (79,829
    )
    
    
    (70,187
    )Total stockholders equity (deficit)
    
    
    (3,031
    )
    
    
    3,429Total liabilities and stockholders equity (deficit)
    
    $
    7,180
    
    
    $
    10,705


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

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

Thirteen weeks ended
    
    Thirty-nine weeks endedSeptember 28,
    
    September 29,
    
    September 28,
    
    September 29,2003
    
    2002
    
    2003
    
    2002SalesRetail
    
    $
    4,970
    
    
    $
    5,543
    
    
    $
    15,208
    
    
    $
    16,526Branded Sales
    
    
    1,539
    
    
    
    2,093
    
    
    
    4,757
    
    
    
    6,250Total Sales
    
    
    6,509
    
    
    
    7,636
    
    
    
    19,965
    
    
    
    22,776Operating ExpensesCost of food and packaging
    
    
    3,371
    
    
    
    2,995
    
    
    
    10,225
    
    
    
    8,812Occupancy expenses
    
    
    1,057
    
    
    
    1,123
    
    
    
    3,143
    
    
    
    3,152Labor expenses
    
    
    1,640
    
    
    
    2,810
    
    
    
    5,331
    
    
    
    8,429Depreciation and amortization
    
    
    533
    
    
    
    954
    
    
    
    2,040
    
    
    
    2,627Other operating expenses
    
    
    266
    
    
    
    437
    
    
    
    824
    
    
    
    1,286General and administrative expenses
    
    
    1,015
    
    
    
    1,809
    
    
    
    4,258
    
    
    
    5,552Increase (decrease) in loss on disposal of assets
    
    
    (75
    )
    
    
    (12
    )
    
    
    130
    
    
    
    (10
    )Provision for asset impairment and store closure
    
    
    160
    
    
    
    2,170
    
    
    
    1,219
    
    
    
    2,194Total operating expenses
    
    
    7,967
    
    
    
    12,286
    
    
    
    27,170
    
    
    
    32,042Loss from operations
    
    
    (1,458
    )
    
    
    (4,650
    )
    
    
    (7,205
    )
    
    
    (9,266
    )Other (expense) incomeInterest and other expense
    
    
    (497
    )
    
    
    (115
    )
    
    
    (944
    )
    
    
    (252
    )Interest and other income
    
    
    1
    
    
    
    3
    
    
    
    7
    
    
    
    44(496
    )
    
    
    (112
    )
    
    
    (937
    )
    
    
    (208
    )Net loss
    
    
    (1,954
    )
    
    
    (4,762
    )
    
    
    (8,142
    )
    
    
    (9,474
    )Series F Convertible Preferred Stock Beneficial Conversion Feature
    
    
    (1,500
    )
    
    
    
    
    
    
    (1,500
    )
    
    
    Net loss attributable to common stockholders
    
    $
    (3,454
    )
    
    $
    (4,762
    )
    
    $
    (9,642
    )
    
    $
    (9,474
    )Basic and diluted net loss per share
    
    $
    (0.58
    )
    
    $
    (0.81
    )
    
    $
    (1.61
    )
    
    $
    (1.62
    )Weighted-average shares used in computing basic
and diluted net loss per share
    
    
    5,990,916
    
    
    
    5,860,375
    
    
    
    5,986,375
    
    
    
    5,846,352


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

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

Series F ConvertiblePreferred Stock
    
    Common Stock
    
    DeferredStock
    
    AccumulatedShares
    
    Amount
    
    Shares
    
    Amount
    
    Compensation
    
    Deficit
    
    TotalBalance at December 29, 2002
    
    
    
    
    
    
    
    
    
    
    5,880
    
    
    $
    73,819
    
    
    $
    (203
    )
    
    $
    (70,187
    )
    
    $
    3,429Issuance of shares for convertible debt
    
    
    
    
    
    
    
    
    
    
    40
    
    
    
    8
    
    
    
    
    
    
    
    
    
    
    
    8Issuances of stock warrants and modifications
of stock warrants and convertible notes to
reduce exercise and conversion price
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    145
    
    
    
    
    
    
    
    
    
    
    
    145Amortization of deferred compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    203
    
    
    
    
    
    
    
    203Employee stock purchase plan
    
    
    
    
    
    
    
    
    
    
    71
    
    
    
    17
    
    
    
    
    
    
    
    
    
    
    
    17Issuance of preferred stock, net of issue costs
    
    
    7,644
    
    
    $
    1,309
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,309Beneficial conversion feature of preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,500
    
    
    
    
    
    
    
    (1,500
    )
    
    
    Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,142
    )
    
    
    (8,142
    )Balance at September 28, 2003
    
    
    7,644
    
    
    $
    1,309
    
    
    
    5,991
    
    
    $
    75,489
    
    
    $
    
    
    
    $
    (79,829
    )
    
    $
    (3,031
    )


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

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

Thirty-nine weeks endedSeptember 28,
    
    September 29,2003
    
    2002Cash flows from operating activitiesNet loss
    
    $
    (8,142
    )
    
    $
    (9,474
    )Adjustments to reconcile net loss to net cash used in operating activitiesDeferred stock compensation expense
    
    
    203
    
    
    
    261Non-cash interest expense
    
    
    295
    
    
    
    176Depreciation and amortization
    
    
    2,090
    
    
    
    2,626(Gain)/Loss on disposal of assets
    
    
    130
    
    
    
    (10
    )Provision for asset impairment and store closure
    
    
    1,169
    
    
    
    2,195Changes in operating assets and liabilities:Accounts receivable
    
    
    125
    
    
    
    (98
    )Inventory
    
    
    110
    
    
    
    (100
    )Prepaid expenses and other current assets
    
    
    332
    
    
    
    (604
    )Accounts payable, including amounts due to related party
    
    
    (280
    )
    
    
    599Accrued compensation
    
    
    (17
    )
    
    
    (56
    )Other accrued liabilities
    
    
    820
    
    
    
    5Other
    
    
    100
    
    
    
    (50
    )Net cash used in operating activities
    
    
    (3,066
    )
    
    
    (4,530
    )Cash flows from investing activitiesPurchases of property and equipment
    
    
    (181
    )
    
    
    (2,282
    )Other
    
    
    
    
    
    
    41Net cash used in investing activities
    
    
    (181
    )
    
    
    (2,241
    )Cash flows from financing activitiesChange in checks issued in excess of bank deposits
    
    
    (157
    )
    
    
    (67
    )Repayment of line-of-credit borrowings
    
    
    (129
    )
    
    
    360Repayment of notes payable
    
    
    (300
    )
    
    
    (182
    )Proceeds from notes payable, preferred stock and warrants
    
    
    4,874
    
    
    
    1,250Debt and preferred stock issuance costs
    
    
    (614
    )
    
    
    (173
    )Change in restricted certificates of deposit
    
    
    (11
    )
    
    
    114Proceeds from employee stock purchase plan
    
    
    
    
    
    
    38Repayment of capital lease obligations
    
    
    (77
    )
    
    
    Net cash provided by financing activities
    
    
    3,586
    
    
    
    1,340Net increase (decrease) in cash and cash equivalents
    
    
    339
    
    
    
    (5,431
    )Cash and cash equivalents
    
    
    491
    
    
    
    6,193Beginning of period
    
    
    491
    
    
    
    6,193End of period
    
    $
    830
    
    
    $
    762Supplemental disclosure of cash flow informationCash paid for interest
    
    $
    145
    
    
    $
    76Supplemental disclosure of non-cash investing and financing activitiesAddition to additional paid-in-capital relating to issuance of warrants and
modification of warrants and convertible notes to reduce exercise and
conversion price
    
    $
    145
    
    
    $
    Notes payable converted to common stock
    
    $
    8
    
    
    $
    Beneficial conversion feature of preferred stock
    
    $
    1,500
    
    
    $
    


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

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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 also close. Upon
closure of the central kitchens, the Company has contracted for the production
of its products.

At September 28, 2003, the Company operated a total of 41 cafés in Seattle
(12), San Francisco (13), Chicago (8) and Los Angeles (8). The five-café
decrease since year-end resulted from closures of under-performing locations,
two in San Francisco, one in Chicago and two in Los Angeles. The Company
closed one in the first quarter, two in the second quarter and two in the third
quarter of 2003. The Company expects to close one additional café in Seattle
before the end of 2003.

Interim financial information The financial information at September 28,
2003, and for the 13 and 39-week periods ended September 28, 2003 and September
29, 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 periods ended September 28, 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
projected undiscounted 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 estimated fair value, which is determined based either on discounted
projected cash flows or appraised values, depending on the nature of the asset.
During the fiscal year-to-date period ended September 28, 2003, the Company
recorded an impairment write-down of approximately $1.2 million related to
certain café locations. These write-downs consisted primarily of leasehold
improvements and, to a lesser extent, equipment.

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 December 29, 2002 is $157,000 representing the excess of
outstanding checks over cash on deposit at the bank on which the checks were
drawn. There were no such amounts at September 28, 2003.

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.

Because the determination of the fair value of the Companys options is based
on assumptions such as interest rates, volatility,

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life, and dividend yield, because additional option grants will likely be made
in future periods, and due to the full acceleration of vesting for outstanding
options in March of 2003, this pro forma information is not likely to be
representative of the pro forma effects on reported net income or loss for
future periods. Had the Company applied the provisions of SFAS No. 123 to all
stock option grants, the Companys net loss would have been as indicated below
(in thousands except share and per share data):

Thirteen-weeks ended
    
    Thirty-nine weeks endedSeptember 28,
    
    September 29,
    
    September 28,
    
    September 29,2003
    
    2002
    
    2003
    
    2002Net loss attributable to common stockholders, as reported
    
    $
    (3,454
    )
    
    $
    (4,762
    )
    
    $
    (9,642
    )
    
    $
    (9,474
    )Add:Total compensation cost included in net loss
    
    
    
    
    
    
    87
    
    
    
    203
    
    
    
    261Deduct:Total stock-based employee compensation expense determined
under fair value based method for all awards
    
    
    
    
    
    
    (175
    )
    
    
    (603
    )
    
    
    (525
    )Proforma net loss
    
    $
    (3,454
    )
    
    $
    (4,850
    )
    
    $
    (10,042
    )
    
    $
    (9,738
    )Net loss per share:Basic and diluted  as reported
    
    $
    (0.58
    )
    
    $
    (0.81
    )
    
    $
    (1.61
    )
    
    $
    (1.62
    )Basic and diluted  pro forma
    
    $
    (0.58
    )
    
    $
    (0.83
    )
    
    $
    (1.68
    )
    
    $
    (1.67
    )


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
    
    39-week period endedSeptember 28, 2003
    
    September 29, 2002
    
    September 28, 2003
    
    September 29, 2002Net loss attributable to common shareholders
    
    $
    (3,454
    )
    
    $
    (4,762
    )
    
    $
    (9,642
    )
    
    $
    (9,474
    )Weightedaverage shares used in computing basic
and diluted net loss per share
    
    
    5,990,916
    
    
    
    5,860,375
    
    
    
    5,986,375
    
    
    
    5,846,352Basic and diluted net loss per share
    
    $
    (0.58
    )
    
    $
    (0.81
    )
    
    $
    (1.61
    )
    
    $
    (1.62
    )Shares excluded from loss per share calculation:Options to purchase common stock
    
    
    616,083
    
    
    
    1,102,549
    
    
    
    616,083
    
    
    
    1,102,549Convertible debt
    
    
    1,113,414
    
    
    
    1,041,667
    
    
    
    1,113,414
    
    
    
    1,041,667Convertible preferred stock
    
    
    76,438,410
    
    
    
    
    
    
    
    76,438,410
    
    
    
    Warrants to purchase common stock
    
    
    1,330,404
    
    
    
    1,180,404
    
    
    
    1,330,404
    
    
    
    1,180,404Total shares excluded
    
    
    79,498,311
    
    
    
    3,324,620
    
    
    
    79,498,311
    
    
    
    3,324,620


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 (deficit) 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. The adoption
of SFAS No. 143 did not have a significant effect on the Companys results of
operations, financial position or cash flows.

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 significant impact
on the Companys results of operations, financial position or cash flows.

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In November 2002, the FASB issued Interpretation No. 45, Guarantors
Accounting and Disclosure Requirements of Guarantees, Including Guarantees of
Indebtedness of Others  an Interpretation of FASB Statements 5, 57, and 107
and Rescission of FASB Interpretation No. 34 (FIN 45). This interpretation
expands on the existing accounting guidance and disclosure requirements for
most guarantees. The Company has not guaranteed indebtedness of others. The
adoption of FIN 45 did not have a significant impact on the Companys results
of operations, financial position or cash flows.

In January 2003, the FASB issued FASB Interpretation No. 46 Consolidation of
Variable Interest Entities, an interpretation of ARB No. 51. (FIN 46). FIN
46 requires certain variable interest entities to be consolidated by the
primary beneficiary of the entity under certain conditions. The Company does
not have any involvement in variable interest entities. The adoption of FIN 46
did not have a significant impact on the Companys results of operations,
financial position or cash flows.

In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities (SFAS No. 149), which amends
and clarifies financial accounting and reporting for derivative instruments
including certain derivative instruments embedded in other contracts and for
hedging activities under SFAS No. 133. The Company does not own any derivative
instruments and is not engaged in hedging activities. The adoption of SFAS No.
149 did not have a significant impact on its results of operations, financial
position or cash flows.

In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity (SFAS No.
150), which clarifies the accounting for certain financial instruments with
characteristics of both liabilities and equity and requires that those
instruments be classified as liabilities in statements of financial position.
Previously, many of these financial instruments were classified as equity.
SFAS No. 150 is effective for all financial instruments entered into or
modified after May 2003 and is otherwise effective at the beginning of the
first interim period after June 15, 2003. The adoption of SFAS No. 150 did not
have a significant impact on its results of operations, financial position or
cash flows.

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 $79.8 million
and a working capital deficit of $4.1 million at September 28, 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 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.

At September 28, 2003, the Company had cash and cash equivalents of
approximately $0.8 million. The Company has used a combination of cash and
cash equivalents, operating revenues and proceeds of borrowings to meet its
immediate cash needs; however, it is anticipated that additional cash will be
needed by the end of 2003 in order to continue operating. The Company is
attempting to conserve cash by reducing expenses and by delaying or deferring
payments to some of the Companys suppliers and on some of the Companys
leases. Poor financial results, inability to comply with the terms of
borrowings, unanticipated expenses or unanticipated opportunities that require
financial commitments could give rise to additional financing requirements
sooner than expected. The Company will need to raise additional cash to
finance its operations, as well as to enhance operations, fund any expansion,
respond to competitive pressures and repay borrowings when they become due. If
the Company raises additional funds through the issuance of equity or
convertible debt securities, the percentage ownership of existing shareholders
would be reduced, and these securities may have rights, preferences or
privileges senior to those of the Companys common stock. There can be no
assurance that the Company will be able to obtain additional financing at terms
favorable to the Company, or at all, 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 within the required timeframe
on acceptable terms, the Company may be forced to curtail operations, dispose
of assets, or seek extended payment terms. Such events would materially and
adversely affect the Companys financial position and results of operations.
In the event that such steps are not sufficient, or that Company directors and
management believe that such actions will not be sufficient, the Company may be
required to discontinue its 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

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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. In January 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. In July 2003, the terms of the note were
further amended to provide that, upon completion of a financing agreement with
Deutsche Bank London Ag (DB), an affiliate of Deutsche Bank, the Company
would make a $300,000 principal payment, and pay the remaining principal amount
and accrued interest, plus a $75,000 fee relating to the $300,000 prepayment,
in 12 equal installments beginning in September 2003. In August 2003, the DB
financing was completed and the Company made the $300,000 payment. On October
1, 2003, the Company was in arrears on its interest and principal payments to
Laurus. Subsequently, in October 2003 the Company received a waiver from
Laurus in which Laurus agreed to waive any defaults resulting from the late
payment of the monthly amount due October 1, 2003. In addition, Laurus agreed
to postpone all payments that would have become due and payable under the note
between October 1, 2003 and November 15, 2003 to November 16, 2003 and waived
any defaults and penalties resulting from such postponement of payments.

In March 2003, the Company completed the offer and sale of $2.0 million in
secured promissory notes, Series D Convertible Preferred Stock (Series D
Preferred Stock) and warrants to purchase common stock to Briazz Venture,
L.L.C. (BV) pursuant to which the Company 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 Flying Food Group L.L.C. (FFG) and its affiliates, $450,000 of
which was borrowed by the Company during January and February 2003. Proceeds
from the offering were used for working capital. The Company also issued a
five-year warrant exercisable for 1,193,546 shares of its 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. The Company
agreed to cause up to one person designated by FFG to be appointed to the
Companys Board of Directors, subject to increase upon receiving shareholder
approval. The Company agreed that, if the Company received shareholder
approval, the Company would cause up to five persons designated by BV to be
appointed to its Board of Directors, in accordance with the rules and
regulations of Nasdaq or any exchange on which the Companys common stock is
listed. The promissory note was secured by all of the Companys assets and bore
interest at 10% per year. Interest was payable monthly in arrears, in cash. The
note was to mature, and all principal and accrued and unpaid interest was to
become due, on March 6, 2004. The terms of the notes included 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.

In April 2003, the Company completed the offer and sale of $550,000 in secured
promissory notes, Series E Convertible Preferred Stock (Series E Preferred
Stock) and warrants to purchase common stock to Spinnaker Investment Partners
L.P. (Spinnaker). 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 were substantially similar to the terms of the note,
warrant and Series D Preferred Stock issued to BV in March 2003. 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 were used for
working capital, after deduction of expenses and a $50,000 management fee
payable to Spinnaker Capital Partners, L.L.C. In connection with the financing,
Spinnaker, Laurus, BV and FFG, 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.

On May 28, 2003, the Company entered into an agreement with DB, BV, Spinnaker
(collectively, the Investors), and Delafield Hambrecht, Inc. (Delafield)
providing for the issuance of an aggregate of $6.0 million of senior secured
non-convertible promissory notes (Senior Notes) and shares of Series F
Convertible Preferred Stock (Series F Preferred Stock) to the Investors.

On July 29, 2003, the Companys shareholders approved both the conversion of
the Series D and Series E Preferred Stock held by BV and Spinnaker and the
proposed financing with the Investors. As a result of this approval, the
Series D and Series E Preferred Stock became convertible into shares of the
Companys common stock and the warrants issued to BV and Spinnaker were
terminated.

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On August 1, 2003, the Company issued $6.0 million of Senior Notes to DB ($3.4
million), BV ($2.0 million), Spinnaker ($.5 million), and Delafield ($0.1
million). The Senior Notes are due two years from issuance, bear interest,
payable quarterly, at LIBOR plus 1%, and are collateralized by a security
interest in all of the Companys assets pursuant to an inter-creditor agreement
among note holders and Laurus. The Senior Notes are not convertible, but the
conversion price of the Series F Preferred Stock may be satisfied by the holder
surrendering a portion of the notes for cancellation. The Company issued to
the Investors and Delafield an aggregate of 7,643,841 shares of Series F
Preferred Stock that are initially convertible into 76,438,410 shares of common
stock at an initial conversion price $0.10 per share of common stock. In the
event that the fair market price of the common stock exceeds the conversion
price, the Series F Preferred Stock may also be converted pursuant to a
cashless exercise feature. The Company also granted registration rights
covering the shares of common stock issuable upon conversion of the Series F
Preferred Stock, the right to name new executive officers to be appointed by
the Company, and the right to designate up to five of the Companys directors
to DB (2), BV (2) and Spinnaker (1).

The Company recorded a debt discount of approximately $1.5 million relating to
the issuance of the Series F Preferred Stock, such value being determined by
independent appraisers. The market price of the Companys common stock
exceeded the conversion price of the Series F Preferred Stock on the date of
issuance. As a result, the Company also recorded a beneficial conversion
feature in accordance with EITF 98-5 Accounting for Convertible Securities
with Beneficial Conversion Features of Contingently Adjustable Conversion
Ratios upon issuance of the Series F Preferred Stock at its estimated fair
value of $1.5 million. The beneficial conversion feature is analogous to a
non-cash dividend and was immediately recognized as a return to the preferred
shareholders. This beneficial conversion feature increased the net loss to common
shareholders.

The securities issued to DB, BV, and Spinnaker were issued in consideration of
(i) $3.4 million of cash from DB, (ii) cancellation of the Series D Preferred
Stock and $2 million of the note held by BV, and (iii) cancellation of the
Series E Preferred Stock and $0.55 million of the note held by Spinnaker,
respectively. The Company issued the securities to Delafield, made a cash
payment to Delafield of $100,000 at closing, and in October paid Delafield an
additional $100,000 in full satisfaction of a change of control fee previously
owed by the Company to Delafield. The Company used a portion of the $3.4
million of new funds raised to repay certain existing indebtedness, including
$300,000 of the amounts due to Laurus pursuant to 14% convertible note, the
aforementioned payments of $200,000 to Delafield, $530,000 of professional
fees, including fees related to the transaction, and payment of $1.0 million
owed to FFG pursuant to the food production agreement.

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, 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
September 28, 2003 (shares in thousands, except exercise price):

Weighted-averageShares
    
    exercise priceOptions outstanding, December 29, 2002
    
    
    1,050
    
    
    $
    5.96Options granted
    
    
    
    
    
    
    N/AOptions forfeited
    
    
    (434
    )
    
    $
    3.52Options outstanding, September 28, 2003
    
    
    616
    
    
    $
    7.68


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 was
amortized generally over the four-year vesting period, until March 2003, when the Company accelerated the vesting of these stock
options and the remaining deferred stock compensation was recognized. As a
result of these grants and acceleration of vesting in March 2003, the Company
recorded deferred stock compensation of approximately $203,000 and $261,000 in
the thirty-nine week periods ended September 28, 2003 and September 29, 2002,
respectively.

In July 2003, the Companys Articles of Incorporation were amended to increase
the authorized shares of common stock to 250 million shares, a new stock
incentive plan was adopted that authorizes the issuance of 12 million shares of
common stock upon exercise of stock options or upon the grant of restricted
stock, and the Company agreed to issue to certain new and existing members of
Company management shares of Series F Preferred Stock convertible into
approximately 5.3 million shares of

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Company common stock and stock options exercisable for approximately 5.4
million shares of Company common stock. As of November 1, 2003, none of these
options or Series F Preferred Stock had been issued.

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, and catering and 2) wholesale. 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. 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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Thirteen weeks ended
    
    Thirty-nine weeks endedSeptember 28,
    
    September 29,
    
    September 28,
    
    September 29,2003
    
    2002
    
    2003
    
    2002RetailNet Sales
    
    $
    4,978
    
    
    $
    5,559
    
    
    $
    15,215
    
    
    $
    16,541Cost of food and packaging
    
    
    (2,388
    )
    
    
    (2,049
    )
    
    
    (7,230
    )
    
    
    (6,167
    )2,590
    
    
    
    3,510
    
    
    
    7,985
    
    
    
    10,374Cost of operations
    
    
    (2,857
    )
    
    
    (3,534
    )
    
    
    (9,158
    )
    
    
    (10,397
    )Provision for asset impairment, store closure and loss on disposal
    
    
    (166
    )
    
    
    (2,171
    )
    
    
    (1,192
    )
    
    
    (2,193
    )Income (loss) from operations
    
    $
    (433
    )
    
    $
    (2,194
    )
    
    $
    (2,365
    )
    
    $
    (2,216
    )Branded SalesBox Lunch, Catering and VendingNet Sales
    
    $
    728
    
    
    $
    972
    
    
    $
    2,607
    
    
    $
    3,642Cost of food and packaging
    
    
    (381
    )
    
    
    (319
    )
    
    
    (1,204
    )
    
    
    (1,123
    )347
    
    
    
    653
    
    
    
    1,403
    
    
    
    2,519Wholesale and GroceryNet Sales
    
    
    803
    
    
    
    1,105
    
    
    
    2,143
    
    
    
    2,592Cost of food and packaging
    
    
    (560
    )
    
    
    (537
    )
    
    
    (1,531
    )
    
    
    (1,332
    )243
    
    
    
    568
    
    
    
    613
    
    
    
    1,260Total Branded SalesNet Sales
    
    
    1,531
    
    
    
    2,077
    
    
    
    4,750
    
    
    
    6,234Cost of food and packaging
    
    
    (941
    )
    
    
    (856
    )
    
    
    (2,734
    )
    
    
    (2,455
    )590
    
    
    
    1,221
    
    
    
    2,016
    
    
    
    3,779Cost of operations
    
    
    (561
    )
    
    
    (1,120
    )
    
    
    (1,889
    )
    
    
    (3,260
    )Provision for asset impairment, store closure and loss on disposal
    
    
    (2
    )
    
    
    12
    
    
    
    (2
    )
    
    
    12Income (Loss) from operations
    
    $
    27
    
    
    $
    113
    
    
    $
    125
    
    
    $
    531KitchensUnallocated cost of food and packaging
    
    $
    (42
    )
    
    $
    (90
    )
    
    $
    (260
    )
    
    $
    (190
    )Unallocated cost of operations
    
    
    (258
    )
    
    
    (925
    )
    
    
    (901
    )
    
    
    (2,676
    )Provision for asset impairment, store closure and loss on disposal
    
    
    83
    
    
    
    
    
    
    
    (105
    )
    
    
    (1
    )Income (Loss) from operations
    
    $
    (217
    )
    
    $
    (1,015
    )
    
    $
    (1,267
    )
    
    $
    (2,867
    )EBITDA
    
    $
    (300
    )
    
    $
    (847
    )
    
    $
    (1,115
    )
    
    $
    (2,371
    )General and AdministrativeIncome (Loss) from operations
    
    $
    (835
    )
    
    $
    (1,553
    )
    
    $
    (3,698
    )
    
    $
    (4,714
    )TotalNet Sales
    
    $
    6,509
    
    
    $
    7,636
    
    
    $
    19,965
    
    
    $
    22,775Cost of food and packaging
    
    
    (3,371
    )
    
    
    (2,995
    )
    
    
    (10,225
    )
    
    
    (8,812
    )3,138
    
    
    
    4,641
    
    
    
    9,740
    
    
    
    13,963Cost of operations
    
    
    (4,511
    )
    
    
    (7,133
    )
    
    
    (15,646
    )
    
    
    (21,045
    )Provision for asset impairment, store closure and loss on disposal
    
    
    (85
    )
    
    
    (2,158
    )
    
    
    (1,299
    )
    
    
    (2,184
    )Income (Loss) from operations
    
    $
    (1,458
    )
    
    $
    (4,650
    )
    
    $
    (7,205
    )
    
    $
    (9,266
    )


Note 6. Commitments and contingencies

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

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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 Chief
Executive Officer.

As further described in Note 3, in March and April 2003, the Company issued
securities to BV and Spinnaker, such that, subject to shareholder approval, FFG
and Spinnaker could own approximately 66.7% and 16.7% respectively of the
Companys common stock on a fully-diluted, post conversion basis. Further, as
described in Note 3, in August 2003, the Company cancelled securities
previously issued to BV and Spinnaker and issued new securities such that DB,
BV, and Spinnaker could own approximately 48%, 29%, and 7%, respectively, 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 by either party if the other party becomes
insolvent. Purchases from FFG approximated $2.5 million and $6.4 million
during the fiscal quarter and year to date periods ended September 28, 2003,
respectively. Included in accounts payable at September 28, 2003 and December
29, 2002 is $763,000 and $200,000, respectively due to FFG.







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. 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, our ability to maintain
current cafe locations and secure new ones, food and labor 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 risk factors set forth in exhibit 99.1 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 distributes 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 October 31, 2003, we operate a total of 41 cafés; in Seattle (12), San
Francisco (13), Chicago (8) and Los Angeles (8). The five café decrease since
year-end results from closures of under-performing locations, two in San
Francisco, one in Chicago and two in Los Angeles. We closed one in the first
quarter, two in the second quarter and two in the third quarter of 2003. We
expect to close one additional café in Seattle before the end of the year.

In December 2002, we contracted with FFG to assemble and package substantially
all of our prepared 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 market in December 2002
and in the Seattle market at the end of February 2003. In Los Angeles, we
closed our central kitchen in December 2002. Pursuant to our agreement with
FFG, FFG subcontracted our food production in the Los Angeles market to HEMA Foods, Inc. We
intend to outsource our food production in San Francisco and pursuant to our
agreement with FFG, we are working together to find another company and to
close that central kitchen. We believe that these efforts have allowed us to
reduce our overhead in our existing markets and the expected closure of the San
Francisco kitchen

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should further reduce operating costs. 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.

In November 2003, we discontinued our branded sales operation in the Los
Angeles market in an effort to reduce costs and improve efficiencies. The
branded sales segment in the Los Angeles market was under-performing due to,
among other things, the large geographic size of the market.

In November 2003, we signed an agreement with Borders, Inc. to manage and
operate the cafe portion of 8 stores on a test basis for a period of six months
after the last test store is opened. We will retain all the receipts generated
from these cafes and be responsible for substantially all of the costs
resulting from the operations of these cafes. In exchange, we will pay Borders
an amount equal to $60,000 for each cafe opened, or a total amount of $480,000,
for improvements made to the cafes. In addition, we will pay a base rent. It
is anticipated that after all startup costs are incurred and the cafes are in a
normalized operating mode, the revenues generated from the operations will
exceed the expenses. However there can be no assurance that this will be the
case. In order to finance this test as well as to provide other working
capital as required, we are in negotiations with certain investors to provide
additional funding. If the funding is successful, we will issue new notes,
preferred stock or both.

As a result of central kitchen and café closures and reductions in corporate
and branded sales personnel due to our restructuring efforts, there was a
decrease of 74 employees from the beginning of the year, or 20%, to 297
employees at September 28, 2003, 45 full-time salaried and 252 hourly. These
employee reductions have resulted in and will result in future decreases in
labor expenses in 2003 as compared to prior periods.

We are continuing to respond to changing economic conditions, which have
included increasing office vacancies and declining employment in areas where we
operate cafes, resulting in declining same store sales. Actions taken to
reduce negative cash flow from operations include reducing costs through
closing central kitchens and outsourcing prepared food production which result
in personnel reductions, closing under-performing cafes, eliminating
unprofitable wholesale accounts, internal reorganization and other workforce
reductions. We are continuing to focus on these actions to reduce costs as
well as on efforts to improve our economic performance by securing additional
revenue sources through our existing business segments and geographic markets,
and through agreements to license or franchise. We are seeking to increase
revenues in our existing cafes through, among other things, improving our menu
offerings and mix, increasing our guest check average through add-on sales,
such as chips, cookies and beverages, and by improving levels of service to our
guests.

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 although we have not
operated our business in geographic segments. Our recent restructuring
efforts, which included closing central kitchens, in part, include operating
certain aspects of our business by geographic segments. We have historically
managed 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 and catering and 2), wholesale. Branded Sales consists of sales that are
aggregated because they have similar economic characteristics. Kitchens consist
of unallocated cost of products and packaging, along with unallocated costs of
kitchen operations. General and Administrative consists of costs incurred by
the corporate office. Management evaluates segment performance based on sales
and operating income (loss).

Below is a comparison of sales in each market for the thirteen and thirty-nine
weeks ended September 28, 2003 and September 29, 2002. Market pre-tax profit
(loss) consists of sales less expenses related to each market including those
corporate general and administrative expenses that can be specifically
identified to a geographic market. Sales include sales from cafés, box lunches,
catering, wholesale and other accounts. Expenses for each market consist of
occupancy expense, labor expense, general and administrative expense including
general and administrative overhead specifically identified to a market, other
operating expense, depreciation and amortization and provision for asset
impairment and store closure. Each of these items is 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.

14



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##### Table of Contents



Thirteen weeks ended
    
    Thirty-nine weeks endedSeptember 28,
    
    September 29,
    
    September 28,
    
    September 29,Geographic Markets
    
    2003
    
    2002
    
    2003
    
    2002(dollars in thousands)SeattleSales:Retail
    
    $
    1,352
    
    
    $
    1,372
    
    
    $
    4,043
    
    
    $
    4,280Branded Sales
    
    
    727
    
    
    
    1,121
    
    
    
    2,241
    
    
    
    3,430Total sales
    
    $
    2,079
    
    
    $
    2,493
    
    
    $
    6,284
    
    
    $
    7,710Cost of food and packaging:Retail
    
    $
    (741
    )
    
    $
    (513
    )
    
    $
    (2,143
    )
    
    $
    (1,616
    )Branded Sales
    
    
    (540
    )
    
    
    (493
    )
    
    
    (1,441
    )
    
    
    (1,487
    )Unallocated cost of products and packaging
    
    
    
    
    
    
    (26
    )
    
    
    (40
    )
    
    
    (54
    )Total cost of food and packaging
    
    $
    (1,281
    )
    
    $
    (1,032
    )
    
    $
    (3,624
    )
    
    $
    (3,157
    )Income (loss) from operations
    
    $
    (187
    )
    
    $
    (315
    )
    
    $
    (673
    )
    
    $
    (448
    )Cafes at end of period
    
    
    12
    
    
    
    12
    
    
    
    12
    
    
    
    12San FranciscoSales:Retail
    
    $
    1,718
    
    
    $
    1,921
    
    
    $
    5,252
    
    
    $
    5,640Branded Sales
    
    
    367
    
    
    
    279
    
    
    
    958
    
    
    
    930Total sales
    
    $
    2,085
    
    
    $
    2,200
    
    
    $
    6,210
    
    
    $
    6,570Cost of food and packaging:Retail
    
    $
    (641
    )
    
    $
    (698
    )
    
    $
    (1,949
    )
    
    $
    (2,055
    )Branded Sales
    
    
    (134
    )
    
    
    (84
    )
    
    
    (334
    )
    
    
    (282
    )Unallocated cost of products and packaging
    
    
    (42
    )
    
    
    (40
    )
    
    
    (220
    )
    
    
    (100
    )Total cost of food and packaging
    
    $
    (817
    )
    
    $
    (822
    )
    
    $
    (2,503
    )
    
    $
    (2,437
    )Income (loss) from operations
    
    $
    (310
    )
    
    $
    (1,856
    )
    
    $
    (1,083
    )
    
    $
    (2,318
    )Cafes at end of period
    
    
    13
    
    
    
    15
    
    
    
    13
    
    
    
    15ChicagoSales:Retail
    
    $
    889
    
    
    $
    1,049
    
    
    $
    2,704
    
    
    $
    3,268Branded Sales
    
    
    186
    
    
    
    269
    
    
    
    719
    
    
    
    856Total sales
    
    $
    1,075
    
    
    $
    1,318
    
    
    $
    3,423
    
    
    $
    4,124Cost of food and packaging:Retail
    
    $
    (482
    )
    
    $
    (400
    )
    
    $
    (1,472
    )
    
    $
    (1,257
    )Branded Sales
    
    
    (114
    )
    
    
    (97
    )
    
    
    (454
    )
    
    
    (292
    )Unallocated cost of products and packaging
    
    
    
    
    
    
    (16
    )
    
    
    
    
    
    
    (20
    )Total cost of food and packaging
    
    $
    (596
    )
    
    $
    (513
    )
    
    $
    (1,926
    )
    
    $
    (1,569
    )Income (loss) from operations
    
    $
    (20
    )
    
    $
    (616
    )
    
    $
    (963
    )
    
    $
    (1,083
    )Cafes at end of period
    
    
    8
    
    
    
    10
    
    
    
    8
    
    
    
    10Los AngelesSales:Retail
    
    $
    1,019
    
    
    $
    1,217
    
    
    $
    3,216
    
    
    $
    3,353Branded Sales
    
    
    251
    
    
    
    409
    
    
    
    832
    
    
    
    1,019Total sales
    
    $
    1,270
    
    
    $
    1,626
    
    
    $
    4,048
    
    
    $
    4,372Cost of food and packaging:Retail
    
    $
    (523
    )
    
    $
    (438
    )
    
    $
    (1,666
    )
    
    $
    (1,239
    )Branded Sales
    
    
    (154
    )
    
    
    (182
    )
    
    
    (506
    )
    
    
    (394
    )Unallocated cost of products and packaging
    
    
    
    
    
    
    (8
    )
    
    
    
    
    
    
    (16
    )Total cost of food and packaging
    
    $
    (677
    )
    
    $
    (628
    )
    
    $
    (2,172
    )
    
    $
    (1,649
    )Income (loss) from operations
    
    $
    (106
    )
    
    $
    (310
    )
    
    $
    (788
    )
    
    $
    (702
    )Cafes at end of period
    
    
    8
    
    
    
    10
    
    
    
    8
    
    
    
    10All MarketsSales:Retail
    
    $
    4,978
    
    
    $
    5,559
    
    
    $
    15,215
    
    
    $
    16,541Branded Sales
    
    
    1,531
    
    
    
    2,078
    
    
    
    4,750
    
    
    
    6,235Total sales
    
    $
    6,509
    
    
    $
    7,637
    
    
    $
    19,965
    
    
    $
    22,776Cost of food and packaging:Retail
    
    
    (2,387
    )
    
    
    (2,049
    )
    
    
    (7,230
    )
    
    
    (6,167
    )Branded Sales
    
    
    (942
    )
    
    
    (856
    )
    
    
    (2,735
    )
    
    
    (2,455
    )Unallocated cost of products and packaging
    
    
    (42
    )
    
    
    (90
    )
    
    
    (260
    )
    
    
    (190
    )Total cost of food and packaging
    
    $
    (3,371
    )
    
    $
    (2,995
    )
    
    $
    (10,225
    )
    
    $
    (8,812
    )Loss from operations before general and administrative
    
    $
    (623
    )
    
    $
    (3,099
    )
    
    $
    (3,507
    )
    
    $
    (4,551
    )Corporate general and administrative
    
    
    (835
    )
    
    
    (1,553
    )
    
    
    (3,698
    )
    
    
    (4,715
    )Loss from operations
    
    $
    (1,458
    )
    
    $
    (4,650
    )
    
    $
    (7,205
    )
    
    $
    (9,266
    )Total cafes at end of period
    
    
    41
    
    
    
    47
    
    
    
    41
    
    
    
    47


15



---



##### Table of Contents



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

Thirteen weeks ended
    
    Thirty-nine weeks endedSeptember 28,
    
    September 29,
    
    September 28,
    
    September 29,2003
    
    2002
    
    2003
    
    2002(As a percentage of sales)Statement of Operations DataSales:Retail
    
    
    76.4
    %
    
    
    72.6
    %
    
    
    76.2
    %
    
    
    72.6
    %Branded Sales
    
    
    23.6
    %
    
    
    27.4
    %
    
    
    23.8
    %
    
    
    27.4
    %Total Sales
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Operating Expenses:Cost of food and packaging
    
    
    51.8
    %
    
    
    39.2
    %
    
    
    51.2
    %
    
    
    38.7
    %Occupancy expenses
    
    
    16.2
    %
    
    
    14.7
    %
    
    
    15.7
    %
    
    
    13.8
    %Labor expenses
    
    
    25.2
    %
    
    
    36.8
    %
    
    
    26.7
    %
    
    
    37.0
    %Depreciation and amortization
    
    
    8.2
    %
    
    
    12.5
    %
    
    
    10.3
    %
    
    
    11.5
    %Other operating expenses
    
    
    4.1
    %
    
    
    5.7
    %
    
    
    4.1
    %
    
    
    5.6
    %General and administrative expenses
    
    
    15.6
    %
    
    
    23.7
    %
    
    
    21.3
    %
    
    
    24.4
    %(Gain)/Loss on Sale of Assets
    
    
    (1.2
    )%
    
    
    (0.2
    )%
    
    
    0.7
    %
    
    
    (0.0
    )%Provision for asset impairment and store closure
    
    
    2.5
    %
    
    
    28.4
    %
    
    
    6.1
    %
    
    
    9.6
    %Total operating expenses
    
    
    122.4
    %
    
    
    160.9
    %
    
    
    136.1
    %
    
    
    140.7
    %Loss from operations
    
    
    (22.4
    )%
    
    
    (60.9
    )%
    
    
    (36.1
    )%
    
    
    (40.7
    )%Other (expense) income
    
    
    (7.6
    )%
    
    
    (1.5
    )%
    
    
    (4.7
    )%
    
    
    (0.9
    )%Net loss
    
    
    (30.0
    )%
    
    
    (62.4
    )%
    
    
    (40.8
    )%
    
    
    (41.6
    )%


RESULTS OF OPERATIONS 13-WEEK PERIOD ENDED SEPTEMBER 28, 2003 COMPARED WITH 13-WEEK PERIOD ENDED SEPTEMBER 29, 2002

Sales Total sales decreased by $1.13 million, or 14.8%, from $7.64 million to
$6.51 million.

Retail sales decreased by $0.57 million, or 10.3%, from $5.54 million to $4.97
million. Same-store sales decreased by $0.43 million, or 78.0%, from $5.40
million to $4.97 million. The number of stores at the end of the respective
thirteen-week periods decreased by six, or 12.8%, from 47 to 41. The decrease
in sales was primarily due to lower office occupancy rates in many of the
buildings in which we are located and, to a lesser extent, due to having closed
five under-performing stores during 2003 and six stores since September 29, 2002.

Branded sales decreased by $0.55 million, or 26.3%, from $2.09 million to $1.54
million. This decrease was primarily due to our reorganization efforts and the
focus on more profitable accounts and the discontinuation of sales to grocery
customers. 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 since
closed central kitchens. We evaluated the grocery segment of our wholesale
business and decided to withdraw from this distribution channel. In addition,
we decided to consolidate and shrink delivery areas and thus discontinued sales
to some 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 $4.32 million, or
35.2%, from $12.29 million to $7.97 million. As a percentage of sales, our
operating expenses decreased from 160.9% to 122.4%. The decrease in percentage
of sales was primarily due to the decrease in overall operating costs from
kitchen and store closures, reorganization and cost control measures and the
decrease in provision for asset impairment.

Cost of food and packaging increased by $0.37 million, or 12.3%, from $3.0
million to $3.37 million and as a percentage of sales from 39.2% to 51.8%.
Cost of food and packaging for retail sales increased by $0.34 million, or
16.6%, from $2.05 million to $2.39 million. Cost of food and packaging for
branded sales increased by $0.09 million or 10.55, from $0.86 million to $0.94
million. Cost of food and packaging increased due to our food production being
outsourced. These increases were more than fully offset by decreases in labor,
occupancy and depreciation and amortization.

Occupancy expense consists of costs related to the leasing of retail space for
our cafes and our central kitchens. Occupancy expense decreased by $0.06
million, or 5.4%, from $1.12 million to $1.06 million, primarily as a result of
the closure of 3 of 4 central kitchens and the closure of six cafes. As a
percentage of sales, occupancy expense increased from 14.7% to 16.2%, primarily
due to decreased sales. Our rents are primarily fixed in nature with some
rents being variable determined as a percentage of sales.

16



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##### Table of Contents



Labor expenses consist of wages and salaries paid to employees. Labor expenses
decreased by $1.17 million, or 41.6%, from $2.81 million to $1.64 million. As
a percentage of sales, labor expenses decreased from 36.8% to 25.2%. These
decreases were primarily due to decreased labor expenses from outsourcing food
production in three markets and thus eliminating central kitchen
labor in those markets and, to a lesser extent,
realization of certain cost control actions and efficiencies.

Depreciation and amortization relates to leasehold improvements, equipment and
vehicles. Depreciation and amortization expense decreased by $0.42 million, or
44.2%, from $0.95 million to $0.53 million. As a percentage of sales,
depreciation and amortization decreased from 12.5% to 8.2%. These decreases
were due primarily to having closed 3 of 4 central kitchens and to a lesser
extent the impact of asset impairment provisions previously recorded.

Other operating expenses consist of direct operating, marketing, repair and
maintenance expense. Other operating expenses decreased by $0.17 million, or
38.6%, from $0.44 million to $0.27 million. As a percentage of sales, other
operating expenses decreased from 5.7% to 4.1%. 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. These expenses primarily consist of
salaries of senior management and staff, and our corporate office lease and
related office expenses. General and administrative expenses decreased by
$0.79 million, or 43.7%, from $1.81 million to $1.02 million. As a percentage
of sales, general and administrative expenses decreased from 23.7% to 15.6%.
Primarily the decrease was due to a reduction in our corporate workforce.

During the fiscal quarter ended September 28, 2003, we recorded a decrease in
the net loss on disposal of assets of $75,000, primarily related to adjustments
to previously recorded losses on the closed Chicago central kitchen resulting
from the settlement of a lawsuit filed against us, which we were able to settle
at a lower amount than originally recorded. Also during the fiscal quarter
ended September 28, 2003, the Company recorded an impairment write-down of
approximately $160,000 related to certain café locations. This write-down
consisted primarily of leasehold improvements and, to a lesser extent,
equipment.

Other (Expense) Income Other (expense) income includes interest and other
expense and interest and other income. Other expense increased by $0.36
million, or 327.7%, from $0.11 million to $0.47 million. As a percentage of
sales, other expense increased from 1.5% to 7.6%. These increases were due to
the interest expense, including amortization of debt issue costs and discounts,
from increased borrowings.

Net Loss Net loss decreased by $2.81 million, or 59.0%, from $4.76 million to
$1.95 million and as a percentage of sales, net loss decreased from 62.4% to
30.0%, primarily due to decreased costs and the decrease in provision for asset
impairment.

RESULTS OF OPERATIONS 39-WEEK PERIOD ENDED SEPTEMBER 28, 2003 COMPARED WITH 39-WEEK PERIOD ENDED SEPTEMBER 29, 2002

Sales Total sales decreased by $2.81 million, or 12.3%, from $22.78 million to $19.97 million.

Retail sales decreased by $1.32 million, or 8.0%, from $16.53 million to $15.21
million. Same-store sales decreased by $1.68 million, or 10.4%, from $16.17
million to $14.49 million. The number of stores at the end of the respective
thirty-nine week periods decreased by six, or 12.8%, from 47 to 41. The
decrease in sales was primarily due to lower office occupancy rates in many of
the buildings in which we are located and, to a lesser extent, due to having
closed five under-performing stores during 2003 and six stores since September 29,
2002.

Branded sales decreased by $1.49 million, or 23.8%, from $6.25 million to $4.76
million. This decrease was primarily due to our reorganization efforts and the
focus on more profitable accounts and the discontinuation of sales to grocery
customers. 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 since
closed central kitchens. The Company has evaluated the grocery segment of our
wholesale business and decided to withdraw from this distribution channel. In
addition, we decided to consolidate and shrink delivery areas and thus
discontinued sales to some 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 $4.87 million, or
15.2%, from $32.04 million to $27.17 million. As a percentage of sales, our
operating expenses decreased from 140.7% to 136.1%. The decrease in percentage
of sales was primarily due to the decrease in overall operating costs from
kitchen and store closures, reorganization and cost control

17



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##### Table of Contents



measures and the decrease in provision for asset impairment.

Cost of food and packaging increased by $1.42 million, or 16.1%, from $8.81
million to $10.23 million and as a percentage of sales from 38.7% to 51.2%.
Cost of food and packaging for retail sales increased by $1.06 million, or
17.2%, from $6.17 million to $7.23 million. Cost of food and packaging for
branded sales increased by $.27 million, from $2.46 million to $2.73 million.
Cost of food and packaging increased due to our food production being
outsourced. These increases were more than fully offset by decreases in labor,
occupancy and depreciation and amortization.

Occupancy expense consists of costs related to the leasing of retail space for
our cafes and our central kitchens. Occupancy expense decreased by $0.01
million, or 0.3%, from $3.15 million to $3.14 million, primarily as a result of
the closure of 3 of 4 central kitchen and six cafes. As a percentage of sales,
occupancy expenses increased from 13.8% to 15.7%, primarily due to decreased
sales. Our rents are primarily fixed in nature with some rents being variable
determined as a percentage of sales.

Labor expenses consist of wages and salaries paid to employees. Labor expenses
decreased by $3.10 million, or 36.8%, from $8.43 million to $5.33 million. As
a percentage of sales, labor expenses decreased from 37.0% to 26.7%. These
decreases were primarily due to decreased labor expenses from outsourcing food
production in three markets and thus eliminating central kitchen labor in those
markets, and, to a lesser extent, realization of certain cost control actions
and efficiencies.

Depreciation and amortization relates to leasehold improvements, equipment and
vehicles. Depreciation and amortization expense decreased by $0.59 million, or
22.4%, from $2.63 million to $2.04 million. As a percentage of sales,
depreciation and amortization decreased from 11.5% to 10.3%. These decreases
were due primarily to having closed 3 of 4 central kitchens and to a lesser
extent the impact of asset impairment provisions previously recorded.

Other operating expenses consist of direct operating, marketing, repair and
maintenance expense. Other operating expenses decreased by $0.47 million, or
36.4%, from $1.29 million to $0.82 million. As a percentage of sales, other
operating expenses decreased from 5.6% to 4.1%. 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. These expenses primarily consist of
salaries of senior management and staff, and our corporate office lease and
related office expenses. General and administrative expenses decreased by
$1.29 million, or 23.2%, from $5.55 million to $4.26 million. As a percentage
of sales, general and administrative expenses decreased from 24.4% to 21.3%.
Primarily the decrease was due to a reduction in our corporate workforce and
the reduction in corporate operating expenses.

Pursuant to a plan to close our four company owned central kitchens and
outsource production of the our branded food products, the Los Angeles and
Chicago central kitchens were closed in late 2002 and the Seattle central
kitchen was closed at the end of February 2003. We recorded a net loss on
disposal of assets of $130,000 primarily relating to the Seattle central
kitchen closure and adjustments to previously recorded losses on the Chicago
and Los Angeles central kitchens. Additionally, the Company recorded an
impairment write-down of approximately $1.22 million related to certain café
locations. These write-downs consisted primarily of leasehold improvements
and, to a lesser extent, equipment.

Other (Expense) Income Other (expense) income includes interest and other
expense and interest and other income. Other expense income increased by $0.73
million, or 347.6%, from $0.21 million to $0.94 million. As a percentage of
sales, other expense increased from 0.9% to 4.7%. These increases were due to
the interest expense, including amortization of debt issue costs and discounts,
from increased borrowings.

Net Loss Net loss decreased by $1.33 million, or 14.0%, from $9.47 million to
$8.14 million and as a percentage of sales, net loss decreased from 41.6% to
40.8%, primarily due to decreased costs and the decrease in provision for asset
impairment.

LIQUIDITY AND CAPITAL RESOURCES

Net cash used in operating activities during the 39-weeks ended September 28,
2003 and September 29, 2002 was approximately $3.07 million and $4.53 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 39-weeks ended September 28, 2003
and September 29, 2002 was approximately $0.18 million and $2.24 million,
respectively. Net cash used in investing activities resulted from capital
additions primarily related to opening additional cafés during the 2002 period.

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Net cash provided by financing activities for the 39-weeks ended September 28,
2003 and September 29, 2002 was approximately $3.59 million and $1.34 million,
respectively. The financing activities during 2003 consisted primarily of cash
received from the net proceeds of $4.87 million in debt financing from DB, BV,
and Spinnaker, which were offset by debt issue costs and repayment of other
borrowings.

Since inception we have financed our operations primarily through the issuance
of capital stock and debt. Since inception through September 28, 2003, we have
raised cash of approximately $71 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 September 28, 2003, we have incurred
net losses of approximately $70 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 suspended 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, suspended 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 which occurred on
August 1, 2003, and restructured the repayment schedule. 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. In
July 2003, the terms of the note were further amended to provide that, upon
completion of the financing with Deutsche Bank London Ag (DB), an affiliate
of Deutsche Bank, we would make a $300,000 principal payment, and pay the
remaining principal amount and accrued interest, plus a $75,000 fee, in 12
equal installments beginning in September 2003. On October 1, 2003, the
Company was in arrears on its interest and principal payments to Laurus.
Subsequently, in October 2003 the Company received a waiver from Laurus in
which Laurus agreed to waive any defaults resulting from the late payment of
the monthly amount due October 1, 2003. In addition, Laurus agreed to postpone
all payments that would have become due and payable under the note between
October 1, 2003 and November 15, 2003 to November 16, 2003 and waived any
defaults and penalties resulting from such postponement of payments. The
current principal balance of this note is approximately $574,400, the amount currently due in fees is approximately $68,750 and the past
due interest as of November 1, 2003 is approximately $60,000.

In August 2002, we entered into a one-year $1.0 million revolving credit line
based upon and collateralized by our accounts receivable, which was extended
through November 2003, and will then terminate. We pay daily fees of 0.0667%
computed on the outstanding daily balance. As of September 28, 2003,
approximately $150,000 was available for borrowing, none of which had been
drawn. In October 2003, a draw of $225,000 was made and subsequently repaid.

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 June 30, 2003, which has since been
extended to June 30, 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. (BV) 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 Flying Food Group L.L.C. (FFG) and its
affiliates, $450,000 of which was borrowed by the Company during January and
February 2003. Proceeds from the offering were used for working capital. 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.
The Company agreed to cause up to one person designated by FFG to be appointed
to the Companys Board of Directors, subject to increase upon receiving
shareholder approval. We agreed that, if we received shareholder approval, we
would cause up to five persons designated by BV 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 was secured
by all of our assets and bore interest at 10% per year. Interest was payable
monthly in arrears, in cash. The note was to mature, and all principal and
accrued and unpaid interest was to become due, on March 6, 2004. The terms of
the notes included 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.

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In April 2003, the Company completed the offer and sale of $550,000 in secured
promissory notes, Series E Preferred Stock and warrants to Spinnaker Investment
Partners L.L.C. (Spinnaker). 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 were substantially similar to the
terms of the note, warrant and Series D Preferred Stock issued to BV in March,
2003. 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
were used for working capital, after deduction of expenses and a $50,000
management fee payable to Spinnaker Capital Partners, L.L.C. In connection with
the financing, Spinnaker, Laurus, BV and FFG, 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.

On May 28, 2003, the Company entered into an agreement with DB, BV, Spinnaker
(collectively, the Investors), and Delafield Hambrecht, Inc. (Delafield)
providing for the issuance of an aggregate of $6.0 million of senior secured
non-convertible promissory notes (Senior Notes) and shares of Series F
Preferred Stock to the Investors.

On July 29, 2003, the Companys shareholders approved both the conversion of
the Series D and Series E Preferred Stock held by BV and Spinnaker and the
proposed financing with the Investors. As a result of this approval, the
Series D and Series E Preferred Stock became convertible into shares of the
Companys common stock and the warrants issued to BV and Spinnaker were
terminated.

On August 1, 2003, the Company issued $6.0 million of Senior Notes to DB ($3.4
million), BV ($2.0 million), Spinnaker ($0.5 million), and Delafield ($0.1
million). The New Notes are due two years from issuance, bear interest,
payable quarterly, at LIBOR plus 1%, and are collateralized by a security
interest in all of the Companys assets pursuant to an inter-creditor agreement
among the note holders and Laurus. The Senior Notes are not convertible, but
the conversion price of the Series F Preferred Stock may be satisfied by the
holder surrendering a portion of the notes for cancellation. The Company
issued to the Investors and Delafield an aggregate of 7,643,841 shares of
Series F Preferred Stock that are initially convertible into 76,438,410 shares
of common stock at an initial conversion price $0.10 per share of common stock.
In the event that the fair market price of the common stock exceeds the
conversion price, the Series F Preferred Stock may also be converted pursuant
to a cashless exercise feature. The Company also granted registration rights
covering the shares of common stock issuable upon conversion of the Series F
Preferred Stock and the right to name new executive officers to be appointed by
the Company, and the right to designate up to five of the Companys directors
to DB (2), BV (2) and Spinnaker (1).

The Company recorded a debt discount of approximately $1.5 million relating to
the issuance of the Series F Preferred Stock. The market price of the
Companys common stock exceeded the conversion price of the Series F Preferred
Stock on the date of issuance. As a result, the Company also recorded a
beneficial conversion feature in accordance with EITF 98-5 Accounting for
Convertible Securities with Beneficial Conversion Features of Contingently
Adjustable Conversion Ratios upon issuance of the Series F Preferred Stock at
its estimated fair value of $1.5 million. The beneficial conversion feature is
analogous to a non-cash dividend and was immediately recognized as a return to the
preferred shareholders. This beneficial conversion feature increased the net
loss to common shareholders.

The securities issued to DB, BV, and Spinnaker were issued in consideration of
(i) $3.4 million of cash from DB, (ii) cancellation of the Series D Preferred
Stock and $2 million of the note held by BV, and (iii) cancellation of the
Series E Preferred Stock and $0.55 million of the note held by Spinnaker,
respectively. The Company issued the securities to Delafield, made a cash
payment to Delafield of $100,000 at closing, and in October paid Delafield an
additional $100,000 in full satisfaction of a change of control fee previously
owed by the Company to Delafield. The Company used a portion of the $3.4
million of new funds raised, to repay certain existing indebtedness, including
$300,000 of the amounts due to Laurus pursuant to 14% convertible note, the
aforementioned payments of $200,000 to Delafield, $530,000 of professional
fees, including fees related to this transaction, and payment of $1.0 million
owed to FFG pursuant to the food production agreement.

In addition, in connection with the financing transaction, the Companys
articles of incorporation were amended to increase the authorized shares of
common stock to 250 million shares, a new stock incentive plan was adopted that
authorizes the issuance of 12 million shares of common stock upon exercise of
stock options or upon the grant of restricted stock, and the Company agreed to
issue to certain new and existing members of the Company management shares of
Series F Preferred Stock convertible into approximately 5.3 million shares of
Company common stock and stock options exercisable for approximately 5.4
million shares of Company common stock. As of November 1, 2003, none of these
options or Series F Preferred Stock have been issued.

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In November 2003, the Company signed an agreement with Borders, Inc. to manage
and operate the cafe portion of 8 stores on a test basis for a period of six
months after the last test store is opened. We will retain all the receipts
generated from these cafes and be responsible for substantially all of the
costs resulting from the operations of these cafes. In exchange, the Company
will pay Borders an amount equal to $60,000 for each cafe opened, or a total
amount of $480,000, for improvements made to the cafes. In addition, we will
pay a base rent. In order to finance this test as well as to provide other
working capital as required, the Company is in negotiations with certain
investors to provide additional funding. If the funding is successful, we will
issue new notes, preferred stock or both.

In connection with a periodic audit by state auditors relating to payment of
sales and use tax, the Company has accrued amounts believed to be sufficient to
provide for potential tax obligations. We continue to respond to and monitor
the audit process.

The Company has incurred substantial operating losses and negative cash flows
from operations since inception and had an accumulated deficit of $79.8 million
and a working capital deficit of $4.1 million at September 28, 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 the Companys ability to continue as a going concern.
We have financed our operations principally through the net proceeds from debt
and equity offerings. Our ability to continue as a going concern is dependant
upon numerous factors, including our ability to obtain additional financing,
our ability to increase our level of future revenues and our 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.

At September 28, 2003, the Company had cash and cash equivalents of
approximately $0.8 million. We have used a combination of cash and cash
equivalents, operating revenues and proceeds of additional borrowings to meet
our immediate cash needs; however, it is anticipated that additional cash will
be needed by the end of 2003 in order to continue operating. The Company is
attempting to conserve cash by reducing expenses and by delaying or deferring
payments to some of our suppliers and on some of the our leases. Poor
financial results, inability to comply with the terms of borrowings,
unanticipated expenses or unanticipated opportunities that require financial
commitments could give rise to additional financing requirements sooner than
expected. We will need to raise additional cash to finance our operations, as
well as to enhance operations, fund any expansion, respond to competitive
pressures and repay borrowings when they become due. If we raise additional
funds through the issuance of equity or convertible debt securities, the
percentage ownership of existing shareholders would be reduced, and these
securities may have rights, preferences or privileges senior to those of our
common stock. 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 the
Company is unable to obtain sufficient funds to satisfy our cash requirements
within the required timeframe on acceptable terms, we may be forced to curtail
operations, dispose of assets, or seek extended payment terms. Such events
would materially and adversely affect our financial position and results of
operations. In the event that such steps are not sufficient, or that Company
directors and management believe that such actions will not be sufficient, we
may be required to discontinue our operations.

Critical Accounting Policies and Recent Accounting Pronouncements For a
detailed discussion on the application of critical accounting policies, recent
accounting pronouncements and other accounting policies, see Note 1 in the
Notes to the Financial Statements included in our December 29, 2002 Annual
Report on Form 10-K and in this Quarterly Report on Form 10-Q.







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.

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 are 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

Under the supervision and with the participation of the Companys management,
including the Companys Chief Executive Officer and Chief Financial Officer,
the Company evaluated the effectiveness of the Companys disclosure controls
and procedures (as defined in Rule 13a-14(c) under the Exchange Act) as of
September 28, 2003 (the Evaluation Date). Based upon that evaluation, the
Chief Executive Officer and Chief Financial Officer concluded that, as of the
Evaluation Date, the Companys disclosure controls and procedures were
effective in timely alerting him to the material information relating to the
Company required to be included in the reports that the Company files or
submits under the Exchange Act. A control system, no matter how well designed
and operated, cannot provide absolute assurance that the objectives of the
control system are met, and no evaluation of controls can provide absolute
assurance that all control issues and instances of fraud, if any, within a
company have been detected.

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 that have materially
affected, or are reasonably likely to materially affect, the Companys internal
controls.







PART II  OTHER INFORMATION







ITEM 1. LEGAL PROCEEDINGS

On April 14, 2003, the Company received a summons and complaint in an action
filed by Walnut Street Properties, Inc. against the Company in the Circuit
Court of Cook County, Illinois, relating to space leased by the Company for its
Chicago central kitchen. The Company closed the central kitchen in December
2002. Walnut Street Properties was seeking unpaid rent and expenses for
reletting allocable to the remainder of the lease term, together with interest
and with costs of the action. In September 2003, the Company settled this
complaint and the legal proceeding was terminated.

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
cancellation of the Companys Series D and Series E Preferred Stock, the
increase in the Companys authorized share capital and the designation and
issuance of Series F Preferred Stock has been previously reported and is also
included in this report. In addition, the Articles of Amendment increasing the
Companys authorized share capital and designating the Series F Preferred Stock
has been previously filed as an Exhibit.

Recent Sales We issued $6.0 million principal amount of Senior Notes and
7,643,841 shares of Series F Preferred Stock to DB, BV, Spinnaker, and
Delafield on August 1, 2003 for the consideration described in this report
under Financial Statements and Managements Discussion and Analysis of
Financial Condition and Results of Operations. The securities were issued to
accredited investors 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.







ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.







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

In July 2003, the Company held its Annual Meeting of Shareholders. The results
of the meeting were previously reported in the Companys Form 10-Q for the
quarterly period ended June 29, 2003 filed on August 13, 2003.

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ITEM 5. OTHER INFORMATION

None.







ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits.

ExhibitNumber
    
    Description3.1(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).3.1.3(9)
    
    Articles of Amendment filed July 30, 2003 (including designation of Series F
Convertible Preferred Stock).3.2(5)
    
    Amended and Restated Bylaws.4.1(2)
    
    Specimen Stock Certificate for Common Stock.4.2(9)
    
    Specimen Stock Certificate for Series F 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 between 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, 2000.10.11(9)
    
    Sublease Agreement between BRIAZZ and Norstar Specialty Foods Inc. regarding 3901
7th Avenue South, Seattle, WA dated March 7, 2003.10.12(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.


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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 issued by BRIAZZ to
Laurus Master Fund, Ltd. on June 18, 2002.10.27(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(9)
    
    Letter Agreement dated as of July 31, 2003 between BRIAZZ and Laurus Master Fund,
Ltd.10.29(9)
    
    Amendment dated as of July 31, 2003 to the Convertible Note issued by BRIAZZ to
Laurus Master Fund, Ltd. on June 18, 2002.10.30(4)
    
    Form of Secured Convertible Demand Note used in October 2002.10.31(5)
    
    Form of Secured Convertible Demand Note used in December 2002 and January 2003.10.32(5)
    
    Food Production Agreement between BRIAZZ and Flying Food Group, L.L.C. dated
December 1, 200210.33(5)
    
    Amended Security Agreement between BRIAZZ, Flying Food Group, L.L.C. and New
Management, Ltd., dated December 3, 2002.10.34(5)
    
    Amended and Restated Purchase Agreement between BRIAZZ and Briazz Venture,
L.L.C., dated March 5, 2003.10.35(5)
    
    $2,000,000 Senior Secured Note issued by BRIAZZ in favor of Briazz Venture,
L.L.C., dated March 6, 2003.10.36(5)
    
    Warrant to purchase 1,193,546 shares of Common Stock issued by BRIAZZ to Briazz
Venture, L.L.C. dated March 6, 2003.10.37(5)
    
    Amendment dated March 6, 2003 between BRIAZZ and Briazz Venture, L.L.C. to
Security Agreement dated December 3, 2002.10.38(5)
    
    Voting Agreement between Briazz Venture, L.L.C. and Victor D. Alhadeff, dated as
of March 6, 2003.10.39(5)
    
    Registration Rights Agreement between BRIAZZ and Briazz Venture, L.L.C., dated
March 6, 2003.10.40(6)
    
    Purchase agreement between BRIAZZ and Spinnaker Investment Partners, L.P., dated
April 10, 200310.41(6)
    
    $550,000 Senior Secured Note issued by BRIAZZ in favor of Spinnaker Investment,
L.P., dated April 10, 200310.42(6)
    
    Warrant to purchase 1,193,546 shares of Common Stock issued by BRIAZZ to
Spinnaker Investment Partners, L.P., dated April 10, 200310.43(6)
    
    Amended and Restated Security Agreement by and among BRIAZZ, Briazz Venture,
L.L.C. and Spinnaker Investment Partners, L.P., dated April 10, 200310.44(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, 200310.45(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, 200310.46.1(7)
    
    Securities Purchase Agreement by and among BRIAZZ, Deutsche Bank London Ag,
Briazz Venture, L.L.C., Spinnaker Investment Partners, L.P. and Delafield
Hambrecht, Inc. dated May 28, 2003.10.46.2(8)
    
    Amendment date August 1, 2003 to Securities Purchase Agreement by and among
BRIAZZ, Deutsche Bank London Ag, Briazz Venture, L.L.C., Spinnaker Investment
Partners, L.P. and Delafield Hambrecht, Inc., dated May 28, 200310.47(8)
    
    Form of Note issued on August 1, 2003 to each of Deutsche Bank London, Ag, Briazz
Venture, L.L.C., Spinnaker Investment Partners, L.P. and Delafield Hambrecht,
Inc.10.48(8)
    
    Security Agreement dated August 1, 2003 among BRIAZZ, Deutsche Bank London Ag and
Flying Food Group, L.L.C.


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10.49(8)
    
    Intercreditor Agreement dated August 1, 2003, among BRIAZZ, Laurus Master Fund,
Ltd., Deutsche Bank London Ag, Flying Food Group, L.L.C., Briazz Venture, L.L.C.,
Spinnaker10.50(8)
    
    Registration Right Agreement dated August 1, 2003 among BRIAZZ, Laurus Master
Fund, Ltd., Deutsche Bank London Ag, Briazz Venture, L.L.C., Spinnaker Investment
Partners, L.P., and Delafield Hambrecht, Inc.10.51(8)
    
    Letter Agreement dated August 1, 2003 between BRIAZZ and Delafield Hambrecht, Inc.10.52(9)
    
    2003 Stock Plan31.1
    
    Certification required by Rule 13a-14(a) or Rule 15d-14(a)32.1
    
    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 2002.99.1
    
    Risk Factors




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|(1) |  | Indicates management contract.                                                                          
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|(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 filed on April 14, 2003.                                      
|   
|(7) |  | Incorporated by reference to our Schedule 14A filed on June 26, 2003.                                   
|   
|(8) |  | Incorporated by reference to out Form 8-K filed on August 11, 2003.                                     
|   
|(9) |  | Incorporated by reference to our Form 10-Q for the quarter ended June 29, 2003 filed on August 13, 2003.

(b) Reports on Form 8-K

The Company filed a Form 8-K on August 5, 2003 pursuant to Items 5 and 7
enclosing a press release announcing the closing of its August 1, 2003
financing.

The Company filed a Form 8-K on August 11, 2003 pursuant to Item 7 to file
exhibits relating to its August 1, 2003 financing.

The Company furnished a Form 8-K on September 16, 2003 to report under Item 9
the appointment of directors. The information in a Form 8-K furnished pursuant
to Item 9 shall not be deemed to be filed under the Exchange Act.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

BRIAZZ, INC.Date: November 12, 2003.
    
    By:
    
    /s/ Victor D. AlhadeffVictor D. Alhadeff
Chief Executive Officer, Chief Financial Officer,
Secretary and Chairman of the Board


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