EXHIBIT 99.1
FOR IMMEDIATE RELEASE
Media Contact: Christina Watt, MWW/Savitt (206) 689-8505
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BRIAZZ ANNOUNCES ANTICIPATED $2,000,000 DEBT FINANCING AND
NEW STRATEGIC ALLIANCE
SEATTLE - October 31, 2002 - Briazz (NASDAQ: BRZZ), the gourmet grab and go cafe
chain, announced today that it is in negotiations to offer and sell up to $2.0
million in secured convertible notes to Flying Food Group or one or more of its
affiliates. Flying Food Group is a provider of in-flight catering services at
major international airports in the United States, and freshly-made food
products for grocery and specialty retail. The notes would be secured by the
assets of Briazz and would be convertible into the common stock of Briazz at
$1.00 per share, at the option of the investors, or upon the occurrence of
certain events, such as a subsequent equity financing. The investor would have
registration rights covering the shares issuable upon conversion of the notes.
The investment in the convertible notes would be made over the next few months
in a series of closings. There can be no assurance that the negotiations with
the investor will be successful or that the offering will be completed.
As of October 30, 2002, the investor has purchased demand notes having an
aggregate principal amount of $350,000. These notes are secured by the company's
assets and will convert into, and be part of, the $2.0 million investment once
the terms of such investment has been finalized. Briazz has used the proceeds
received to date, and will use the proceeds received in the future, to pay down
existing debts and for general working capital.
In addition to the $2.0 million debt financing, Briazz is in initial discussions
with institutional investors for an additional $3.0 to $4.0 million of capital.
There can be no assurance that the negotiations with institutional investors
will be successful or that the offering will be completed.
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In connection with the $2.0 million financing, Briazz is negotiating with FFG to
produce its food at FFG's central kitchens. FFG has central kitchen facilities
in each of Briazz's geographic markets. Briazz's intent is to close its own
central kitchens following the move of the food preparation operations to FFG.
"We are very excited about the opportunity to work with FFG, which has an
excellent reputation for quality and consistency in the food industry. By
contracting with FFG for the preparation of our food, we believe it maintains
the advantages of central kitchens, without the overhead involved," said Victor
Alhadeff, Chairman and CEO of Briazz. "Currently, we estimate we are using
approximately 20% of our Seattle kitchen's capacity, approximately 40% of our
San Francisco kitchen's capacity, 20% or less of the Chicago kitchen's capacity
and approximately 30% of the Los Angeles kitchen's capacity. By closing these
kitchens and moving food preparation to FFG, our operating expenses in each
geographic market would be significantly lower. It also allows us to move into
new geographic markets more quickly."
Briazz proposes to enter into a management services contract with FFG. Under the
proposed terms of the agreement, Briazz would grant FFG a five-year right to
purchase up to 2 million shares of common stock at $1.10 per share. FFG would
have registration rights covering the shares issuable upon exercise of the
right. Unless and until Briazz obtained shareholder approval, exercise of the
right, together with conversion of the convertible notes, would be limited to
19.9% of our outstanding common stock.
Briazz anticipates that all of its central kitchens will be closed by early
December. Briazz reported $3.7 million of unallocated central kitchen losses in
2001 and $1.9 million in the 1st half of 2002. There can be no assurance that
the negotiations with FFG regarding food preparation will be successful or that
the transition to a third-party's central kitchens for food preparation will be
completed.
"The contemplated agreements with Flying Food are the foundation of a key new
strategic alliance. The outsourcing of the kitchens will include the hiring of
many current Briazz employees who actually prepare our menu items on a daily
basis. The outsourcing agreement will result in substantial savings and
simplification of the business. Because FFG has operations in a number of
cities, Briazz can now serve customers in some of the largest markets in America
without opening new kitchens in those markets. In addition, Briazz and Flying
Food share several key relationships. Under this alliance we can better serve
key strategic customers, " continued Alhadeff.
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In conjunction with the closure of the central kitchens, Briazz will reduce the
operational complexity of the business and the related G&A expenses. "The
strategic alliance with FFG allows Briazz to dramatically cut expenses and
positions the company to strengthen its balance sheet," explained Alhadeff. In
addition to the expected savings resulting from its central kitchen closures,
Briazz expects to reduce its overhead by eliminating approximately 15 to 17
corporate positions. Briazz expects to complete these reductions by early
December.
Due to Briazz's decision to move its food preparation to FFG, Briazz is
reevaluating its grocery business and will be withdrawing from the test with
Albertsons.
None of the securities described herein have been registered under the
Securities Act of 1933, as amended, and none of the securities described herein
will be registered under the Securities Act. None of the securities described
herein may be offered or sold in the United States or to, or for the account or
benefit of, U.S. persons absent registration or an applicable exemption from
registration requirements.
This press release does not constitute an offer of any of the securities
described herein in any jurisdiction.
ABOUT BRIAZZ
With its first cafe opened in Seattle in 1995, Briazz now operates 46 cafes near
heavy concentrations of office buildings in Chicago, Los Angeles, San Francisco
and Seattle. Providing gourmet foods to on-the-go consumers through
company-operated cafes, box lunch delivery, corporate accounts and selected
wholesale accounts, Briazz features high quality, high taste sandwiches, soups
and salads as well as baked goods, fruit and coffee.
This press release contains statements that may constitute "forward-looking
statements" within the meaning of the Securities Act of 1933 and the Securities
Exchange Act of 1934, as amended by the Private Securities Litigation Reform Act
of 1995. Such statements include comments regarding the use of proceeds of the
anticipated $2.0 million financing, the company's negotiations and completion of
the $2.0 million convertible note financing and further financings on terms
favorable to the company, if at all, the company's negotiations and completion
of the food preparation agreement with Flying Food Group on terms favorable to
the company, if at all, the timing and magnitude of central kitchen closures and
reductions in G&A, the benefits of a strategic alliance with Flying Food and the
benefits to the company from using a third-party for food preparation.
Prospective investors are cautioned that any such forward-looking statements are
not guarantees of future results or performance and involve risks and
uncertainties, and actual results may 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 the
company's operating results, negotiating an agreement with the private investor
and other investors on terms favorable to the company, or at all, preparing,
filing and clearing SEC comments with respect to the proposed registration
statement relating to the convertible note financing, and the investors' ability
to fund their proposed commitments, the ability of the company to compete
successfully, office occupancy, the ability of the company to maintain current
cafe locations and secure new ones, food and labor costs, operation in only four
geographic areas and reliance upon distributors and wholesale customers. For
additional factors that may cause actual results to differ materially from those
contemplated by such forward-looking statements,
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please see the "Risk Factors" described in Exhibit 99.1 to the company's Report
on Form 10-Q, filed on August 13, 2002, and in other filings on file with the
SEC, which Risk Factors are incorporated herein as though fully set forth. The
company undertakes no obligation to update or revise forward-looking statements
to reflect changed assumptions, the occurrence of unanticipated events or
changes to future operating results.
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