Significant Gross Margin Improvement From First Quarter 2002 Cash Operating Expenses Continue to Decrease KIRKLAND, Wash., July 25 -- ImageX, today announced revenues of $12.2 million for the quarter ended June 30, 2002, compared with revenues of $12.1 million for the first quarter of 2002, and revenues of $15.6 million for the second quarter last year. As of June 30, 2002, ImageX had cash and cash equivalents of $13.1 million, representing a decrease of $2.3 million from March 31, 2002. ImageX president and CEO Rich Begert stated that management is confident its new ImageX.com Channel Marketing System should have a positive impact on second half 2002 revenue performance. "In the second quarter, we hired a sales team skilled in selling enterprise software, and successfully deployed version 2.0 of the ImageX Channel Marketing System to our first customer," Begert said. "Additionally, we have begun to build a significant customer pipeline for future Channel Marketing System sales opportunities, while decreasing our operating expenses and increasing our gross margins. "The Channel Marketing System reduces the costs of marketing support for companies with complex sales channels," Begert said. "It gives executives the information and control to trim their channel support costs up to 30 percent by reducing administrative labor, spending less on printed materials, and controlling marketing costs by channel segments." For the second quarter 2002, the Company reported a cash operating loss of $2.4 million, or $0.08 per basic and diluted share. For the same period last year, the company reported a cash operating loss of $6.5 million or $0.24 per share. The Company's net loss, including all non-cash items, was $4.0 million, or $0.13 per share, on 30.9 million weighted average shares outstanding, compared with a net loss of $9.9 million, or $0.36 per share, for the same period last year on 27.3 million weighted average shares. Financial Highlights ImageX reported gross profit of $4.9 million for the second quarter, compared with gross profit of $5.5 million for the same period last year. Gross margin improved to 40.4 percent in the second quarter 2002 from 35.2 percent in the first quarter 2002, due to a higher margin contribution from our software segment as well as higher margins obtained from further utilization of our patented technology in our print facilities. Total operating expenses before depreciation and amortization were $7.3 million for the second quarter, compared with $12.1 million for the same period last year, a decline of 39.4 percent. Excluding a one-time lease restructuring charge in first quarter 2002, operating expenses in second quarter 2002 compared to the first quarter fell 5 percent, demonstrating the Company's continued focus on expense control. "Our cash consumption rate continues to decline in spite of revenue softness. We are closely monitoring our progress and taking all necessary steps to achieve cash flow breakeven in the first half of 2003," said Gina M. Meyers, vice president of finance and corporate controller. "We expect to reach cash flow break-even by the end of the first half of 2003 as a result of new revenue from the Channel Marketing System and continued expense control," Begert said. "However, as a consequence of soft economic conditions and the related impact on revenues, the Company has revised its expected annual 2002 revenue to between $45 and $50 million. Cash operating expenses in the second half of 2002 are expected to remain consistent with the second quarter," said Meyers.