Kozmo Com Inc · S-1 · On 3/20/00

Filed On 3/20/00   ·   SEC File 333-32864   ·   Accession Number 912057-0-12562

Registration Statement (General Form)   —   Form S-1
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: S-1         Registration Statement (General Form)                102    483K 
 2: EX-3.1      Articles of Incorporation/Organization or By-Laws     19     71K 
 3: EX-3.2      Articles of Incorporation/Organization or By-Laws     21     74K 
 4: EX-4.1      Instrument Defining the Rights of Security Holders    74    237K 
10: EX-10.10    Material Contract                                      3     20K 
11: EX-10.11    Material Contract                                      9     38K 
12: EX-10.12    Material Contract                                      7     29K 
13: EX-10.13    Material Contract                                      6     28K 
 5: EX-10.5     Material Contract                                     14     59K 
 6: EX-10.6     Material Contract                                     14     59K 
 7: EX-10.7     Material Contract                                      2     13K 
 8: EX-10.8     Material Contract                                      2     11K 
 9: EX-10.9     Material Contract                                      2     13K 
14: EX-23.1     Consent of Experts or Counsel                          1      6K 
15: EX-27.1     Financial Data Schedule                                2      7K 

S-1   —   Registration Statement (General Form)
Document Table of Contents

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 21, 2000

                                                 REGISTRATION NO. 333-
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 
------------------------

KOZMO.COM, INC. 
(Exact name of Registrant as specified in its charter)

                                                        [Enlarge/Download Table]
                                                                                                   
            DELAWARE                         5961                           13-3956223             
(State or other jurisdiction of  (Primary Standard Industrial  (I.R.S. Employer Identification No.)
 incorporation or organization   Classification Code Number)                                       

------------------------

80 BROAD STREET, 18(TH) FLOOR 
NEW YORK, NEW YORK 10004
(212) 797-1330
(Address and telephone number of Registrant's principal executive offices)
------------------------------

GERARDO BURDO 
CHIEF FINANCIAL OFFICER 
KOZMO.COM, INC. 
80 BROAD STREET, 18(TH) FLOOR 
NEW YORK, NEW YORK 10004
(212) 797-1330
(Name, address and telephone number of agent for service) 
------------------------------

COPIES TO:

                                                                [Download Table]
                                                                   
RICHARD B. VILSOET, ESQ.                  STEPHEN H. COOPER, ESQ.  
 SPENCER D. KLEIN, ESQ.                 WEIL, GOTSHAL & MANAGES LLP
   SHEARMAN & STERLING                       767 FIFTH AVENUE      
  599 LEXINGTON AVENUE                   NEW YORK, NEW YORK 10153  
NEW YORK, NEW YORK 10022                      (212) 310-8000       
     (212) 848-4000                                                

------------------------

   APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.                

   If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of  
1933, check the following box. / /                                              

If this Form is filed to register additional securities for an offering 
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier        
effective registration statement for the same offering. / /                     

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act   
registration statement number of the earlier effective registration statement   
for the same offering. / /                                                      

If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act   
registration statement number of the earlier effective registration statement   
for the same offering. / /                                                      

  If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. / /                                                    
--------------------------

CALCULATION OF REGISTRATION FEE 

                                                        [Enlarge/Download Table]

                                                 PROPOSED MAXIMUM   PROPOSED MAXIMUM    AMOUNT OF  
     TITLE OF EACH CLASS OF       AMOUNT TO BE    OFFERING PRICE       AGGREGATE       REGISTRATION
  SECURITIES TO BE REGISTERED    REGISTERED (1)   PER SHARE (2)    OFFERING PRICE (2)      FEE     
                                                                                                   
Common Stock, par value                                                                            
  $0.001 per share..............                        $             $150,000,000       $39,600   

(1) Includes shares that the Underwriters have the option to purchase to cover  
over-allotments, if any.                                                

(2) Estimated solely for purposes of calculating the registration fee pursuant  
to Rule 457(o) under the Securities Act of 1933.                        
------------------------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION       
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF  
THE SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME    
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING        
PURSUANT TO SECTION 8(A), MAY DETERMINE.                                        

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The information in this prospectus is not complete and may be changed. We may   
not sell these securities until the registration statement filed with the       
Securities and Exchange Commission is effective. This preliminary prospectus is 
not an offer to sell these securities and it is not soliciting an offer to buy  
these securities in any state where the offer or sale is not permitted.         

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SUBJECT TO COMPLETION, DATED MARCH 21, 2000 

    Shares

[Logo]

Common Stock

----------- 

Prior to this offering, there has been no public market for our common  
stock. The initial public offering price is expected to be between $            
and $           per share. We expect to list our common stock on The Nasdaq     
Stock Market's National Market under the symbol "KZMO".                         

The underwriters have an option to purchase a maximum of                
additional shares to cover over-allotments of shares.                           

   Investing in our common stock involves risks. See "Risk Factors" on page 6.

                                                        [Enlarge/Download Table]

                                                              Underwriting                         
                                                              Discounts and         Proceeds to    
                                        Price to Public        Commissions             Kozmo       
                                      -------------------  -------------------  -------------------
                                                                                                   
Per Share............................ $                    $                    $                  
Total................................ $                    $                    $                  

Delivery of the shares of common stock will be made on or about       , 
2000.                                                                           

Neither the Securities and Exchange Commission nor any state securities 
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a     
criminal offense.                                                               

Credit Suisse First Boston                                                      

Salomon Smith Barney                            

            U.S. Bancorp Piper Jaffray

The date of this prospectus is       , 2000.

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[A color image of the Kozmo.com home page with explanatory text                 
describing the various features of the home page, indicating how                
the site is organized and highlighting features such as the "buy"               
and "rent" buttons.]                                                            

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--------------

TABLE OF CONTENTS 

                                                                [Download Table]

                                        PAGE 
                                        ---- 
                                             
PROSPECTUS SUMMARY....................      1
RISK FACTORS..........................      6
FORWARD-LOOKING STATEMENTS............     16
USE OF PROCEEDS.......................     17
DIVIDEND POLICY.......................     17
CAPITALIZATION........................     18
DILUTION..............................     20
SELECTED FINANCIAL DATA...............     22
MANAGEMENT'S DISCUSSION AND ANALYSIS         
  OF FINANCIAL CONDITION AND RESULTS         
  OF OPERATIONS.......................     23
BUSINESS..............................     29
MANAGEMENT............................     40

                                                                [Download Table]

                                        PAGE 
                                        ---- 
                                             

PRINCIPAL STOCKHOLDERS................     49
CERTAIN RELATIONSHIPS AND RELATED            
  TRANSACTIONS........................     52
DESCRIPTION OF CAPITAL STOCK..........     55
SHARES ELIGIBLE FOR FUTURE SALE.......     57
UNDERWRITING..........................     59
NOTICE TO CANADIAN RESIDENTS..........     62
LEGAL MATTERS.........................     63
EXPERTS...............................     63
WHERE YOU CAN FIND ADDITIONAL                
  INFORMATION.........................     63
INDEX TO FINANCIAL STATEMENTS.........    F-1

--------------

YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR TO
WHICH WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH   
INFORMATION THAT IS DIFFERENT. THIS DOCUMENT MAY ONLY BE USED WHERE IT IS LEGAL 
TO SELL THESE SECURITIES. THE INFORMATION IN THIS DOCUMENT MAY ONLY BE ACCURATE 
ON THE DATE OF THIS DOCUMENT.                                                   

DEALER PROSPECTUS DELIVERY OBLIGATION 

UNTIL       , 2000 (25 DAYS AFTER COMMENCEMENT OF THIS OFFERING), ALL   
DEALERS THAT EFFECT TRANSACTIONS IN THESE SECURITIES, WHETHER OR NOT            
PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS
IN ADDITION TO THE DEALER'S OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS AN
UNDERWRITER AND WITH RESPECT TO UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.             

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PROSPECTUS SUMMARY

THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION THAT IS DESCRIBED IN MORE  
DETAIL IN THIS PROSPECTUS AND DOES NOT CONTAIN ALL OF THE INFORMATION THAT MAY  
BE IMPORTANT TO YOU. TO UNDERSTAND THE RISKS INVOLVED IN YOUR INVESTMENT        
DECISION, YOU SHOULD READ CAREFULLY THIS ENTIRE PROSPECTUS, INCLUDING THE RISK  
FACTORS AND OUR FINANCIAL STATEMENTS, AND THE DOCUMENTS TO WHICH WE REFER YOU.  
IN THIS PROSPECTUS, "KOZMO," "WE," "US" AND "OUR" REFER TO KOZMO.COM, INC.      

KOZMO.COM, INC. 

We enable consumers to order a variety of entertainment, food and       
convenience products over the Internet for free delivery in under one hour. Our 
promise of under one hour delivery is designed to satisfy a consumer's desire   
for immediate gratification. We focus on selling frequently purchased, high     
margin items with well-known brand names. Additionally, we recently initiated a 
business-to-business service to enable select retailers to provide their        
customers with an expedited delivery option on a fee-for-service basis through  
our distribution networks.                                                      

We believe that our first mover advantage and the quality of our service
have allowed and will continue to allow us to increase our customer base and    
build our brand name as we enter new geographic markets. We currently offer our 
service in the New York City, Seattle, San Francisco, Boston, Washington, D.C.  
and Los Angeles markets. By the end of 2000, we intend to enter at least ten    
additional markets. In 1999, the number of customers registered on our web site 
grew at a compounded monthly rate of approximately 30%.                         

We serve each of our markets from one or more distribution centers. Our 
distribution centers are approximately 10,000 square feet in size and are       
located primarily in low-rent areas with access to key thoroughfares. The size  
of our typical distribution center provides capacity to expand our product      
offerings in our existing markets. Our business model enables us to quickly     
establish operations in a new market with a moderate capital expenditure and is 
designed to eliminate the high lease expense, build-out cost and inventory      
requirements normally associated with having multiple retail locations in a     
single market.                                                                  

   Traditionally, consumers have relied on storefront and catalog retailers to
satisfy many of their purchasing needs and only recently have been turning to   
the Internet in increasing numbers. In-store shopping, although offering the    
opportunity for immediate receipt of a purchased item, can be frustrating and   
time consuming and may require consumers to travel to a variety of stores for   
different products with no assurance that an item will be in stock. Although    
catalog shopping is more convenient than in-store shopping and typically        
provides a greater product selection, the delay in the receipt of a purchased   
item is frustrating to many consumers.                                          

    Our solution combines the convenience, time savings, product information and
personalization of catalog and Internet shopping with the immediate             
gratification of in-store shopping. Our distribution network within each of our 
markets also allows select retailers to offer their customers an expedited      
delivery option. The key components of our solution include:                    

- CONVENIENCE. Our under one hour free delivery capability provides     
   consumers with prompt receipt of a broad selection of goods without the
    inconvenience of in-store shopping or the delivery delay associated with
catalog shopping and most Internet shopping.                        

- USER-FRIENDLY WEB SITE. Our web site is easy to navigate and provides 
     consumers with useful product information and helpful third party reviews
and the opportunity to personalize product offerings.               

- LARGE SELECTION OF HIGH QUALITY PRODUCTS. We offer a broad range of   
    entertainment, food and convenience products, which consist primarily of
well-known national and local brands.                               

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    - QUALITY CUSTOMER SERVICE. We provide superior customer service through our
   delivery staff, online help desk and toll-free customer service number.

 - EFFICIENT LOGISTICS PROCESSES. Our advanced logistics management system
simplifies product and order handling and enables us to efficiently 
organize and execute deliveries.                                    

- LOW COST DISTRIBUTION MODEL. The start-up and operating costs of our  
 distribution centers are significantly lower than those that would be
    incurred by other retailers to service the same geographic market. As we
add new product lines, we believe that our average order size will  
  increase and that we will generate additional orders within each area,
thereby increasing delivery density.                                

GROWTH STRATEGY                                                                 

    Our growth strategy has two objectives: to be the leading online provider of
entertainment, food and convenience products with free delivery in under one    
hour, and to further enhance the usage of our distribution infrastructure by    
providing select retailers an expedited delivery option. To accomplish these    
objectives, we intend to:                                                       

- EXPAND INTO NEW GEOGRAPHIC MARKETS;                                   

- EXPLOIT OUR RAPID DELIVERY INFRASTRUCTURE FOR BUSINESS-TO-BUSINESS    
TRANSACTIONS;                                                       

- BUILD THE KOZMO BRAND;                                                

- BUILD A LOYAL CUSTOMER BASE; AND                                      

    - ESTABLISH STRATEGIC RELATIONSHIPS WITH KEY VENDORS AND OTHER RETAILERS AND
SERVICE PROVIDERS.                                                  

We were incorporated in New York in April 1997 and reincorporated in    
Delaware in August 1999. Our principal executive offices are located at 80 Broad
Street, New York, New York 10004, and our telephone number is (212) 797-1330.   
Our web site address is http://www.kozmo.com. Information on our web site does  
not constitute part of this prospectus.                                         

We have applied for federal trademark registration of Kozmo.com-TM-,    
Kozmo-TM-, the Kozmo.com logo and our slogans "We'll Be Right Over-TM-," "From  
the Internet to Your Door in Under One Hour-TM-," "From the Internet to Your    
Desk in Under One Hour-TM-" and "From the Internet to Your Dorm in Under One    
Hour-TM-." This prospectus also contains other trademarks, service marks and    
trade names that are the property of their respective owners.                   

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THE OFFERING

                                                        [Enlarge/Download Table]
                                                                                           
Common stock offered......................... shares                                       

Common stock to be outstanding after this                                                  
  offering................................... shares                                       

Use of proceeds.............................. General corporate purposes, including capital
                                              expenditures and working capital.            

Proposed Nasdaq National Market symbol....... KZMO                                         

  The number of shares of common stock to be outstanding after this offering
includes 66,760,203 shares of common stock issuable upon the automatic          
conversion of our outstanding convertible preferred stock upon the completion of
this offering, including 22,644,167 shares issuable upon conversion of our      
Series E and F convertible preferred stock issued after December 31, 1999.      

  The number of shares of common stock to be outstanding after this offering
is based on the number of shares outstanding as of December 31, 1999 and        
excludes:                                                                       

- 19,577,433 shares of common stock reserved for issuance upon the      
conversion of our convertible preferred stock issuable pursuant to  
      warrants, at a weighted average exercise price of $5.54 per share, and the
      automatic conversion of such preferred stock, on a one-for-one basis, into
shares of common stock, including 11,371,821 shares of common stock 
issuable pursuant to warrants issued after December 31, 1999;       

    - 63,240 shares of common stock issuable upon the exercise of warrants, at a
weighted average exercise price of $1.58 per share, including       
 13,240 shares issuable pursuant to warrants issued after December 31,
1999; and                                                           

 - 13,738,329 shares of common stock reserved for issuance under our stock
option plans.                                                       

 Except as otherwise indicated, all information in this prospectus assumes
the underwriters have not exercised their over-allotment option.                

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SUMMARY FINANCIAL DATA

                                                        [Enlarge/Download Table]

                                                      PERIOD FROM                                     
                                                     APRIL 17, 1997                                   
                                                     (INCEPTION) TO        YEAR ENDED DECEMBER 31,    
                                                      DECEMBER 31,       ---------------------------- 
                                                          1997              1998             1999     
                                                     --------------      -----------      ----------- 
                                                     (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)  
                                                                                                      
STATEMENT OF OPERATIONS DATA:                                                                         
  Revenues..........................................  $        --        $       155      $     3,509 
  Costs of revenues.................................           --                 35            1,997 
                                                      -----------        -----------      ----------- 
  Gross profit......................................           --                120            1,512 
  Loss from operations..............................         (118)              (813)         (26,529)
  Net loss..........................................         (118)              (813)         (26,370)
  Net loss attributable to common stockholders......         (123)              (868)         (28,959)

  Basic and diluted net loss per common share.......  $     (0.01)       $     (0.08)     $     (2.79)
                                                      ===========        ===========      =========== 
  Weighted-average shares used in computing basic                                                     
    and diluted net loss per common share...........   10,182,000         10,350,000       10,362,192 
                                                      ===========        ===========      =========== 
  Pro forma basic and diluted net loss per common                                                     
    share...........................................                                      $     (1.29)
                                                                                          =========== 
  Weighted-average shares used in computing pro                                                       
    forma basic and diluted net loss per common                                                       
    share...........................................                                       22,430,968 
                                                                                          =========== 

                                                        [Enlarge/Download Table]

                                                                        DECEMBER 31, 1999            
                                                             ----------------------------------------
                                                                                           PRO FORMA 
                                                              ACTUAL       PRO FORMA      AS ADJUSTED
                                                             --------      ---------      -----------
                                                                                                     
BALANCE SHEET DATA:                                                                                  
  Cash and cash equivalents................................. $88,867       $202,475                  
  Working capital...........................................  78,378        201,986                  
  Total assets.............................................. 102,998        286,082                  
  Stockholders' equity......................................  88,540        271,624                  

The pro forma balance sheet data summarized above gives effect to:      

- the issuance in January 2000 of 7,338,986 shares of Series E    
        convertible preferred stock for net cash proceeds of $32.0 million and
$382,000 of credits against future advertising costs;         

       - the issuance in March 2000 of 11,333,250 shares of Series F convertible
preferred stock for net cash proceeds of $81.6 million;       

      - the issuance in March 2000 of 1,323,977 shares of Series F convertible
  preferred stock, valued at $10.0 million, in connection with the
        execution of a letter agreement with Columbia TriStar Home Video, Inc;

      - the issuance in March 2000 of 1,323,977 shares of Series F convertible
  preferred stock, valued at $10.0 million, in connection with the
execution of a license agreement with Warner Home Video;      

      - the issuance in March 2000 of 1,323,977 shares of Series F convertible
    preferred stock in exchange for $10.0 million of common stock of a
publicly traded company;                                      

       - the issuance in March 2000 of a warrant to purchase 8,650,000 shares of
   Series E convertible preferred stock, valued at $35.7 million, in
       connection with the execution of a supply and delivery agreement with
Amazon.com LLC;                                               

       - the issuance in March 2000 of a warrant to purchase 2,699,145 shares of
  Series F convertible preferred stock, valued at $3.8 million, in
connection with the execution of a                            

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service licensing and distribution agreement with Ticketmaster
Online--CitySearch, Inc.; and                                 

       - the automatic conversion of our outstanding convertible preferred stock
   (including 44,116,036 shares of preferred stock outstanding as of
December 31, 1999 and 22,644,167 shares issued subsequent to  
  December 31, 1999), on a one-for-one basis, into an aggregate of
         66,760,203 shares of common stock upon the completion of this offering.

  The pro forma as adjusted balance sheet data summarized above gives effect
to the issuance and sale of       shares of our common stock in this offering at
an assumed initial public offering price of $      per share, and our receipt of
the estimated net proceeds of that sale, after deducting the underwriting       
discounts and commissions and our estimated offering expenses.                  

   See the notes to our financial statements for the computation of the shares
used in computing pro forma basic and diluted net loss per common share.        

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RISK FACTORS

    AN INVESTMENT IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD
CAREFULLY CONSIDER THE RISKS DESCRIBED BELOW BEFORE DECIDING TO INVEST IN SHARES
OF OUR COMMON STOCK. THE TRADING PRICE OF OUR COMMON STOCK COULD DECLINE DUE TO 
ANY OF THESE RISKS, IN WHICH CASE YOU COULD LOSE PART OR ALL OF YOUR INVESTMENT.
IN ADDRESSING THESE RISKS, YOU SHOULD ALSO REFER TO THE OTHER INFORMATION IN    
THIS PROSPECTUS, INCLUDING OUR FINANCIAL STATEMENTS AND THE RELATED NOTES.      

RISKS RELATED TO OUR BUSINESS                                                   

WE HAVE INCURRED SUBSTANTIAL LOSSES AND ANTICIPATE CONTINUED LOSSES AND NEGATIVE
CASH FLOW                                                                   

We have incurred substantial net losses and have had negative cash flow 
since our inception. As of December 31, 1999, we had an accumulated deficit of  
$27.3 million. We incurred net losses of approximately $813,000 in 1998 and     
$26.4 million in 1999. We will continue to incur operating and net losses and to
have negative cash flow for the foreseeable future. We expect that the rate at  
which we will incur those losses and have negative cash flow will increase      
significantly from current levels as we:                                        

- enter new markets and expand our operations in existing markets;      

- build-out and equip new distribution centers;                         

- increase the number of personnel employed at existing and future      
distribution centers;                                               

- continue to develop our web site, distribution networks and delivery  
infrastructure; and                                                 

- pursue brand development, marketing and other promotional activities. 

WE HAVE A LIMITED HISTORY OF OPERATIONS AND OPERATE IN A NEW AND RAPIDLY        
EVOLVING MARKET, WHICH MAKES OUR BUSINESS AND PROSPECTS DIFFICULT TO EVALUATE   

We were founded in April 1997 and began operations in March 1998. Our   
limited operating history makes an evaluation of our business and prospects very
difficult. With such a limited operating history, our past results do not       
provide a meaningful basis for evaluating an investment in our common stock, and
you should not rely on them as indicators of our future performance. You should 
consider our business and prospects in light of the risks, expenses and         
difficulties that we have encountered and will continue to encounter as an early
stage Internet company, including:                                              

- our need to continue to develop and adjust our business model;        

- our need to expand our customer base and average order size;          

- the difficulty of predicting the success of our new product offerings;

- our need to achieve greater brand recognition;                        

    - the lack of widespread acceptance of the Internet as a means of purchasing
products and services; and                                          

- competing services that have been and may be established on a local or
national basis.                                                     

  We cannot be certain that our business strategy will be successful or that
we will successfully address these risks.                                       

OUR BUSINESS MODEL MAY NOT BE READILY REPLICABLE IN ADDITIONAL GEOGRAPHIC       
MARKETS                                                                     

 A critical part of our strategy is to expand our business by establishing
operations, including distribution centers, in additional markets to achieve    
economies of scale and maximize returns from our significant and ongoing capital
investment in our distribution system. Our expansion is dependent upon our      
ability to replicate our distribution network and delivery model in a timely    
manner in markets that have different geographic, demographic and population    
density characteristics.                                                        

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    Our ability to operate successfully in new markets will depend upon a number
of factors, including:                                                          

- our ability to adapt our original business model, which was first     
    implemented in New York City, to geographic areas requiring distribution
primarily by vans and cars;                                         

- our ability to hire and train qualified employees in each of our new  
markets;                                                            

    - our ability to establish the necessary supply channels in each new market;

- consumer acceptance of our product and service offerings in each new  
market; and                                                         

- existing and future competition in each new market.                   

  The timing of our expansion into new markets also depends on these factors
and is subject to considerable uncertainty. If our efforts to replicate our     
business model in one or more new markets should fail, we would incur           
substantial costs without generating offsetting revenues and could be forced to 
delay our entrance into other markets. Our business plan contemplates rapid,    
widespread expansion of our service in markets throughout the United States. We 
believe that this rapid introduction of our service to a large number of markets
will be crucial to our success. If we are unable to expand our business and     
achieve acceptable order volume levels in accordance with our aggressive        
schedule, we could be forced to revise our business plan, which would require us
to incur substantial unanticipated costs.                                       

THE SUCCESS OF OUR BUSINESS DEPENDS ON ATTRACTING AND RETAINING A LARGE NUMBER  
OF CUSTOMERS. IF WE ARE UNABLE TO DO SO, WE WILL NOT BE ABLE TO ACHIEVE         
PROFITABILITY                                                                   

To succeed, we must attract a large number of consumers who have        
traditionally relied on retail stores and catalogs and persuade them to shop    
online through our web site. We may be required to incur significantly higher   
advertising and promotional expenditures than we currently anticipate to attract
shoppers to our web site and to convert those shoppers to purchasing customers. 
Our success also depends on ensuring that these customers remain loyal long-term
customers of Kozmo. Even if a substantial market develops for online sales of   
products for immediate delivery, we cannot be certain that consumers will accept
our online solution over those offered by our competitors. If we do not achieve 
widespread customer acceptance of our online solution, our revenues will suffer 
and we may not be able to achieve profitability when we expect, or at all.      

WE WILL NEED SUBSTANTIAL ADDITIONAL FUNDING FOR OUR PLANNED EXPENDITURES, AND WE
CANNOT BE CERTAIN THAT ADDITIONAL FINANCING WILL BE AVAILABLE                   

 We will require substantial capital to fund our operations and expand our
business. The net proceeds of this offering, together with our available funds  
and cash from operations, is expected to be sufficient to meet our near-term    
capital requirements. However, we anticipate that in the future we will seek    
additional funds through debt or equity financing. Our ability to obtain        
financing will depend, upon other things, on our development efforts, business  
plans, operating performance and general conditions in capital markets at the   
time the financing is sought. If we are unable to obtain required financing on  
terms favorable to us, or at all, we may be forced to abandon or delay our      
expansion plans. In addition we may be unable to take advantage of acquisition  
opportunities, enhance our products or services or otherwise respond to         
competitive pressures. Even if we are able to raise additional funds through the
issuance of equity or debt securities, those securities may have rights,        
preferences or privileges senior to your rights.                                

WE MAY BE UNABLE TO EFFECTIVELY HANDLE INCREASED VOLUMES OF WEB SITE TRAFFIC OR 
CUSTOMER ORDERS, AND WE MAY NOT BE ABLE TO EFFECTIVELY UPGRADE AND EXPAND OUR   
TECHNOLOGY OR TRANSACTION SYSTEMS                                               

A key element of our business strategy is to generate a high volume of  
traffic on, and use of, our web site. To the extent we are unable to adequately 
handle any increases in the volume of traffic on                                

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our web site, we would likely disappoint or lose those potential or existing    
customers whom we are unable to serve satisfactorily or at all, which would     
reduce our revenues. Refinements or modifications to our business systems and   
technologies may be necessary to address an increase in the volume of traffic on
our web site or in the number of orders placed by our customers. We may be      
unable to accurately project the rate or timing of these increases, or to       
adequately expand and upgrade our systems and infrastructure to accommodate such
increases.                                                                      

SYSTEM FAILURES OR UNFORESEEN DISRUPTIONS TO OUR TECHNICAL AND OPERATIONAL      
SYSTEMS COULD HARM OUR BUSINESS                                                 

  Our ability to successfully receive, process and fulfill customers' orders
depends largely on the efficient and uninterrupted operation of our computer and
communications hardware systems. Any disruptions or failures in connection with 
these systems could significantly diminish the quality of the service we offer  
and force us to incur unanticipated costs. Our systems and operations are       
vulnerable to damage and interruption from fire, flood, power loss,             
telecommunications failure, break-ins, earthquakes and similar events that are  
beyond our control. Although we have a redundant system in place for our data   
base server, web server and e-mail system, if our systems are unable to address 
disruptions to our computer and communications hardware systems, our business   
will suffer.                                                                    

PROBLEMS IN OUR DELIVERY OPERATIONS COULD HARM OUR BUSINESS                     

 We use our own staff to deliver products from our distribution centers to
our customers. Therefore, we are subject to the risks of employee strikes.      
Additionally, our ability to deliver products in under one hour is subject to   
inclement weather and disruptions in the transportation infrastructure in one or
more of our markets. Our failure to deliver products to our customers in a      
timely manner or to meet our targeted delivery times could harm our reputation  
and brand, which would harm our business and sales.                             

INADEQUATE INVENTORY CONTROLS COULD INCREASE OUR COSTS OF REVENUES              

  Our failure to implement adequate controls over our inventory as we expand
our distribution centers may result in unacceptable levels of inventory         
shrinkage from theft, non-return of rental products and damaged goods resulting 
in an increase in our costs of revenues.                                        

IF WE ARE UNABLE TO OBTAIN SUFFICIENT QUANTITIES OF PRODUCTS AT COMPETITIVE     
PRICES FROM OUR KEY VENDORS, WE MAY BE UNABLE TO ACHIEVE PROFITABILITY          

We obtain products from manufacturers, wholesalers and distributors. We 
currently rely on national and regional distributors for a substantial portion  
of our products, as well as premium specialty suppliers or local sources for    
gourmet foods and other food products. These suppliers are not contractually    
bound to continue to supply us products on the terms under which they are       
currently supplied, or at all. From time to time, we may experience difficulty  
in obtaining sufficient product allocations from key vendors. In addition, our  
key vendors may establish their own online retailing efforts, which may impair  
our ability to obtain sufficient product allocations from these vendors. Many of
our key vendors also supply products to our storefront and online retail        
competitors. If we are unable to obtain sufficient quantities of products from  
our key vendors to meet consumer demand, our net sales and results of operations
may suffer. Our suppliers may also change their pricing structures, which could 
reduce our margins. Our inability to offset price increases from our suppliers  
with a corresponding price increase to our customers will reduce our margins and
could disrupt our ability to achieve our targeted expansion.                    

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WE COULD FACE LIABILITY FOR THE ACTIONS OF OUR DELIVERY STAFF OR FOR            
CONTAMINATION OF OUR FOOD PRODUCTS                                              

    We may face potential liability for the negligent or illegal acts of members
of our delivery staff. The insurance we carry for claims based on these acts may
not be adequate. If negligent, illegal or unprofessional conduct of our delivery
staff were to occur, it would harm our reputation and our business even if it   
did not give rise to liability.                                                 

The products that we deliver may contain contaminants. Food products    
occasionally contain contaminants due to inherent defects in those products or  
improper storage or handling. If any of the food products that we sell causes   
harm to any of our customers, we could be subject to product liability claims.  
We currently do not carry insurance that would cover these claims. If we are    
required to defend ourselves against a product liability claim, whether or not  
we are found liable under such a claim, we could incur substantial costs, our   
reputation could suffer and our customers might substantially reduce their      
orders or stop ordering from us.                                                

Our delivery staff is required to verify the age of purchasers of our   
tobacco products. If our delivery staff fails to request the proper             
identification or if false identification cards are presented by the purchaser, 
we could face substantial penalties and legal liability for sales of tobacco    
products to underage persons. Any inquiry or investigation from a regulatory    
authority could have a negative impact on our reputation and if we are required 
to defend ourselves against any liability claim, whether or not we are found    
liable under such claim, could cause us to incur substantial costs.             

WE FACE INTENSE COMPETITION FROM OTHER RETAILERS INCLUDING STOREFRONT, ONLINE   
AND CATALOG RETAILERS, WHICH MAY ADVERSELY AFFECT OUR BUSINESS. IF WE ARE UNABLE
TO EFFECTIVELY COMPETE, OUR BUSINESS COULD SUFFER                               

The retail market for many of our products is extremely competitive. We 
compete against local, regional, and national convenience, video, music, book,  
magazine and food stores and online and catalog retailers. We must continue to  
offer popular, high margin products, anticipate trends in storefront, online and
catalog retailing, and develop a loyal customer base in order to successfully   
compete and expand our market share. Many of our existing and potential         
competitors are larger and have substantially greater resources and more        
established brand names than we have. We expect that this competition will      
intensify as more storefront, online and catalog retailers offer competitive    
delivery options to their customers. For example, Blockbuster recently announced
its intention to offer home delivery of videos through Food.com. If existing or 
new competitors adopt elements of our business practices or if storefront       
retailers of the products and services which we offer expand their businesses   
online, then we will face pricing and other competitive pressures. In addition, 
some of our competitors have developed or may develop delivery systems that are 
less automated and capital-intensive than ours, enabling them to commence       
operations in a particular geographic market before we are able to do so, which 
could harm our competitive position.                                            

ALTERNATIVE SOURCES OF HOME VIDEO AND PRE-RECORDED MUSIC MAY ADVERSELY AFFECT   
OUR BUSINESS                                                                

  The video rental component of our business may experience competition from
other forms of entertainment delivery, including video-on-demand delivered over 
cable, satellite and the Internet and additional programming offerings on       
satellite and digital cable systems. Video-on-demand is currently available in  
some test markets. If video-on-demand were offered profitably at a reasonable   
price and newly released movies were made available at the same time, or before,
they are made available to us or if direct broadcast satellite and digital cable
were to become widely available and accepted, public demand for our products    
could fall.                                                                     

Our sales of pre-recorded music may experience competition from digital 
delivery of music over the Internet. MP3 and other forms of downloadable digital
music are currently available for sale on several web sites and free on some web
sites. Wide consumer acceptance of digitally downloadable music could harm our  
business.                                                                       

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THE VIDEO RENTAL PORTION OF OUR BUSINESS COULD LOSE A SIGNIFICANT COMPETITIVE   
ADVANTAGE IF MOVIE STUDIOS CHANGE THEIR CURRENT DISTRIBUTION PRACTICES          

    A significant competitive advantage that the video rental industry currently
enjoys over most other non-theater movie distribution channels is a "window" of 
exclusivity as compared to other forms of non-theater distribution, including   
pay-per-view, basic and premium cable television, and network and syndicated    
television. The length of the exclusivity period for movie rentals varies,      
typically from 30 to 90 days in the United States and from 120 to 180 days in   
foreign markets. Thereafter, movies are made sequentially available to other    
distribution channels.                                                          

Our competitive advantage over other forms of non-theater distribution  
channels would suffer if:                                                       

- video rental were no longer the first release following the initial   
theatrical release;                                                 

 - the length of the exclusive period for video rentals were shortened; or

  - video rentals no longer enjoyed an exclusive distribution window as they
do now.                                                             

    If any of these events were to occur, consumers would no longer need to wait
until after the video rental distribution window had closed before being able to
view a newly released movie through another non-theater distribution channel.   
Although we believe that movie studios have a significant interest in           
maintaining a viable home video rental industry, we cannot predict the impact,  
if any, of any future decisions by movie studios.                               

OUR EFFORTS TO BUILD STRONG CUSTOMER LOYALTY AND BRAND IDENTITY MAY NOT BE      
SUCCESSFUL                                                                      

In e-commerce, customer attrition rates, or the rates at which customers
cancel a service, are generally high. Although we do not charge on a            
subscription basis for our service, we depend upon customers once they have     
ordered from us. If our offerings fail to meet our customers' expectations for  
any reason, we may be unable to develop long-term customer loyalty and may      
experience significant decreases in repeat customer orders as a percentage of   
orders delivered.                                                               

We believe that establishing and maintaining brand identity and brand   
loyalty is critical to attracting customers and vendors. If our advertising,    
marketing and partnering strategies fail to make the Kozmo brand attractive to  
the demographic groups we target, we may be unable to expand our business at the
rate we have planned and we may be forced to incur additional costs. Promotion  
and enhancement of the Kozmo brand also will depend on our ability to           
consistently provide high-quality service and product offerings to our          
customers. If consumers and vendors do not perceive our service or product      
offerings to be of high quality, or if we introduce new products that are not   
favorably received by our customers, the value of the Kozmo brand name could    
suffer, and our customer base will not grow at the rate we need to be           
profitable, or at all.                                                          

WE MAY NOT BE ABLE TO OBTAIN REQUIRED LICENSES OR PERMITS FOR THE SALE OF       
TOBACCO OR ALCOHOL PRODUCTS                                                     

As we expand our operations into new markets and enhance our product    
selection, some of our new and existing product offerings may be subject to     
state licensing or permiting requirements. We may be unable to obtain any       
required permits or licenses in a timely manner, or at all. Changes to existing 
laws or our inability to obtain required permits or licenses could prevent us   
from selling alcohol or tobacco products in one or more of our geographic       
markets. Any of these events could harm our net sales, gross profit and our     
ability to attract and retain customers.                                        

IF THE PROTECTION OF OUR TRADEMARKS AND PROPRIETARY RIGHTS IS INADEQUATE, OUR   
BUSINESS MAY SUFFER                                                         

    We rely on patent, trademark and copyright laws, trade secret protection and
confidentiality or license agreements with our employees, customers, partners,  
and others to protect our proprietary rights. However, the steps we take to     
protect our proprietary rights may be inadequate. Currently, we have no         
registered patents or trademarks, but we have filed a provisional patent        
application for our                                                             

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dispatching system and trademark applications for Kozmo.com-TM-, Kozmo-TM-, the 
Kozmo.com logo, and our slogans "We'll Be Right Over"-TM-, "From the Internet to
Your Door in Under One Hour"-TM-, "From the Internet to Your Desk in Under One  
Hour"-TM-, and "From the Internet to Your Dorm in Under One Hour"-TM-, in the   
United States, and from time to time we expect to file other patent and         
trademark applications. We cannot ensure that any of these applications will be 
approved, that any issued patents will adequately protect our intellectual      
property or that any issued patents will not be challenged by third parties. In 
addition, other parties may independently develop similar or competing          
technology or design around any patents that may be issued to us. Because our   
applications for registration of our tradenames, logo and slogans have not yet  
been granted, we cannot ensure that third parties will not use them in a manner 
that could damage our brand identity and our reputation.                        

WE MAY NOT BE ABLE TO PROTECT OUR DOMAIN NAMES AGAINST ALL INFRINGERS, WHICH    
COULD DECREASE THE VALUE OF OUR BRAND NAME AND PROPRIETARY RIGHTS               

We currently own the Internet domain name "Kozmo.com." Domain names     
generally are regulated by Internet regulatory bodies. The regulation of domain 
names in the United States and in foreign countries is subject to change.       
Regulatory bodies could establish additional top-level domains, appoint         
additional domain name registrars or modify the requirements for holding domain 
names. The relationship between regulations governing domain names and laws     
protecting trademarks and similar proprietary rights is unclear. Therefore, we  
may be unable to prevent third parties from acquiring domain names that infringe
upon or otherwise decrease the value of our brand name, trademarks and other    
proprietary rights.                                                             

RISKS RELATED TO OUR MANAGEMENT                                                 

WE HAVE VERY LIMITED EXPERIENCE IN MANAGING GEOGRAPHICALLY DIVERSE OPERATIONS   

Although we have established our operations in six markets and plan to  
further expand to additional markets, we do not have long-term experience       
operating in diverse geographical locations. Our inability to successfully      
manage our operations in numerous and widespread markets, particularly at the   
pace of our planned expansion, could harm our business. The success of our      
planned expansion will depend upon our ability to, among other things:          

- integrate the operations of new distribution centers into our existing
operations;                                                         

   - coordinate and manage distribution operations in multiple, geographically
dispersed locations;                                                

- successfully replicate our business model in other markets;           

- control our costs; and                                                

- establish and maintain adequate management and personnel, information 
systems and financial controls.                                     

    Our failure to successfully address these factors could require us to revise
our business plan and incur substantial additional expenses.                    

THE LOSS OF THE SERVICES OF OUR KEY PERSONNEL, OR OUR FAILURE TO ATTRACT AND    
RETAIN OTHER HIGHLY QUALIFIED PERSONNEL IN THE FUTURE, COULD HARM OUR BUSINESS  

    Our success depends to a significant extent on our founders, Joseph Park and
Yong Kang and their ability to operate effectively, both independently and      
together. The loss of Messrs. Park or Kang or any other members of senior       
management could delay or prevent the implementation of our business plan. Our  
business depends also on our ability to attract and retain additional qualified 
personnel. We may be unable to continue hiring additional personnel as our      
business grows because competition for personnel, particularly for employees    
with technical expertise, is intense and the costs of hiring and retaining such 
personnel are high. If one or more of our existing or future employees resigns  
to join a                                                                       

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competitor or to form a competing company, any resulting loss of existing or    
potential customers or other unauthorized disclosure or use of our proprietary  
information, technical knowledge, practices, procedures or customer lists could 
harm the expansion of our business and customer base, and force us to incur     
unanticipated costs.                                                            

SEVERAL KEY MEMBERS OF OUR MANAGEMENT TEAM HAVE ONLY RECENTLY JOINED US AND, IF 
THEY ARE NOT SUCCESSFULLY INTEGRATED INTO OUR BUSINESS OR IF THEY FAIL TO WORK  
TOGETHER AS A MANAGEMENT TEAM, OUR BUSINESS WILL SUFFER                         

Several key members of our management team have recently joined us,     
including Gerardo Burdo, our chief financial officer, Kenneth Trevathan, our    
chief operating officer, Christopher Shimojima, our chief marketing officer and 
William Herald, our chief technology officer. We expect to hire additional key  
management personnel. If we do not effectively integrate these persons into our 
business, or if they do not work together as a management team to implement our 
business strategy, our business will suffer.                                    

RISKS RELATED TO THE INTERNET AND E-COMMERCE                                    

WE DEPEND ON CONTINUED GROWTH IN USE OF THE INTERNET AND E-COMMERCE             

Our future revenues and any future profits depend significantly upon the
widespread acceptance and use of the Internet and other online services as an   
effective medium of commerce by consumers. The Internet may not be accepted as a
viable commercial marketplace for a number of reasons, including inadequate     
development of the necessary network infrastructure or delayed development of   
enabling technologies and performance improvements. To the extent that the      
Internet continues to experience significant growth in the number of users, the 
frequency of use or bandwidth requirements the infrastructure for the Internet  
may not be able to support such demands. The Internet has experienced a variety 
of outages due to damage to portions of its infrastructure. If outages or delays
frequently occur in the future, Internet usage (including usage of our web site)
could grow slowly, stagnate or decline. In particular, these delays and outages 
could result in slower response times and adversely affect usage of our web     
site. Even if the necessary infrastructure or technologies develop, we may incur
significant costs to adapt our systems. Our success also depends upon acceptance
and use of e-commerce, which is a recent phenomenon.                            

IF WE DO NOT RESPOND TO RAPID TECHNOLOGICAL CHANGES, OUR SERVICES COULD BECOME  
OBSOLETE AND WE COULD LOSE CUSTOMERS                                            

    To be competitive, we must continue to enhance and improve the functionality
and features of our online business system. The Internet and the online commerce
industry are rapidly changing. If competitors introduce new products and        
services featuring new technologies, or if new industry standards and practices 
emerge, our existing web site and proprietary systems may become obsolete. We   
may use new technologies ineffectively, or we may be unable to license or       
otherwise obtain new technologies from third parties. We may also experience    
difficulties in adapting our web site or the systems that we use to receive,    
process and fulfill customers' orders to changing customer demands, new         
technologies or emerging industry standards.                                    

WE MAY BE SUED DUE TO SECURITY CONCERNS AND CREDIT CARD FRAUD                   

Consumer concerns over the security of transactions conducted on the    
Internet or the privacy of users may inhibit the growth of the Internet and     
e-commerce. To transmit confidential information securely, we rely on encryption
and authentication technology licensed to us by third parties. Events or        
developments may result in a compromise or breach of the algorithms that we use 
to protect customer transaction data. Any penetration of our network security or
misappropriation of our customers'                                              

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personal or credit card information could subject us to liability. We may also  
be liable for claims based on unauthorized purchases with credit card           
information, impersonation or other similar fraud claims.                       

GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES COULD ADD ADDITIONAL BURDENS TO   
DOING BUSINESS ON THE INTERNET                                                  

Laws and regulations applicable to Internet communications, commerce and
advertising are becoming more prevalent. E-commerce is new and rapidly changing,
and federal and state regulations relating to the Internet and e-commerce are   
evolving. Currently, there are few laws or regulations directly applicable to   
access to the Internet or e-commerce. Due to the increasing popularity of the   
Internet, it is possible that laws and regulations may be enacted to address    
issues such as user privacy, pricing, content, copyrights, distribution,        
antitrust matters and the quality of products and services. The adoption of     
these laws or regulations could reduce the rate of growth of the Internet, which
could potentially decrease the usage of our web site and could otherwise harm   
our business.                                                                   

   The applicability to the Internet of existing laws governing issues such as
property ownership, copyrights and other intellectual property issues, libel,   
obscenity and personal privacy is uncertain. Most of these laws were adopted    
prior to the advent of the Internet and do not contemplate or address the unique
issues of the Internet. New laws applicable to the Internet may impose          
substantial burdens on companies conducting business over the Internet. In      
addition, the growth and development of e-commerce may prompt calls for more    
stringent consumer protection laws in the United States and abroad. We also may 
be subject to regulation not specifically related to the Internet, such as laws 
affecting catalog sellers.                                                      

The Federal Trade Commission has proposed regulations regarding the     
collection and use of personal identifying information obtained from individuals
when accessing web sites, with particular emphasis on access by minors. These   
regulations may include requirements that we establish procedures to disclose   
and notify users of privacy and security policies, obtain consent from users for
collection and use of information and provide users with the ability to access, 
correct and delete personal information stored by us. These regulations may also
include enforcement and remedial provisions. Even in the absence of those       
regulations, the Federal Trade Commission has begun investigations into the     
privacy practices of other companies that collect information on the Internet.  
One investigation resulted in a consent decree under which an Internet company  
agreed to establish programs to implement the principles noted above. We may    
become a party to a similar investigation or enforcement proceeding, or the     
Federal Trade Commission's regulatory and enforcement efforts may harm our      
ability to collect demographic and personal information from users, which could 
be costly or adversely affect our marketing efforts.                            

WE MAY BE LIABLE FOR INFORMATION DISPLAYED ON AND COMMUNICATED THROUGH OUR WEB  
SITE                                                                        

We may be subjected to claims for defamation, negligence, copyright or  
trademark infringement or other theories relating to the information that we    
publish on our web site. These claims have been brought against online companies
as well as print publications in the past. Based on hyperlinks that we provide  
to other web sites, we may also be subjected to claims based upon online content
that we do not control but that is accessible from our web site.                

RISKS RELATED TO THIS OFFERING                                                  

OUR STOCK PRICE WILL FLUCTUATE AFTER THIS OFFERING, WHICH COULD RESULT IN       
SUBSTANTIAL LOSSES FOR INVESTORS                                            

Although the initial public offering price will be determined based on  
several factors, the market price for our common stock will vary from the       
initial offering price after trading commences. This could result in substantial
losses for investors. The market price of our common stock may fluctuate        

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significantly in response to a number of factors, some of which are beyond our  
control. These factors include:                                                 

- quarterly variations in operating results;                            

- changes in financial estimates by securities analysts;                

- announcements by us or our competitors, of new product and service    
      offerings, significant contracts, acquisitions or strategic relationships;

  - publicity about our company, our products and services, our competitors,
or e-commerce in general;                                           

- additions or departures of key personnel;                             

- any future sales of our common stock or other securities; and         

    - stock market price and volume fluctuations of publicly traded companies in
general and Internet-related companies.                             

 The trading prices of Internet-related companies and e-commerce companies
have been especially volatile and many are at or near historical highs.         
Investors may be unable to resell their shares of our common stock at or above  
the offering price. In the past, securities class action litigation has often   
been brought against a company following periods of volatility in the market    
price of its securities. We may be the target of similar litigation in the      
future. Securities litigation could result in substantial costs and divert      
management's attention and resources, which could seriously harm our business   
prospects, financial condition and operating results.                           

WE DO NOT INTEND TO PAY CASH DIVIDENDS                                          

    We have not paid cash dividends since our inception, and we do not intend to
pay cash dividends in the foreseeable future.                                   

WE HAVE DISCRETION AS TO THE USE OF PROCEEDS, AND YOU MAY NOT AGREE WITH OUR USE

   Our management can spend the proceeds from this offering in ways with which
the stockholders may not agree. We cannot predict that the proceeds will be     
spent in ways that yield a favorable return.                                    

OUR OFFICERS AND DIRECTORS AND SOME EXISTING STOCKHOLDERS WILL EXERCISE         
SIGNIFICANT CONTROL OVER OUR COMPANY AND COULD PREVENT OR DELAY BENEFICIAL      
CORPORATE ACTIONS                                                               

After this offering, our executive officers and directors and existing  
stockholders will own or control approximately       % of our outstanding common
stock. As a result, these stockholders will be able to exercise significant     
control over all matters requiring stockholder approval, including the election 
of directors and most of our other corporate actions. This control could delay, 
defer or prevent others from initiating a potential merger, takeover or other   
change in control, even if these actions would benefit our stockholders and us. 
This control would limit the effective voting power of our other stockholders   
and could depress the market price of our common stock. See "Principal          
Stockholders."                                                                  

FUTURE SALES OF OUR COMMON STOCK MAY CAUSE OUR STOCK PRICE TO DECLINE           

If our stockholders sell substantial amounts of our common stock in the 
public market following this offering, the market price of our common stock     
could decline. Upon completion of this offering, we expect to have      shares  
of common stock outstanding, of which       shares sold in this offering will be
freely tradable, without restriction, in the public market. Our directors,      
officers and certain other stockholders have entered into customary lock-up     
agreements in connection with this offering, generally providing that they will 
not sell, otherwise dispose of or transfer any of the economic consequences of  
ownership of our common stock or other securities without the prior written     
consent                                                                         

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of Credit Suisse First Boston. These lock-up restrictions will expire 180 days  
after the date of this prospectus. As a result, a substantial number of shares  
of our common stock will be eligible for sale in the public market after the    
expiration of the 180 day period.                                               

   In addition, 16,068,808 shares under options and warrants outstanding as of
December 31, 1999 and 5,925,133 additional shares available for future option   
grants under our stock option plans will become eligible for sale in the public 
market once permitted by provisions of various vesting agreements, lock-up      
agreements and Rules 144 and 701 under the Securities Act, as applicable. See   
"Shares Eligible for Future Sale."                                              

PROVISIONS IN OUR CHARTER DOCUMENTS AND DELAWARE LAW COULD PREVENT OR DELAY A   
CHANGE IN CONTROL OF OUR COMPANY AND MAY REDUCE THE MARKET PRICE OF OUR COMMON  
STOCK                                                                           

Provisions of our amended and restated certificate of incorporation and 
bylaws may discourage, delay or prevent a merger or acquisition that a          
stockholder may consider favorable. These provisions include:                   

- authorizing our board of directors to issue preferred stock without   
stockholder approval;                                               

- limiting the ability of stockholders to call special meetings;        

- prohibiting stockholder actions by written consent; and               

  - establishing advance notice requirements for nominations for election to
   the board of directors or for proposing matters that can be acted on by
stockholders at stockholder meetings.                               

Certain provisions of Delaware law also may discourage, delay or prevent
someone from acquiring or merging with us, which may cause the market price of  
our common stock to decline.                                                    

PURCHASERS OF SHARES IN THIS OFFERING WILL INCUR IMMEDIATE SUBSTANTIAL DILUTION 
OF APPROXIMATELY $                                                              
PER SHARE                                                                       

The initial public offering price of our common stock is expected to be 
substantially higher than the book value per share of our outstanding common    
stock. As a result, investors purchasing common stock in this offering will     
incur immediate substantial dilution of approximately $    per share. In        
addition, we have issued options and warrants to acquire common stock at prices 
significantly below the initial offering price. Assuming that outstanding       
options and warrants are exercised in full, there would be further dilution of  
$         per share to investors in this offering. See "Dilution" for a more    
detailed description of how new stockholders will incur dilution.               

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FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements that address, among 
other things: development of services; expansion strategy; use of proceeds;     
projected capital expenditures; liquidity; development of additional revenue    
sources; development and expansion of marketing relationships; market acceptance
of e-commerce; technological advancement; and ability to develop "brand"        
awareness. These statements may be found in the sections of this prospectus     
entitled "Prospectus Summary," "Risk Factors," "Use of Proceeds," "Management's 
Discussion and Analysis of Financial Condition and Results of Operations" and   
"Business". They are identified by the use of the terms "believe," "do not      
believe," "expect," "plan," "intend," "estimate," "anticipate" and similar      
expressions. These statements reflect our current views with respect to future  
events, are based on assumptions and are subject to uncertainties. Our actual   
results could differ materially from those anticipated in these forward-looking 
statements as a result of various factors, including all the risks discussed in 
"Risk Factors" and elsewhere in this prospectus.                                

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USE OF PROCEEDS 

We will receive net proceeds from this offering of approximately        
$     million, assuming an initial public offering price of $         per share 
and after deducting estimated underwriting discounts and commissions and our    
estimated offering expenses. If the underwriters exercise their over-allotment  
option in full, our net proceeds will be approximately $       million.         

    The principal purposes of this offering are to obtain additional capital, to
create a public market for our common stock and to facilitate future access to  
public capital markets. We expect to use the proceeds of the offering for       
general corporate purposes, including working capital and capital expenditures, 
but we have no specific plans for allocation of the proceeds. We may also use a 
portion of the proceeds to acquire or invest in complementary businesses,       
products or technologies. We have no current agreements or understandings for,  
and are not engaged in negotiations with respect to, any acquisition or         
investment. Our management has broad discretion as to the use of the net        
proceeds.                                                                       

Pending their use, we will invest the net proceeds in short-term,       
interest-bearing, investment-grade securities.                                  

DIVIDEND POLICY 

We have never declared or paid cash dividends on our capital stock. We  
intend to retain all available funds and any future earnings for use in the     
operation of our business and we do not anticipate paying any cash dividends in 
the foreseeable future.                                                         

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CAPITALIZATION

  The following table sets forth our capitalization as of December 31, 1999:

- on an actual basis;                                                   

- on a pro forma basis giving effect to:                                

- the issuance in January 2000 of 7,338,986 shares of Series E    
        convertible preferred stock for net cash proceeds of $32.0 million and
$382,000 of credits against future advertising costs;         

       - the issuance in March 2000 of 11,333,250 shares of Series F convertible
preferred stock for net cash proceeds of $81.6 million;       

      - the issuance in March 2000 of 2,647,954 shares of Series F convertible
  preferred stock, valued at $20.0 million, in connection with the
execution of agreements with the recipients of those shares;  

      - the issuance in March 2000 of 1,323,977 shares of Series F convertible
    preferred stock in exchange for $10.0 million of common stock of a
publicly traded company;                                      

       - the issuance in March 2000 of a warrant to purchase 8,650,000 shares of
   Series E convertible preferred stock, valued at $35.7 million, in
       connection with the execution of a supply and delivery agreement with
Amazon.com LLC;                                               

       - the issuance in March 2000 of a warrant to purchase 2,699,145 shares of
  Series F convertible preferred stock, valued at $3.8 million, in
       connection with the execution of a service licensing and distribution
agreement with Tickmaster--Online CitySearch, Inc.; and       

       - the automatic conversion of our outstanding convertible preferred stock
         (including 44,116,036 shares of convertible preferred stock outstanding
    as of December 31, 1999 and 22,644,167 shares issued subsequent to
  December 31, 1999), on a one-for-one basis, into an aggregate of
         66,760,203 shares of common stock upon the completion of this offering.

  - on a pro forma as adjusted basis to give effect to the issuance and sale
      of       shares of our common stock in this offering at an assumed initial
public offering price of $       per share, and our receipt of the  
 estimated net proceeds of that sale, after deducting the underwriting
discounts and commissions and our estimated offering expenses.      

The number of shares of common stock outstanding excludes:              

- 19,577,433 shares of common stock reserved for issuance upon the
    conversion of our convertible preferred stock issuable pursuant to
  warrants, at a weighted average exercise price of $5.54, and the
       automatic conversion of such preferred stock, on a one-for-one basis,
    into shares of common stock, including 11,371,821 shares of common
     stock issuable pursuant to warrants issued after December 31, 1999;

     - 63,240 shares of common stock issuable upon the exercise of warrants,
    at a weighted average exercise price of $1.58 per share, including
       13,240 shares issuable pursuant to warrants issued after December 31,
1999; and                                                     

       - 13,738,329 shares of common stock reserved for issuance under our stock
plans.                                                        

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    This information should be read in conjunction with our financial statements
and the related notes to those statements included in the prospectus.           

                                                        [Enlarge/Download Table]

                                                                      DECEMBER 31, 1999         
                                                              ----------------------------------
                                                                                      PRO FORMA 
                                                               ACTUAL    PRO FORMA   AS ADJUSTED
                                                              --------   ---------   -----------
                                                                    (DOLLARS IN THOUSANDS)      
                                                                                                
Cash and cash equivalents...................................  $ 88,867   $202,475               
                                                              ========   ========               
Stockholders' equity:                                                                           
  Series A convertible preferred stock, $.01 par value;                                         
    1,133,332 shares authorized, issued and outstanding                                         
    actual; and no shares issued and outstanding pro forma                                      
    and pro forma as adjusted...............................  $     11   $     --               
  Series B convertible preferred stock, $.01 par value;                                         
    4,998,517 shares authorized, issued and outstanding                                         
    actual; and no shares issued and outstanding pro forma                                      
    and pro forma as adjusted...............................        50         --               
  Series C convertible preferred stock, $.01 par value;                                         
    2,508,500 shares authorized, issued and outstanding                                         
    actual; and no shares issued and outstanding pro forma                                      
    and pro forma as adjusted...............................        25         --               
  Series D convertible preferred stock, $.01 par value;                                         
    15,616,119 shares authorized, issued and outstanding,                                       
    actual; and no shares issued and outstanding pro forma                                      
    and pro forma as adjusted...............................       156         --               
  Series E convertible preferred stock, $.01 par value;                                         
    45,500,000 shares authorized; 19,859,568 shares issued                                      
    and outstanding actual; no shares issued and outstanding                                    
    pro forma and pro forma as adjusted.....................       199         --               
  Series F convertible preferred stock, $.01 par value;                                         
    20,000,000 shares authorized; no shares issued and                                          
    outstanding actual, pro forma and pro forma as                                              
    adjusted................................................        --         --               

  Common stock $.001 par value; 90,918,897 shares                                               
    authorized, 10,400,000 shares issued and outstanding                                        
    actual; 77,160,203 issued and outstanding pro forma; and                                    
          shares issued and outstanding pro forma as                                            
    adjusted................................................        10         77               

  Additional paid-in-capital................................   118,150    301,990               

  Contribution receivable...................................      (158)      (540)              

  Deferred compensation.....................................    (2,602)    (2,602)              

  Accumulated deficit.......................................   (27,301)   (27,301)              
                                                              --------   --------               
      Total stockholders' equity and capitalization.........  $ 88,540   $271,624               
                                                              ========   ========               

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DILUTION

If you purchase our common stock in this offering, your interest will be
diluted to the extent of the difference between the public offering price per   
share of our common stock and the pro forma net tangible book value per share of
our common stock after this offering. The pro forma net tangible book value of  
our common stock as of December 31, 1999 was $212.1 million, or $2.75 per share.
This per share amount represents the amount of our total tangible assets reduced
by the amount of our total liabilities and divided by the total number of shares
of our common stock outstanding after giving pro forma effect to the following: 

- the issuance in January 2000 of 7,338,986 shares of Series E    
        convertible preferred stock for net cash proceeds of $32.0 million and
$382,000 of credits against future advertising costs;         

       - the issuance in March 2000 of 11,333,250 shares of Series F convertible
preferred stock for net cash proceeds of $81.6 million;       

      - the issuance in March 2000 of 2,647,954 shares of Series F convertible
  preferred stock, valued at $20.0 million, in connection with the
execution of agreements with the recipients of those shares;  

      - the issuance in March 2000 of 1,323,977 shares of Series F convertible
    preferred stock in exchange for $10.0 million of common stock of a
publicly traded company;                                      

       - the issuance in March 2000 of a warrant to purchase 8,650,000 shares of
   Series E convertible preferred stock, valued at $35.7 million, in
       connection with the execution of a supply and delivery agreement with
Amazon.com LLC;                                               

       - the issuance in March 2000 of a warrant to purchase 2,699,145 shares of
  Series F convertible preferred stock, valued at $3.8 million, in
       connection with the execution of a service licensing and distribution
agreement with Ticketmaster Online--CitySearch, Inc., and     

       - the automatic conversion of our outstanding convertible preferred stock
         (including 44,116,036 shares of convertible preferred stock outstanding
    as of December 31, 1999 and 22,644,167 shares issued subsequent to
  December 31, 1999), on a one-for-one basis, into an aggregate of
         66,760,203 shares of common stock upon the completion of this offering.

Dilution in pro forma net tangible book value per share represents the  
difference between the amount per share paid by purchasers of shares of common  
stock in this offering and the pro forma net tangible book value per share of   
common stock immediately after the completion of this offering.                 

  After giving effect to the issuance and sale of       shares of our common
stock in this offering at an assumed initial public offering price of $         
per share, and our receipt of the estimated net proceeds of that sale after     
deducting the underwriting discounts and commissions and our estimated offering 
expenses, the pro forma as adjusted net tangible book value of our common stock 
at December 31, 1999 would have been approximately $      million or $      per 
share. This represents an immediate increase in net tangible book value of      
$      per share to our existing stockholders and an immediate dilution of      
$      per share to purchasers of common stock in this offering. The following  
table illustrates this dilution on a per share basis:                           

                                                                [Download Table]
                                                                               
Assumed initial public offering price per share.............           $       
    Pro forma net tangible book value per share as of                          
      December 31, 1999..................................... $                 
    Increase per share attributable to this offering........                   
                                                             --------          
Pro forma as adjusted net tangible book value per share                        
  after the offering........................................                   
                                                                       --------
Dilution per share to new investors.........................           $       
                                                                       ========

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The following table shows, on a pro forma as adjusted basis as of       
December 31, 1999, the differences between the amounts of the total             
consideration and the average price per share paid by our existing stockholders 
and the amounts paid by purchasers in this offering before deducting the        
underwriting discounts and commissions and our estimated offering expenses,     
based on an assumed initial offering price of $         per share. The table    
also gives effect, on a pro forma as adjusted basis, to the conversion of all of
our outstanding convertible preferred stock into common stock upon the          
completion of this offering and the total number of shares of common stock sold 
by us in this offering.                                                         

                                                        [Enlarge/Download Table]

                                               SHARES PURCHASED    TOTAL CONSIDERATION               
                                              -------------------  -------------------  AVERAGE PRICE
                                               NUMBER    PERCENT    AMOUNT    PERCENT     PER SHARE  
                                              --------   --------  --------   --------  -------------
                                                                                                     
Existing stockholders........................                 %    $               %      $          
New investors................................                                             $          
                                              --------     ---     --------     ---                  
Totals.......................................              100%    $            100%                 
                                                           ===                  ===                  

The foregoing discussion and table assume no exercise of any outstanding
stock options or warrants to purchase shares of our common stock or convertible 
preferred stock, including:                                                     

- 19,577,433 shares of common stock reserved for issuance upon the      
conversion of our convertible preferred stock issuable pursuant to  
warrants to, at a weighted average exercise price of $5.54, and the 
      automatic conversion of such preferred stock, on a one-for-one basis, into
shares of common stock, including 11,371,821 shares of common stock 
issuable pursuant to warrants issued after December 31, 1999;       

   - 63,240 shares of common stock issuable upon the exercise of warrants at a
weighted average exercise price of $1.58 per share, including 13,240
    shares issuable pursuant to warrants issued after December 31, 1999; and

 - 13,738,329 shares of common stock reserved for issuance under our stock
plans.                                                              

Assuming the exercise in full of all outstanding options, warrants to   
purchase common stock and warrants to purchase convertible preferred stock and  
the conversion of such preferred stock into common stock, our pro forma as      
adjusted net tangible book value at December 31, 1999 would be $        per     
share, representing an immediate increase in net tangible book value of         
$        per share to our existing stockholders and an immediate decrease in the
net tangible book value per share of $        to the new investors.             

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SELECTED FINANCIAL DATA 

The selected balance sheet data as of December 31, 1998 and 1999 and the
selected statement of operations data for the period from April 17, 1997        
(inception) to December 31, 1997 and the years ended December 31, 1998 and 1999 
have been derived from our audited financial statements included elsewhere in   
this prospectus. The selected balance sheet data as of December 31, 1997 has    
been derived from our audited financial statements not included in this         
prospectus. Our historical results are not indicative of the results to be      
expected in the future. You should read these selected financial data in        
conjunction with "Management's Discussion and Analysis of Financial Condition   
and Results of Operations" and our financial statements and the related notes   
included elsewhere in this prospectus.                                          

                                                        [Enlarge/Download Table]

                                                                PERIOD FROM              YEAR ENDED          
                                                              APRIL 17, 1997            DECEMBER 31,         
                                                              (INCEPTION) TO     --------------------------- 
                                                             DECEMBER 31, 1997      1998             1999    
                                                             -----------------   ----------       ---------- 
                                                             (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) 
                                                                                                             
STATEMENT OF OPERATIONS DATA:                                                                                
Revenues:                                                                                                    

  Rental....................................................    $       --       $      108       $    1,706 
  Product sales.............................................            --               47            1,803 
                                                                ----------       ----------       ---------- 
    Total revenues..........................................            --              155            3,509 
                                                                ----------       ----------       ---------- 

Costs of revenues:                                                                                           

  Cost of rental............................................            --               14              671 
  Cost of product sales.....................................            --               21            1,326 
                                                                ----------       ----------       ---------- 
    Total costs of revenues.................................            --               35            1,997 
                                                                ----------       ----------       ---------- 

    Gross profit............................................            --              120            1,512 

Operating expenses:                                                                                          

  Marketing and sales.......................................            --              117           10,252 
  Product development.......................................            --               49            1,964 
  General and administrative................................           118              674           11,551 
  Delivery..................................................            --               66            3,265 
  Depreciation and amortization.............................            --               24              801 
  Non-cash compensation.....................................            --                3              208 
                                                                ----------       ----------       ---------- 
    Total operating expenses................................           118              933           28,041 
                                                                ----------       ----------       ---------- 

Loss from operations........................................          (118)            (813)         (26,529)
Interest income, net........................................            --               --              159 
                                                                ----------       ----------       ---------- 
Net loss....................................................          (118)            (813)         (26,370)

Dividends and accretion of redemption value on mandatorily                                                   
  redeemable convertible preferred stock....................            (5)             (55)          (2,589)
                                                                ----------       ----------       ---------- 
Net loss attributable to common stockholders................    $     (123)      $     (868)      $  (28,959)
                                                                ==========       ==========       ========== 
Basic and diluted net loss per common share.................    $    (0.01)      $    (0.08)      $    (2.79)
                                                                ==========       ==========       ========== 
Weighted-average shares outstanding used in computing basic                                                  
  and diluted net loss per common share.....................    10,182,000       10,350,000       10,362,192 
                                                                ==========       ==========       ========== 
Pro forma basic and diluted net loss per common share.......                                      $    (1.29)
                                                                                                  ========== 
Weighted-average shares outstanding used in computing pro                                                    
  forma basic and diluted net loss per common share.........                                      22,430,968 
                                                                                                  ========== 


                                                                              DECEMBER 31,                   
                                                             ----------------------------------------------- 
                                                                   1997             1998             1999    
                                                             -----------------   ----------       ---------- 
                                                                             (IN THOUSANDS)                  
                                                                                                             
BALANCE SHEET DATA:                                                                                          
Cash and cash equivalents...................................    $       36       $       82       $   88,867 
Working capital (deficit)...................................            84             (186)          78,378 
Total assets................................................           153              558          102,998 
Stockholders' equity (deficit)..............................           (23)            (909)          88,540 

   See the notes to our financial statements for the computation of the shares
used in computing pro forma basic and diluted net loss per common share.        

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION 
AND RESULTS OF OPERATIONS 

THE FOLLOWING DISCUSSION AND ANALYSIS SHOULD BE READ IN CONJUNCTION WITH
"SELECTED FINANCIAL DATA" AND OUR FINANCIAL STATEMENTS AND THE RELATED NOTES    
INCLUDED ELSEWHERE IN THIS PROSPECTUS. THIS DISCUSSION CONTAINS FORWARD-LOOKING 
STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. OUR ACTUAL RESULTS COULD DIFFER
MATERIALLY FROM THOSE ANTICIPATED IN THE FORWARD-LOOKING STATEMENTS AS A RESULT 
OF CERTAIN FACTORS INCLUDING THE RISKS DISCUSSED IN "RISK FACTORS" AND ELSEWHERE
IN THIS PROSPECTUS.                                                             

OVERVIEW                                                                        

We enable consumers to order a variety of entertainment, food and       
convenience products over the Internet for free delivery in under one hour.     
Additionally, we recently initiated a business-to-business service to enable    
select retailers to provide their customers with an expedited delivery option   
through our distribution networks. We launched our products and services in New 
York City in March 1998 and expanded our operations to Seattle in June 1999, San
Francisco and Boston in September 1999, Washington, D.C. in November 1999 and   
Los Angeles in February 2000. We intend to enter at least ten additional markets
by the end of 2000. In 1999, the number of customers registered on our web site 
grew at a compounded monthly rate of approximately 30%.                         

We use an innovative, proprietary business system that combines our web 
site, distribution center and delivery network. We serve each of our markets    
from one or more distribution centers. Our typical distribution center is       
approximately 10,000 square feet in size and is located in low-rent area with   
access to key thoroughfares. Deliveries to customers are made via van, car,     
scooter or bicycle depending on the population and traffic density and          
geographical breadth of the particular market.                                  

From our inception in April 1997 through March 1998, our operations     
consisted primarily of start-up activities, including raising capital,          
recruiting personnel, developing our marketing and administrative organizations 
and purchasing operating assets. We began recognizing revenues in March 1998    
when we opened our first distribution center in New York City.                  

   We have incurred significant losses since our inception. As of December 31,
1999, we had an accumulated deficit of $27.3 million. We expect that we will    
continue to incur substantial losses for the foreseeable future and that the    
rate at which we incur those losses will increase as we enter new markets and   
expand our operations in existing markets. We also expect to incur significant  
marketing, product development, selling, general and administrative, and        
delivery expenses. As a result, we will need to generate significant revenues to
achieve profitability and may never achieve profitability.                      

    REVENUES.  Our revenues are derived from the sale of products such as books,
convenience items, DVDs, food, music, video cassettes, and video games and from 
the rental of DVDs, video cassettes and video games. We recognize revenues, net 
of discounts and returns, when products are delivered to customers. Discounts   
and returns have been insignificant to date. We expect that our rental revenues,
as a percent of total revenues, will decline as the number of products that we  
offer for sale increases.                                                       

COSTS OF REVENUES.  Costs of revenues include costs of carrying our     
inventory, including amortization of our inventory of rental products and the   
costs of products sold.                                                         

MARKETING AND SALES.  Marketing and sales expenses include the cost of  
advertising through various media channels, such as television, radio, print,   
direct mailing and outdoor marketing, and the cost of public relations.         

PRODUCT DEVELOPMENT.  Product development expenses consist primarily of 
consultants' fees and payroll and related expenses for the personnel responsible
for web site maintenance, systems infrastructure and web site content.          

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GENERAL AND ADMINISTRATIVE.  General and administrative expenses consist
primarily of salaries and payroll related costs, rent and related costs,        
utilities, travel and entertainment costs, professional fees and costs of office
and distribution center supplies.                                               

DELIVERY.  Delivery expenses consist primarily of payroll and payroll   
related costs for our delivery staff.                                           

DEPRECIATION AND AMORTIZATION.  Depreciation is calculated using the    
straight-line method over the estimated useful lives of the related assets,     
which range from three to seven years. Equipment acquired under capital leases  
and leasehold improvements are amortized using the straight-line method over the
shorter of the lease terms or their estimated useful lives. Amortization of our 
inventory of rental products (principally videocassettes) is included in costs  
of revenues.                                                                    

DIVIDENDS AND ACCRETION OF REDEMPTION VALUE ON MANDATORILY REDEEMABLE   
CONVERTIBLE PREFERRED STOCK. We have presented the effects of the cumulative    
undeclared dividends and the accretion charges to redemption value on the       
mandatorily redeemable convertible preferred stock on the net loss attributable 
to common stockholders. These dividends and accretion charges are presented     
through December 23, 1999, at which time, in connection with the issuance of our
Series E convertible preferred stock, the redemption rights were cancelled.     

    NON-CASH COMPENSATION.  During the year ended December 31, 1998, we recorded
$3,000 of compensation expense in connection with the issuance of options to    
purchase 20,000 shares of common stock to consultants for services performed.   
During the year ended December 31, 1999, we recorded $137,000 of compensation   
expense in connection with the issuance of warrants to purchase 100,000 shares  
of common stock to consultants for services performed. The value of each of     
these options and warrants was determined using the Black-Scholes pricing model.

During March 2000, we issued a five-year warrant to purchase 8,650,000  
shares of Series E convertible preferred stock to Amazon.com LLC, in connection 
with its execution of a three-year strategic agreement with us. In addition,    
during March 2000, we issued a one-year warrant to purchase 2,699,145 shares of 
Series F convertible preferred stock to Ticketmaster Online--City Search in     
connection with its execution of a three-year strategic agreement with us. We   
ascribed a total value of $39.5 million in the aggregate to these warrants using
the Black-Scholes pricing model. In addition, in March 2000, we issued an       
aggregate of 2,647,954 shares of Series F convertible preferred stock, valued at
$20.0 million, in connection with the execution of two, three year strategic    
agreements. The aggregate value of $59.5 million ascribed to the warrants and   
shares will be treated as deferred expense in our balance sheet and will be     
ratably amortized over the terms of the strategic agreements.                   

    During 1999, we recorded $2.7 million of deferred compensation in connection
with the issuance of stock options having an exercise price less than the deemed
fair value of our common stock at the date of the options were granted. The     
deferred compensation will be amortized as a charge to operations over the      
vesting period of the options. Total amortization of deferred compensation for  
the year ended December 31, 1999 was $71,000. We expect to amortize the         
following amounts of deferred compensation in each subsequent year as follows:  
2000-$669,000; 2001-$669,000; 2002-$669,000; 2003-$595,000.                     

 For the period from January 1, 2000 through February 29, 2000, we granted
options to purchase an aggregate of 5,239,125 shares of common stock to         
employees at a weighted average exercise price of $4.35. The deemed fair value  
of our common stock during that period ranged from $3.51 to $6.17 per share. We 
recorded deferred compensation of $5.6 million in connection with the grant of  
the portion of those of the options having an exercise price less than the      
deemed fair value of our common stock at the date of grant. This amount will be 
amortized as a charge to operations over the vesting period of the options. We  
expect to amortize the following amounts of this deferred compensation in each  
year as follows: 2000-$1.3 million; 2001-$1.4 million; 2002-$1.4 million;       
2003-$1.4 million; 2003-$100,000.                                               

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YEARS ENDED DECEMBER 31, 1998 AND 1999                                          

REVENUES.  Revenues increased to $3.5 million for 1999 from $155,000 for
1998, primarily due to an increase in the size of our customer base and volume  
of our orders as a result of our opening of new distribution centers in New     
York, Seattle, San Francisco, Boston and Washington D.C. Our customer base also 
increased as a result of our implementation of various marketing initiatives,   
including new cable television advertisements and online and print advertising, 
as well as word-of-mouth sign-ups.                                              

COSTS OF REVENUES.  Costs of revenues increased to $2.0 million for 1999
from $35,000 for 1998. This was due to an increase in amortization of our rental
inventory, which was attributable in part to the substantial increase in our    
inventory during the year as we opened new distribution centers, and to an      
increase in our cost of products sold, which reflected the substantial increase 
in the sales of products.                                                       

MARKETING AND SALES.  Marketing and sales expenses increased to         
$10.3 million for 1999 from $117,000 for 1998. The increase was due primarily to
increased use of cable television advertising, online, print and direct mail    
advertising, in addition to promotional efforts associated with our opening of  
new distributions centers throughout 1999.                                      

PRODUCT DEVELOPMENT.  Product development expenses increased to         
$2.0 million in 1999 from $49,000 in 1998. The increase was primarily due to an 
increase in the number of personnel responsible for web site maintenance,       
systems infrastructure and web site content.                                    

  GENERAL AND ADMINISTRATIVE.  General and administrative expenses increased
to $11.6 million for 1999 from $674,000 for 1998. The increase was due primarily
to increased rents and utility charges connected with the opening of our new    
distribution centers as well as higher payroll, travel and entertainment,       
professional fees, and office and distribution center supplies.                 

    DELIVERY.  Delivery expenses increased to $3.3 million for 1999 from $66,000
for 1998. The increase was due primarily to the hiring of delivery personnel,   
both in New York City where the volume of orders increased, as well as in other 
markets where we opened new distribution centers during the year.               

  DEPRECIATION AND AMORTIZATION.  Depreciation and amortization increased to
$801,000 for 1999 from $24,000 for 1998. The increase was due primarily to      
purchases of computer hardware and software in addition to furniture and        
fixtures for our new distribution centers and our corporate office.             

    INTEREST INCOME (EXPENSE), NET.  Interest income consists of interest earned
on cash and cash equivalents. We expect interest income to increase as a result 
of the investment of the proceeds from the sale of our Series E and F preferred 
stock in January and March 2000, respectively, and the net proceeds from our    
sale of       shares of common stock in this offering.                          

INCEPTION (APRIL 17, 1997) THROUGH DECEMBER 31, 1997                            

  We did not generate any revenues or incur any costs of revenues, marketing
and sales, product development, delivery, depreciation and amortization or      
non-cash compensation expenses prior to 1998 because we were in a development   
stage. We began recognizing revenues in March 1998 when we launched our first   
distribution center in New York City. General and administrative expenses of    
$118,000 during the period from inception through December 31, 1997 were        
primarily related to professional fees and costs incurred in connection with    
recruiting personnel and developing our marketing and administrative            
capabilities.                                                                   

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QUARTERLY RESULTS OF OPERATIONS                                                 

  The following table presents our unaudited quarterly results of operations
for each of the four calendar quarters of 1999. We have prepared this table on a
basis consistent with our audited financial statements contained in this        
prospectus and have included all necessary adjustments, consisting of normal    
recurring adjustments, necessary for a fair presentation or our results of      
operations for these quarterly periods. You should read the quarterly financial 
data together with our audited financial statements and the notes to those      
statements contained in this prospectus. The operating results shown in the     
following table are not necessarily indicative of the results of operations for 
any future period.                                                              

                                                        [Enlarge/Download Table]

                                                                  THREE MONTHS ENDED              
                                                      ------------------------------------------- 
                                                      MARCH 31,   JUNE 30,   SEPT. 30,   DEC. 31, 
                                                        1999        1999       1999        1999   
                                                      ---------   --------   ---------   -------- 
                                                                                                  
STATEMENT OF OPERATIONS DATA:                                                                     
Revenues:                                                                                         
  Rental............................................. $    166    $    256   $    517    $    767 
  Product sales......................................       84         106        263       1,350 
                                                      --------    --------   --------    -------- 
    Total revenues...................................      250         362        780       2,117 
                                                      --------    --------   --------    -------- 
Costs of revenues:                                                                                
  Cost of rental.....................................       65         115        194         297 
  Cost of product sales..............................       52          85        207         982 
                                                      --------    --------   --------    -------- 
    Total costs of revenues..........................      117         200        401       1,279 
                                                      --------    --------   --------    -------- 
    Gross profit.....................................      133         162        379         838 
Operating expenses:                                                                               
  Marketing and sales................................      116         315      2,598       7,223 
  Product development................................      114         149        489       1,212 
  General and administrative.........................       75         731      2,437       8,308 
  Delivery...........................................      112         210        662       2,281 
  Depreciation and amortization......................       11         122        196         472 
  Non-cash compensation..............................       --           3        141          64 
                                                      --------    --------   --------    -------- 
    Total operating expenses.........................      428       1,530      6,523      19,560 
                                                      --------    --------   --------    -------- 
Loss from operations.................................     (295)     (1,368)    (6,144)    (18,722)
Interest income (expense), net.......................       --           2        (33)        190 
                                                      --------    --------   --------    -------- 
Net loss............................................. $   (295)   $ (1,366)  $ (6,177)   $(18,532)
                                                      ========    ========   ========    ======== 

Increases in revenues over the course of 1999 were primarily due to     
increases in our customer base and the number of total orders. Our customer base
grew from 3,700 at December 31, 1998, to 8,800, 16,119, 28,085 and 101,234 at   
March 31, June 30, September 30 and December 31, 1999, respectively. This growth
was primarily the result of new marketing initiatives, including new cable      
television advertisements, online, print and direct mail advertising, and to a  
significant increase in word-of-mouth sign-ups, as well as our opening of       
additional distribution centers throughout the year. Growth in our customer base
and increased order frequency resulted in a total order volume of 29,231,       
44,275, 78,118 and 177,581 during the three-month periods ended March 31,       
June 30, September 30 and December 31, 1999, respectively.                      

  Increases in costs of revenues and operating expenses, including marketing
and sales expenses, general and administrative expenses and delivery expenses,  
during 1999 were primarily the result of opening new distribution centers       
throughout 1999.                                                                

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  In addition, product development expense increased over the course of 1999
primarily due to increased costs for consultants and an increase in payroll and 
related expenses associated with an increase in the number of personnel         
responsible for web site maintenance, systems infrastructure and web site       
content.                                                                        

  We have experienced, and expect to continue to experience, higher revenues
as a result of a higher volume of orders during the fourth quarter holiday      
season.                                                                         

LIQUIDITY AND CAPITAL RESOURCES                                                 

Since our inception we have financed our operations primarily through   
private placements of various series of our preferred stock, which has resulted 
in our receipt of approximately $232.3 million of cash, including $113.6        
million subsequent to December 31, 1999, net of issuance costs, plus          
$10.0 million of marketable securities.                                         

Net cash used in operating activities was $21.6 million in 1999. This   
resulted primarily from the funding of our net loss for the year, as adjusted   
for non-cash expenses, and an increase in operating assets, including product   
inventory, security deposits and accounts receivable, partially offset by       
increases in operating liabilities, including accounts payable and accrued      
expenses. Net cash used in operating activities was $444,000 in 1998, also due  
primarily to the funding of our net loss for the year, adjusted for non-cash    
expenses, and increases in operating liabilities, including accounts payable and
accrued expenses. Net cash used in operating activities was $140,000 for the    
period from April 17, 1997 (inception) through December 31, 1997, primarily due 
to the net loss for the period.                                                 

   Net cash used in investing activities was $7.6 million in 1999, $171,000 in
1998 and $94,000 for the period from April 17, 1997 (inception) through         
December 31, 1997. Net cash used in investing activities was primarily for the  
purchase of property, equipment and the inventory of rental products required   
for our new distribution centers.                                               

Net cash provided by financing activities was $118.0 million in 1999,   
primarily from the sale of shares of our Series B through Series E preferred    
stock. Net cash provided by financing activities was $661,000 in 1998, primarily
from the sale of our Series A and Series B preferred stock, in addition to loans
from our founders. Net cash provided by financing activities was $270,000 for   
the period from April 17, 1997 (inception) through December 31, 1997, resulting 
primarily from the sale of shares of our Series A preferred stock and common    
stock, in addition to loans from our founders.                                  

  Although we have no material commitments for capital expenditures, we have
experienced a substantial increase in capital expenditures since our inception, 
consistent with the growth in our operations and staffing. We anticipate that   
this will continue for the foreseeable future. We intend to continue to expand  
our marketing and sales programs and conduct aggressive brand promotions.       

Pursuant to our agreement with Starbucks executed in March 2000, we are 
committed to making the following cash payments to Starbucks of $15.0 million in
2000, $25.0 million in 2001, $35.0 million in 2002, $35.0 million in 2003 and   
$40.0 million in 2004.                                                          

   As of December 31, 1999, we have commitments under non-cancelable operating
leases amounting to $16.6 million, of which $2.0 million will be due on or      
before December 31, 2000.                                                       

We expect to devote substantial resources to continue development of our
brand and web site, expand our sales, support, marketing and establish          
additional facilities and build the systems necessary to support our growth.    
Although we believe that the proceeds of this offering, together with our       
current cash and cash equivalents will be sufficient to fund our activities for 
at least the next 12 months, there can be no assurance that we will not require 
additional financing within this time frame or that additional funding, if      
needed, will be available on terms acceptable to us or at all. In addition,     
although there are no present understandings, commitments or agreements with    
respect to                                                                      

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any acquisition of other businesses, products or technologies, we may, from time
to time, evaluate acquisitions of other businesses, products and technologies.  
In order to consummate potential acquisitions, if any, we may need additional   
equity or debt financing.                                                       

RECENT ACCOUNTING PRONOUNCEMENTS                                                

   In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES. SFAS     
No. 133 establishes accounting and reporting standards for derivative           
instruments, including derivative instruments embedded in other contracts, and  
for hedging activities. Subsequently, the FASB issued SFAS No. 137 which        
deferred the effective date of SFAS No. 133. SFAS No. 137 is effective for all  
fiscal quarters of fiscal years beginning after June 15, 2000. We have has not  
yet determined the impact of this pronouncement on our financial position or    
results of operations.                                                          

MARKET RISK                                                                     

   The primary objective of our investment activities is to preserve principal
while at the same time maximizing the income we receive from our investments    
without significantly increasing risk of loss. Some of the securities in which  
we may invest may be subject to market risk. This means that a change in        
prevailing interest rates may cause the market value of the investment to       
fluctuate. For example, if we hold a security that was issued with a fixed      
interest rate at the then-prevailing rate and the prevailing interest rate later
rises, the market value of our investment will probably decline. To minimize    
this risk in the future, we intend to maintain our portfolio of cash equivalents
and short-term investments in a variety of securities, including commercial     
paper, money market funds, government and non-government debt securities. We    
maintained our portfolio of cash equivalents in money market funds as of        
December 31, 1999. In general, the fair value of money market funds is not      
subject to market risk because the interest paid on such funds fluctuates with  
prevailing market rates.                                                        

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BUSINESS

OVERVIEW                                                                        

We enable consumers to order a variety of entertainment, food and       
convenience products over the Internet for free delivery in under one hour. Our 
promise of under one hour delivery is designed to satisfy a consumer's desire   
for immediate gratification. We focus on selling frequently purchased, high     
margin items with well-known brand names. Additionally, we recently initiated a 
business-to-business service to enable select retailers to provide their        
customers with an expedited delivery option through our distribution network.   

Our innovative, proprietary business system integrates our web site,    
distribution centers and delivery infrastructure. We believe that our first     
mover advantage and the quality of our service have allowed and will continue to
allow us to increase our customer base and build our brand name as we enter new 
geographic markets. We launched our service in New York City in March 1998 and  
have since expanded our operations to the Seattle, San Francisco, Boston,       
Washington, D.C. and Los Angeles markets. We intend to enter at least ten       
additional markets by the end of 2000. In 1999, the number of customers         
registered on our web site grew at a compounded monthly rate of approximately   
30%.                                                                            

We serve each of our markets from one or more distribution centers. Our 
distribution centers are approximately 10,000 square feet in size and are       
located primarily in low-rent areas with access to key thoroughfares. The size  
of our typical distribution center provides capacity to expand our product      
offerings in our existing markets. Our business model enables us to quickly     
establish operations in a new market with a moderate capital expenditure and is 
designed to eliminate the high lease expense, build-out cost and inventory      
requirements normally associated with having multiple retail locations in a     
single market.                                                                  

INDUSTRY BACKGROUND                                                             

LIMITATIONS OF STOREFRONT AND CATALOG RETAILING                         

   Traditionally, consumers have relied on storefront and catalog retailers to
satisfy many of their purchasing needs and only recently have begun turning to  
the Internet in increasing numbers. In-store shopping, although offering the    
opportunity for immediate receipt of a purchased item, can be frustrating and   
time consuming, particularly during peak shopping times. The consumer must      
identify a store that is open and likely to carry the desired item. The consumer
then must travel to the store, search for the item with no guarantee that the   
item will be in stock, and then wait in line for service. A consumer who desires
a variety of items may be required to visit a number of stores. In addition,    
most retail stores do not provide consumers with ready access to detailed       
product information and useful reviews.                                         

  Catalog retailers typically provide greater product selection and shopping
convenience than storefront retailers and are more convenient for consumers than
in-store shopping. However, because they deliver their products by mail or via  
package delivery companies, such as UPS and Federal Express, catalog retailers  
are generally unable to provide under one hour or even same day delivery.       
Typically, consumers purchasing products from catalog retailers must wait       
anywhere from three to five days for standard mail delivery and at least one    
full day for express package delivery. This delay in the receipt of a purchased 
item is frustrating to many consumers. In addition, shipping and handling       
charges can be significant relative to the total value of goods purchased,      
particularly if the customer elects premium one or two day shipping services.   

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LIMITATIONS OF ONLINE RETAILING                                         

   Online retailers address some of the limitations inherent in storefront and
catalog retailing. They enable consumers to select from and quickly purchase a  
wide variety of goods, obtain comprehensive product information and informative 
reviews, and customize their shopping experience through personalization        
features. However, most online retailers do not provide under one hour or even  
same day delivery.                                                              

THE KOZMO SOLUTION                                                              

We combine the convenience, time savings, product information and       
personalization of catalog and online shopping with the prompt receipt of       
purchased items normally possible only with in-store shopping. Through our web  
site, we sell a wide variety of frequently purchased, high margin items with    
well-known brand names, and we deliver them to our customers in under one hour. 
We also offer select retailers the opportunity, on a fee-for-service basis, to  
provide their customers with the benefits of our distribution networks. We      
believe these business-to-business relationships will enhance our revenues,     
operating margins and brand awareness.                                          

The principal components of our solution include:                       

   CONVENIENCE.  Our under one hour delivery model provides our customers with
extraordinary convenience not available from most other retailers and is        
designed to appeal to their desire for immediate gratification. Consumers can   
choose from a wide variety of branded goods and avoid the inconveniences of     
in-store shopping, such as the commute and the wait in line. Moreover, our      
solution enables our customers to avoid the delivery delays typically associated
with catalog or online shopping. We believe our product selection and the speed 
and convenience of our delivery service make us an invaluable resource to       
time-starved consumers and will engender customer loyalty.                      

USER-FRIENDLY WEB SITE.  Our web site is convenient, easy-to-use and    
designed to save consumers time and avoid frustration. Customers may shop for   
products by browsing clearly organized product categories or by using keyword   
searches. Our web site also assists customer decision-making by providing useful
product information and helpful third-party reviews, as well as interesting     
related content. Our customers can establish mobile profiles so that they can   
use our service outside their home areas. They also can establish wish lists for
popular items, which enable us to automatically inform them of the availability 
of desired products, such as recently published books and new video releases,   
thereby enhancing the buying experience.                                        

LARGE SELECTION OF HIGH QUALITY PRODUCTS.  We provide consumers with    
one-stop shopping for a broad range of products. We offer many products that are
complementary to each other, which we believe increases our average order size  
and our attractiveness to consumers. Our products include well-known national   
brands, such as COCA-COLA, NABISCO, GILLETTE, KODAK and CREST. Additionally, in 
local markets, we may offer well-known local brands, such as COSI sandwiches and
KRISPY KREME donuts in New York, EXTREME PIZZA and BRIAZZ sandwiches and salads 
in San Francisco, and COUGAR MOUNTAIN cookies in Seattle. Our products are      
priced at levels that are competitive with those generally found in retail      
stores.                                                                         

   QUALITY CUSTOMER SERVICE.  We provide superior customer service through our
online help desk, a toll-free customer service number and two convenient options
to return rental products, dropoff boxes at Starbucks or other select retail    
locations and, for a fee, home pick up. We have an opportunity to personally    
interact with our customers each time an order is delivered, thereby allowing us
to continually reinforce our brand. Our delivery staff, known as                
"Kozmonauts-TM-," are the backbone of our operations and are incentivized with  
competitive compensation. In addition, all salaried employees, including many   
Kozmonauts-TM-, are eligible to receive stock options. Kozmonauts-TM- are       
trained to ensure a consistently high level of courtesy when dealing with       
customers.                                                                      

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 EFFICIENT LOGISTICS PROCESSES.  Our Kozmo Intelligent Dispatch System, or
KIDS-TM-, is an advanced logistics management system that simplifies product and
order handling and enables us to efficiently organize and execute deliveries by 
taking advantage of available geographical data and advanced routing and        
scheduling algorithms. It also allows us to more effectively deploy and redeploy
our delivery staff when they are in the field. We package each customer order in
a separate container at our distribution center and deliver groups of orders to 
a common destination area via the most efficient route by van, car, scooter or  
bicycle in under one hour.                                                      

LOW COST DISTRIBUTION MODEL.  We believe that the start-up and operating
costs of our distribution centers are significantly lower than the comparable   
costs that would be incurred by other retailers to service the same geographic  
market. Our distribution centers are approximately 10,000 square feet in size   
and can accommodate up to 50,000 SKUs, providing capacity for future product    
growth. We believe that expanding our product offerings will enable us to       
achieve greater operating efficiencies by including a greater number of items in
each delivery. We intend to increase the number of customers we serve in a      
particular market by establishing additional distribution centers in that market
as needed. This will enable us to spread our marketing and operational expenses 
over a wider service base.                                                      

GROWTH STRATEGY                                                                 

    Our growth strategy has two objectives: to be the leading online provider of
entertainment, food and convenience products with free delivery in under one    
hour and to further enhance the usage of our distribution infrastructure by     
providing select retailers with an expedited delivery option on a fee-for-      
service basis. Focusing on these objectives will allow us to increase our       
average order size and generate additional orders, thereby increasing delivery  
density, revenues and our margins. The key elements of our strategy are to:     

EXPAND INTO NEW GEOGRAPHIC MARKETS.  Based on our experience in the six 
markets in which we currently operate, we believe that a significant opportunity
exists to extend our operations into additional markets. Our distribution model 
has been designed for smooth and rapid deployment in new markets. We currently  
intend to enter at least ten additional markets by the end of 2000 while        
expanding our operations in our existing markets by opening additional          
distribution centers as needed.                                                 

EXPLOIT OUR RAPID DELIVERY INFRASTRUCTURE FOR BUSINESS-TO-BUSINESS      
TRANSACTIONS. We intend to increase the volume of products delivered through our
distribution networks by offering select retailers an expedited delivery option 
for their customers on a fee-for-service basis. This delivery option will allow 
these retailers to serve those customers whose desire for immediate             
gratification would cause them to otherwise turn to a storefront retailer. We   
expect these arrangements to improve the efficiency of our distribution networks
by increasing the volume and density of our deliveries, our average order size  
and our brand awareness. For example, we recently entered into an agreement with
Amazon.com to provide its customers with a one hour delivery option for books,  
music, toys and other products in markets we serve.                             

 BUILD THE KOZMO BRAND.  We intend to establish Kozmo as the leading brand
for under one hour delivery of online purchases. We will seek to build and      
reinforce consumer recognition of our brand through public relations programs,  
advertising campaigns, promotional activities and joint marketing efforts. We   
also intend to enter into strategic relationships that provide us with          
co-branding opportunities and the opportunity to offer new products and         
services. For example, we recently entered into a strategic relationship with   
Starbucks that will provide us with a significant in-store marketing presence.  

  BUILD A LOYAL CUSTOMER BASE.  We intend to build an ever expanding base of
loyal customers in each of our markets. We believe that the high quality and    
reliability of our delivery service will cause our existing customers to        
increase their use of our service and recommend us to other consumers. We       

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strive to enhance our customers' shopping experience by actively seeking their  
feedback, expanding our product selection to cater to changing consumer         
preferences and continuing to improve our web site. We expect to increase the   
efficiency of our distribution networks and create a competitive advantage over 
storefront, catalog and online competitors as our customer base increases in    
each market.                                                                    

  ESTABLISH STRATEGIC RELATIONSHIPS WITH KEY VENDORS AND OTHER RETAILERS AND
SERVICE PROVIDERS.  We intend to enter into strategic relationships that will   
allow us to offer our customers an enhanced shopping experience and a more      
comprehensive selection of products and services. We believe these relationships
will allow us to increase our access to new customers, increase our order size, 
increase the volume of traffic on our web site and improve the efficiencies of  
our operations. For example, we have a relationship with Ticketmaster           
Online--CitySearch that is designed to attract traffic to our web site. We will 
be the only online retailer advertised on CitySearch's web site that offers     
delivery in under one hour.                                                     

PRODUCT OFFERINGS                                                               

We offer consumers a broad selection of quality products at competitive 
prices. We focus on selling frequently purchased, high margin items with        
nationally-recognized brand names. We also seek to offer products that are      
complementary to each other in order to encourage customers to order additional 
items. In certain markets, we also offer products that are particularly         
well-known in those markets.                                                    

Our product offerings are currently concentrated in the following       
categories:                                                                     

- BOOKS. We sell approximately 300 of the best selling book titles in   
hardcover and paperback across a wide range of categories. Forrester
    Research estimates that online book spending will grow from $1.7 billion
in 1999 to $3.2 billion in 2004.                                    

  - FOOD. We sell beverages, candy, snack foods, ice cream, and pre-made and
      pre-packaged pizzas, salads and sandwiches prepared by our suppliers. Some
    of the major brands we offer include BEN & JERRY'S, NABISCO and HERSHEY.
    Forrester Research estimates that online food and beverage spending will
grow from $1.1 billion in 2000 to $16.0 billion by 2004.            

- HOME VIDEOS. We offer approximately 12,000 movie titles in VHS        
   videocassette format and approximately 2,000 movie titles in DVD format
      for rent or for sale. Our selection includes the most popular new releases
   as well as classic, foreign and independent films. We also sell DVD and
     VHS players. Veronis Suhler estimates the total market for the home video
 market will grow from $18.1 billion in 1999 to $20.2 billion by 2003.

   - MAGAZINES. We sell approximately 200 popular magazines across a number of
   categories including news, sports, business, entertainment and leisure.
  Veronis Suhler estimates the total market size for magazines will grow
from $7.7 billion in 1998 to $9.1 billion by 2003.                  

   - MINI-MART. We sell over-the-counter drugs, batteries, film and disposable
    cameras, bath and personal care products, baby care products and tobacco
   products. Some of the brands we offer include TYLENOL, DURACELL, KODAK,
  JOHNSON & JOHNSON and HUGGIES. The National Association of Convenience
 Stores estimates that the total in-store convenience store market was
$164.0 billion in 1998.                                             

 - PRE-RECORDED MUSIC. We sell approximately 2,000 CD titles including the
     top current music releases and other popular titles in a variety of music
      categories such as alternative, R&B, classical, rock and roll, country and
     jazz. We also sell portable CD players. Forrester Research estimates that
     online music spending will grow from $1.3 billion in 1999 to $4.2 billion
in 2004.                                                            

 - VIDEO GAMES. We offer approximately 400 video games for rent as well as
for sale. We feature popular new releases and a selection of classic
      games. We also sell gaming consoles by major brands such as Sega, Nintendo
   and Sony. Veronis Suhler estimates that the total market for video game
 software will grow from $3.0 billion in 1998 to $5.1 billion by 2003.

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In addition to our customary product offerings, we periodically offer   
seasonal products, such as toys for the holiday season and cards and candy for  
Valentine's Day.                                                                

THE KOZMO WEB SITE                                                              

Our web site is our first point of contact with our customers and the   
gateway to the Kozmo shopping experience. Our web site is easy to use,          
convenient and time-saving for our customers. The key features of our web site  
include:                                                                        

   LOCALIZED OFFERING.  Customers enter their zip codes upon entry to our home
page and are then routed automatically to a localized web site that includes not
only major nationally branded products but also prominent local brands. We      
believe that our ability to tailor our product offerings to consumer preferences
by region is a competitive advantage and increases customer loyalty.            

HIGHLY INTUITIVE LAYOUT.                                                

          [A black and white image of the Kozmo.com home page.
                This image will show a web browser displaying our home
page.]                                                                          

Our web site design enables consumers to browse intuitively among our   
products by category or through convenient key word searches. Popular and new   
DVDs, videocassette and game rental offerings are prominently displayed,        
enabling consumers to quickly locate those items that are most likely to        
interest them.                                                                  

PERSONALIZATION.   MY KOZMO-TM- is a personalization tool that enables a
user to customize the shopping experience. Users can create a "wish list" of    
desired movies identified by title or featured performer and are automatically  
notified when the movie becomes available. We are currently enhancing MY        
KOZMO-TM- to items that are complementary to each other and suggest related     
products that a customer might want to add to an order.                         

   DELIVERY OPTIONS.  Our web site enables our customers to choose the time at
which an order is delivered, opting for delivery either in under one hour after 
placing the order or within any other specified one-hour time period during the 
rest of the day. Our customers can also provide us with special instructions to 
ensure accurate and timely delivery.                                            

INFORMATION.  We provide consumers with useful product information and  
helpful third party reviews, allowing them to buy or rent with confidence. We   
have also developed, and are currently implementing, a system for receiving and 
publishing our customer reviews. Information on our hours of operation, drop box
locations and customer assistance is also easily accessible.                    

DISTRIBUTION CENTERS                                                            

We currently operate thirteen distribution centers. In three of our six 
existing markets, we have more than one distribution center. Our distribution   
centers are approximately 10,000 square feet in size and are located primarily  
in low-rent areas with access to key thoroughfares. The size of our typical     
distribution center provides capacity to expand our product offerings. Our      
business model enables us to quickly establish operations in a new market with a
moderate capital expenditure. We now have over two years of experience in       
operating our distribution centers and have adapted their design to maximize the
speed and accuracy of our distribution. We employ a flexible layout of          
standardized equipment that enables us to easily adjust to evolving product and 
customer requirements. We are adding automation features to our new distribution
centers to improve the efficiency of our operations.                            

    Each of our distribution centers is linked to our web site through a central
web server. The web server routes orders to the distribution center nearest to  
the customer's zip code. Our proprietary systems manage virtually all           
operational processes within the center, including product gathering and        
packaging, inventory management, customer service and delivery route planning.  
These processes are                                                             

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fully integrated, simplifying distribution and inventory management. For        
example, we begin gathering items as soon as they are selected by the customer  
while simultaneously adjusting our inventory database and web site information  
display to reflect the removal of these items from available stock even before  
the customer has completed the checkout process. We are currently implementing  
several key initiatives to enhance our operational efficiency, including using  
wireless communications, to monitor order fulfillment.                          

DELIVERY OPERATIONS                                                             

Our proprietary KIDS-TM- system optimizes delivery sequences and routes,
minimizing travel distances and maximizing productivity. The system uses        
operations research models and integrates environmental factors, such as time of
day, weather conditions, mode of transportation and product characteristics. Our
delivery methods vary depending upon local population density, travel times and 
order size, and include vans, cars, scooters and bicycles. Future plans call for
use of integrated Global Positioning Systems to allow real-time tracking of our 
delivery personnel, thereby improving the accuracy and efficiency of deliveries.

MARKET EXPANSION                                                                

We currently operate in the following markets:                          

                                                                [Download Table]

                                                             DATE OPERATIONS
KOZMO MARKET                                                    COMMENCED   
------------                                                 ---------------
                                                                            
New York City..............................................  March 1998     
Seattle....................................................  June 1999      
San Francisco..............................................  September 1999 
Boston.....................................................  September 1999 
Washington, D.C............................................  November 1999  
Los Angeles................................................  February 2000  

 We intend to enter at least ten additional markets by the end of 2000. We
select markets and prioritize our expansion schedule by evaluating factors such 
as the size of the market opportunity, market readiness, competitive activity,  
and start-up and operational costs. The number of required distribution centers 
in any particular market will vary depending on the geographic size of the      
market, its population density, Internet usage, and expected size and frequency 
of customer order volume. We have conducted in-depth research on potential      
target markets which have included local visits to 25 cities to gather          
first-hand market intelligence.                                                 

   We have developed a comprehensive plan for opening distribution centers and
expanding into new markets. The plan is designed to facilitate a quick launch of
our services in a new market once it has been selected. A team of experts work  
together to set up and prepare each distribution center, including build-out,   
inventory procurement and systems implementation. The training of managers and  
staff is provided locally in each market and at our corporate headquarters in   
New York.                                                                       

As demand within a market grows, we may launch additional distribution  
centers in that market. The implementation time and resources necessary for     
these expansions are significantly less than for new market entry because we are
able to take advantage of existing resources and expertise. These additional    
distribution centers allow us to increase our coverage area and create economies
of scale in operations and marketing.                                           

RELATIONSHIP WITH AMAZON.COM                                                    

We have a strategic relationship with Amazon.com LLC, an affiliate of   
Amazon.com, Inc., that we believe will increase the use of our delivery         
infrastructure and allow us to attract other business-to-business partners. In  
March 2000, we entered into a supply and delivery agreement with Amazon.com LLC 
to deliver books, music and toy products offered on the Amazon.com web site to  
its customers in                                                                

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our markets in under one hour. The agreement is subject to establishing mutually
acceptable customer service standards and acceptable pricing for the delivery   
service. In addition, the agreement provides that Amazon.com LLC will engage in 
selected promotional activities to introduce the Kozmo delivery service to      
Amazon.com's customer base.                                                     

Amazon.com Inc. is our largest stockholder, and has invested a total of 
$60 million to-date in Kozmo. See "Principal Stockholders" and "Certain         
Relationships and Related Transactions" for a further discussion of our         
relationship with Amazon.com.                                                   

RELATIONSHIP WITH STARBUCKS                                                     

    We have an exclusive relationship with Starbucks Corporation that we believe
will provide additional convenience for our customers, increase our brand       
awareness and expand our product selection. In February 2000, we entered into a 
five year strategic agreement with Starbucks to place a drop box in each        
Starbucks store located in our current and future markets to collect items      
returned by our customers. The agreement also provides for exclusive joint      
marketing and promotional activities, such as the placement of the Kozmo brand  
on Starbucks napkins, cups and posters, free product samples for Starbucks      
customers that join Kozmo and links to our web site from the Starbucks web site.
In addition, we will offer Starbucks products such, as coffee by the pound,     
teas, ice cream and bottled beverages, for delivery in under one hour. We intend
to explore other opportunities with Starbucks, including delivery of hot        
beverages. Starbucks has invested a total of $25 million in our company.        

OTHER STRATEGIC RELATIONSHIPS                                                   

We pursue strategic relationships in order to gain access to additional 
consumers, build brand recognition, add complementary items to our product      
offerings and increase the selection of products of other retailers delivered   
through our distribution networks. In addition to our relationship with         
Amazon.com and Starbucks, we have established the following relationships:      

 COLUMBIA TRISTAR HOME VIDEO.  We recently entered into a letter agreement
under which Columbia TriStar Home Video, Inc. will provide us with a greater    
number of movie titles, and more copies of each title than we currently obtain, 
on VHS cassettes and DVDs, at a substantially lower initial cost than we would  
otherwise pay, in exchange for a percentage of the rental revenues generated by 
those titles. We believe this agreement will reduce our initial cash            
requirements for our rental inventories of VHS cassettes and DVDs and increase  
the number of titles we carry. Columbia TriStar Home Video will also directly   
provide us with VHS cassettes and DVDs at a lower cost than we would otherwise  
pay, for purposes of resale to consumers.                                       

TICKETMASTER ONLINE--CITYSEARCH.  We recently entered into a service    
licensing and distribution agreement with Ticketmaster Online--CitySearch, Inc.,
expiring in 2001 pursuant to which we are the exclusive online one-hour delivery
service advertised on CitySearch web sites in all cities where both Kozmo and   
CitySearch operate. We believe that our relationship with CitySearch will       
increase traffic on our web site and build brand awareness. CitySearch provides 
web sites for over fifty cities worldwide with detailed information on          
restaurants, nightlife, movies and the arts. According to Media Metrix,         
CitySearch web sites were visited by 6.1 million unique users in January 2000.  
CitySearch will also provide a direct link to a separate web page where users   
can enter their zip code to access our web site.                                

WARNER HOME VIDEO.  We recently entered into a licensing agreement with 
Warner Home Video under which Warner Home Video will provide us with a greater  
number of movie titles, and more copies of each title than we currently obtain, 
on VHS cassettes and DVDs, including New Line and HBO titles, at a substantially
lower initial cost than we would otherwise pay, in exchange for a percentage of 
the rental revenues generated by those movie titles. We believe this agreement  
will reduce our initial cash requirements for our rental inventories of VHS     
cassettes and DVDs and                                                          

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increase the number of titles we carry. Warner Home Video will also directly    
provide us with VHS cassettes and DVDs at a lower cost than we would otherwise  
pay, for purposes of resale to consumers. Under the agreement we issued         
1,323,977 shares of Series F convertible preferred stock to Warner Home Video   
valued at $10 million.                                                          

MARKETING AND PROMOTION                                                         

    We have implemented a marketing and promotion campaign to increase awareness
and acceptance of the Kozmo brand. Our marketing efforts focus on:              

- informing customers of the benefits of our unique service;            

- promoting a consistent, quality brand image;                          

- establishing long-lasting relationships with customers;               

- increasing consumer traffic to our web site;                          

- increasing order frequency and average order size; and                

- building customer loyalty.                                            

Our marketing and promotional efforts focus on consumers who value      
convenience and time-savings. We tailor our advertising to appeal to local      
tastes in each of our markets. We gather feedback from our customers to enhance 
our customer service, which we believe will lead to an increase in order        
frequency. We seek to reinforce the Kozmo name and brand through advertising,   
promotions, packaging and delivery. We design our public relations strategy to  
achieve coverage of our business across a wide array of media, including        
television, radio, billboards, magazines and the Internet.                      

CUSTOMER SERVICE                                                                

We believe that our ability to establish and maintain long-term         
relationships with our customers is dependent upon the quality of the experience
we provide. We aim to provide premium customer service through three points of  
contact: our web site, our delivery staff and our customer service              
representatives.                                                                

Our web site contains extensive information for customers and offers a  
number of help and feedback options. Our online help desk offers information    
such as hours of operation, product availability, order tracking, order         
modification or cancellation and drop box locations. We strive to answer each   
customer's e-mail within four hours.                                            

  Our delivery staff is a significant part of our focus on customer service.
Each Kozmonaut-TM- is a valued employee and is incentivized with competitive    
compensation. In addition, all salaried employees, including many               
Kozmonauts-TM-, are eligible to receive stock options. We adhere to rigorous    
hiring standards to evaluate and select delivery personnel that are courteous   
and professional in their dealings with our customers. Every new delivery       
employee is required to complete a two-day training program that communicates   
and reinforces our commitment to customer service. We conduct follow-up training
on an ongoing basis and have implemented a review process to ensure compliance  
with our standards of customer service.                                         

 Our highly trained customer service representatives are available through
our toll-free telephone number seven days a week during operating hours. Calls  
are prioritized to allow inquiries related to current orders to receive top     
priority. We have engaged the services of a third party specializing in         
e-commerce customer support to handle our voice and Internet-based customer     
inquiries.                                                                      

 As part of our privacy policy, we do not disclose customer information to
third parties.                                                                  

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TECHNOLOGY                                                                      

 Our web site architecture is based upon IBM's Net.Commerce software. This
architecture is designed to handle the anticipated growth in our visitor        
traffic. By combining this architecture with hardware and software from leading 
providers, such as Oracle, Sun Microsystems and Cisco, we believe that our      
systems can be expanded as required to serve our technological needs.           

    To assist us with power, network and fire-suppression systems in our central
server environment, we are co-locating our servers with Global Crossing Global  
Center, Inc. Future plans contemplate additional co-location arrangements as our
geographic expansion continues.                                                 

  Our back-office uses the Oracle Enterprise Resource Planning System, which
is integrated into our e-commerce systems to provide us with automated          
accounting and purchasing functionality. Future plans contemplate full          
auto-replenishment of inventory and a data storage and data mining system for   
enhanced information processing.                                                

COMPETITION                                                                     

   We operate in a highly competitive and rapidly evolving market. Our current
and future competitors include:                                                 

 - ONLINE RETAILERS. These retailers include companies such as Amazon.com,
      CDNow, Buy.com, Urbanfetch, Webvan, Food.com and HomeGrocer.com as well as
a number of smaller privately held companies.                       

  - STOREFRONT RETAILERS. These retailers include national video stores such
    as Blockbuster and Hollywood Entertainment, mass merchant retailers such
    as Wal-Mart and Target, convenience stores such as 7-Eleven and Circle K
and grocery stores such as Safeway and Kroger.                      

- FULFILLMENT SERVICE PROVIDERS. These service providers include Federal
     Express, UPS and DHL. These competitors do not currently sell products to
   consumers or provide same day delivery for retailers but may attempt to
enter these markets or provide these services in the future.        

The principal competitive factors that affect our business are shopping 
convenience, product availability and quality, shopping environment, price and  
customer service and loyalty. We believe that we compare favorably to the       
competition with respect to each of these factors, although many of our         
competitors are able to provide nationwide service which we do not offer. In    
addition, many of our current and potential storefront and online competitors   
have longer operating histories than we do, larger customer bases, greater brand
recognition and significantly greater financial, marketing, technical,          
management and other resources. If we fail to compete effectively in any of     
these areas, we may lose existing and potential customers, which would harm our 
financial performance.                                                          

GOVERNMENT REGULATION                                                           

  The law relating to Internet business is evolving. A number of legislative
and regulatory proposals under consideration by federal, state, local and       
foreign governmental organizations may lead to new laws and regulations covering
issues such as user privacy, freedom of expression, pricing, content and quality
of products and services, taxation, advertising, intellectual property rights   
and information security. Furthermore, the growth of e-commerce may prompt calls
for more stringent consumer protection laws regarding the collection and use of 
personal identifying information obtained from individuals when accessing web   
sites, with particular emphasis on access by minors. Several states have        
proposed legislation to limit the uses of personal user information gathered    
online or require online services to establish privacy policies. The Federal    
Trade Commission has also initiated actions against at least three online       
service companies regarding the manner in which personal information is         
collected from users and provided to third parties. We do not currently provide 
personal information regarding                                                  

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our users to third parties nor do we collect information on consumers through   
the use of "cookies" placed permanently on customers' hard drives. However, the 
adoption of such consumer protection laws could create uncertainty in web usage 
and reduce the demand for our products and services. Additionally, we may be    
required to incur additional costs in order to comply with new laws or          
regulations or the laws governing markets in which we may operate in the future.

 We are not certain how our business may be affected by the application of
existing laws governing issues such as property ownership, copyrights,          
encryption and other intellectual property issues, taxation, libel, obscenity   
and export or import matters. The vast majority of these laws were adopted prior
to the wide use of the Internet and do not contemplate or address the unique    
aspects of the Internet and related technologies. Changes in laws intended to   
address these issues could create uncertainty in the Internet industry. This    
uncertainty could reduce demand for our services or increase the cost of doing  
business as a result of litigation costs or increased service delivery costs.   

    We are subject to a variety of regulations concerning the handling, sale and
delivery of food and tobacco products. It is uncertain whether the handling of  
certain food items in our distribution facility will subject us to regulation by
the United States Department of Agriculture. In addition, we are subject to     
state and local regulations applicable to food and tobacco products. We are     
required to obtain state licenses and permits for the sale of tobacco products  
in each location in which we open a distribution center. We cannot assure you   
that we will be able to obtain any required permits or licenses in a timely     
manner, or at all. Any applicable federal, state or local regulations or        
required permits or licenses may cause us to incur substantial compliance costs 
or delay or prohibit the availability of certain items at one or more of our    
distribution centers. In addition, any inquiry or investigation from a food     
regulatory authority could have a negative impact on our reputation.            

   We are currently evaluating whether to offer alcoholic beverages in certain
markets. To do so, we would be required to obtain state, and in some cases      
county and municipal, licenses and permits for the sale of alcohol in each      
location in which we deliver such products. We cannot assure you that we would  
be able to obtain any required permits or licenses in a timely manner, or at    
all. In addition, the U.S. Congress is considering enacting legislation that    
would restrict the interstate sale of alcoholic beverages over the Internet.    
Changes to existing laws or our inability to obtain required permits or licenses
could prevent us from selling alcoholic beverages in one or more of our         
geographic markets or a portion of those markets where a market extends over two
or more licensing jurisdictions.                                                

As we expand our services, we may become subject to additional laws or  
regulations, compliance with which could limit the products or services that we 
provide or otherwise adversely affect our results of operations.                

INTELLECTUAL PROPERTY                                                           

 We rely on a combination of patent, trademark, copyright and trade secret
laws and contractual restrictions to establish and protect our proprietary      
information, and we regard them as important to our success. We have entered    
into confidentiality and invention assignment agreements with our employees,    
consultants and others to limit access to and disclosure of our proprietary     
information; however, our attempts to protect our proprietary information may   
prove inadequate.                                                               

    We have filed applications for the registration of Kozmo.com-TM-, Kozmo-TM-,
the Kozmo.com logo and our slogans "We'll Be Right Over-TM-," "From the Internet
to Your Door in Under One Hour-TM-," "From the Internet to Your Desk in Under   
One Hour-TM-," and "From the Internet to Your Dorm in Under One Hour-TM-" in the
United States, although we have not secured registration of any of our marks to 
date. In August 1999, we filed a provisional patent application with the United 
States Patent and Trademark Office with respect to our dispatching system. From 
time to time, we may file additional patent applications covering aspects of our
proprietary technology. We currently have no patents protecting our technology. 
We cannot assure you that any of our pending patent applications                

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will be approved, that any issued patents will protect our intellectual property
or that any issued patents or trademark registrations will not be challenged by 
third parties.                                                                  

EMPLOYEES                                                                       

As of March 10, 2000, we had 445 salaried employees and 2,220 hourly    
employees. Our employees are not parties to any collective bargaining           
agreements. We have not experienced any work stoppages, and we consider our     
employee relations to be good.                                                  

FACILITIES                                                                      

  Our headquarters are located in New York City where we lease approximately
56,000 square feet of office space. In New York City, we currently lease three  
distribution centers. In Seattle, we currently lease two distribution centers.  
In Los Angeles, we currently lease five distribution centers. In each of Boston,
Washington, D.C., Chicago and San Francisco, we currently lease one distribution
center. Generally, we enter into an operating lease for a new distribution      
center one to three months prior to the opening of that distribution center. We 
believe that our facilities are adequate for our current needs and that         
additional suitable space will be available on acceptable terms as required. We 
do not own any real estate at present, and we expect, wherever possible, to     
lease rather than own our distribution centers in the additional markets we     
enter.                                                                          

LEGAL PROCEEDINGS                                                               

From time to time, we may be involved in legal proceedings relating to  
claims arising out of our ordinary course of business. We believe that there is 
no litigation pending that could have a material adverse effect on our business,
financial condition, results of operations or cash flows.                       

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MANAGEMENT

DIRECTORS, EXECUTIVE OFFICERS AND SENIOR MANAGEMENT                             

 Our directors, executive officers and senior management as of the date of
this offering and their ages as of December 31, 1999 are as follows:            

                                                        [Enlarge/Download Table]

NAME                                      AGE     POSITION                                            
----                                    --------  --------                                            
                                                                                                      
Joseph Park............................    28     Chief Executive Officer and Chairman of the Board of
                                                  Directors                                           
Yong Kang..............................    27     President and Director                              
Gerardo Burdo..........................    34     Senior Vice President and Chief Financial Officer   
Kenneth Trevathan......................    53     Senior Vice President and Chief Operating Officer   
Christopher Shimojima..................    44     Senior Vice President and Chief Marketing Officer   
William Herald.........................    49     Senior Vice President and Chief Technology Officer  
Larry Johnson..........................    48     Senior Vice President of International              
Scott Evans............................    32     Vice President of Logistics                         
James Alt..............................    33     Vice President of Supply Chain Management           
Andrew Resnick.........................    42     Vice President of Corporate Development             
Jack Chen (2)..........................    33     Director                                            
Hugh Evans (1).........................    31     Director                                            
Gerald Gallagher (2)...................    58     Director                                            
Seth Goldstein (1).....................    29     Director                                            
Robert Greene (1)(2)...................    39     Director                                            

------------------------                                                        

(1) Member of Audit Committee                                                   

(2) Member of Compensation Committee                                            

JOSEPH PARK co-founded Kozmo with Mr. Kang and has served as our chief  
executive officer and chairman of the board of directors since July 1997. From  
July 1996 to July 1997, Mr. Park served as an analyst in the corporate finance  
division of Goldman, Sachs & Co., where he was involved in public equity, hybrid
and investment grade debt offerings, mergers and acquisitions, and financial    
advisory work. From June 1994 to June 1996, Mr. Park served as an analyst in the
investment research department at Goldman, Sachs & Co., covering the consumer   
durable goods and packaging industries.                                         

    YONG KANG co-founded Kozmo with Mr. Park and has served as our president and
a director since July 1997. From July 1996 to July 1997, Mr. Kang was an        
assistant vice president at Societe Generale in the media and communications    
group, specializing in senior bank financing, high yield debt and private equity
transactions for companies in the broadcasting, cable and entertainment         
industries. From July 1994 to July 1996, Mr. Kang was a senior analyst in the   
mergers and acquisitions group of the Toronto-Dominion Bank, specializing in    
acquisition advisory, private equity and high yield debt transactions for cable,
cellular/PCS, paging and broadcasting companies.                                

 GERARDO BURDO has served as our senior vice president and chief financial
officer since November 1999. From 1991 to 1999, Mr. Burdo held various positions
at Ethan Allen Inc., most recently as principal financial officer, vice         
president and treasurer and as a director of Ethan Allen Canada. From 1987 to   
1991, Mr. Burdo held various positions at KPMG LLP.                             

KENNETH TREVATHAN has served as our senior vice president and chief     
operating officer since November 1999. From 1984 to 1999, Mr. Trevathan held    
executive positions in various divisions at Federal Express, most recently as   
managing director of the logistics and electronic commerce operations of its    
North American operations. Mr. Trevathan currently serves as a member of the    
board of directors of Dormnow.com.                                              

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CHRISTOPHER SHIMOJIMA has served as our senior vice president and chief 
marketing officer since December 1999. From 1994 to 1999, Mr. Shimojima held    
various positions at AT&T, including vice president and general manager of the  
10-10-345 Lucky Dog business and vice president of national retention marketing.
From 1992 to 1994, Mr. Shimojima was the director of brand strategy at PepsiCo. 

   WILLIAM HERALD has served as our senior vice president and chief technology
officer since February 2000. From 1996 to 2000, Mr. Herald served as a vice     
president and chief information officer of the Coca-Cola Company. From 1988 to  
1996, he was a partner at Ernst & Young and became the national director for the
firm's Center for Technology Enablement.                                        

    LARRY JOHNSON has served as our senior vice president of international since
February 2000. From 1993 to 2000, Mr. Johnson was the vice president of         
franchising in the international division of Toys 'R' Us. From 1991 to 1993, he 
was a director of merchandise planning and allocation at Limited Corporation.   
From 1987 to 1991, Mr. Johnson was a division vice president in various         
merchandising capacities at Carter Hawley Hale.                                 

    SCOTT EVANS has served as our vice president of logistics since August 1999.
From 1990 to 1999, Mr. Evans held various positions at United Parcel Service    
including industrial engineering manager, financial services manager, corporate 
strategic operations manager and operations supervisor.                         

   JAMES ALT has served as our vice president of supply chain management since
October 1999. From 1998 to 1999, Mr. Alt was a management consultant at Ernst & 
Young. From 1989 to 1996, he held various corporate positions at Target.        
Mr. Alt currently serves as a member of the board of directors of Autoprof.com. 

ANDREW RESNICK has served as our vice president of corporate development
since October 1999. From 1994 to 1999, Mr. Resnick served as executive vice     
president of operations and marketing for Timothy's World Coffee. From 1990 to  
1994, he was a regional director of operations for Blockbuster Video.           

    JACK CHEN was elected a director of our company in October 1999. Mr. Chen is
a founder of StarMedia Network, a Latin American Internet portal company, and   
has been its president and one of its directors since March 1996. From 1995 to  
March 1996, Mr. Chen was a vice president at S.L. Chen & Associates. Prior to   
that, Mr. Chen held various positions at CS First Boston Investment Management. 

HUGH EVANS was elected a director of our company in December 1998.      
Mr. Evans has been a principal with Stonington Partners, a private equity firm, 
since 1994. Mr. Evans was an analyst at Merrill Lynch Capital Partners, the     
predecessor to Stonington Partners, from 1992 to 1994. Mr. Evans is also a      
director of Explore, Inc., Lincoln Technical Institute, Inc., FoodTrader.com,   
and Younology.com.                                                              

GERALD GALLAGHER was elected a director of our company in October 1999. 
Since 1987, Mr. Gallagher has been a general partner in Oak Investment Partners.
From 1977 to 1987, Mr. Gallagher was vice chairman of Dayton Hudson Corporation,
where he served in both operating and staff positions. Mr. Gallagher also is a  
director of Garden.com, Zany Brainy, and PF Chang's China Bistro.               

   SETH GOLDSTEIN was elected a director of our company in October 1999. Since
January 1999, Mr. Goldstein has been an investment principal at Flatiron        
Partners. In 1998, Mr. Goldstein created a new digital convenience service for  
mobile professionals called root.net. From June 1997 to May 1998, Mr. Goldstein 
served as senior vice president of the CKS Group. From 1995 to June 1997,       
Mr. Goldstein served as the chief executive officer of SiteSpecific, which he   
founded, until it was acquired by the CKS Group. Mr. Goldstein is also a        
director of Valassis Communications, Planetfeedback.com, Quixi, the Internet    
Appliance Network, Scout Electromedia and Sonata.com.                           

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  ROBERT GREENE was elected a director of our company in October 1999. Since
June 1999, Mr. Greene has been a managing partner at Flatiron Partners. From    
August 1994 to May 1999, Mr. Greene served as a general partner and principal at
Chase Capital Partners and helped build the firm's technology and Internet      
business. Mr. Greene also is a director of each of Multex.com, Kinkos.com and   
Resonate.com.                                                                   

BOARD OF DIRECTORS                                                              

   We currently have eight directors. Currently each director is elected for a
term of one year. There are no family relationships among any of our directors  
or executive officers.                                                          

   Upon completion of the offering our board of directors will be divided into
three classes, each with staggered three-year terms. As a result, only one class
of directors will be elected at each annual meeting of our stockholders, with   
the other classes continuing for the remainder of their respective three-year   
terms.                                                                          

BOARD COMMITTEES                                                                

Our board of directors established an audit committee and a compensation
committee. The audit committee makes recommendations to the board of directors  
regarding the selection of independent accountants, reviews our internal        
accounting procedures and the scope and results of audit and other services by  
our independent accountants and reviews the accounting principals to be used in 
the preparation of our financial statements. The audit committee currently      
consists of Hugh Evans, Robert Greene and Seth Goldstein, each of whom is an    
independent director under the rules of the National Association of Securities  
Dealers, Inc. The compensation committee reviews and makes recommendations to   
the board of directors regarding our stock plans and compensation of our        
officers. The compensation committee also establishes and reviews general       
policies relating to compensation and benefits of our employees. The            
compensation committee currently consists of Robert Greene, Gerald Gallagher and
Jack Chen.                                                                      

DIRECTOR COMPENSATION                                                           

   We reimburse our directors for their out-of-pocket expenses incurred in the
performance of their duties as directors but do not pay to any of our directors 
cash compensation for these services. We have in the past granted and will      
continue to grant stock options to our directors. Directors are also eligible to
participate in our 1997 Stock Option Plan, 1999 Stock Option Plan and 1999      
Incentive Stock Plan. On August 16, 1999, we granted Mr. Evans an option to     
purchase 50,000 shares of common stock at an exercise price of $1.11 per share  
under our 1999 Stock Option Plan, and on February 15, 2000, we granted          
Mr. Evans an option to purchase 50,000 shares of common stock at an exercise    
price of $4.41 per share under our 1999 Incentive Stock Option Plan. Under the  
1999 Incentive Stock Plan we granted Mr. Chen options to purchase 100,000 shares
of common stock at an exercise price of $1.80 per share and 100,000 shares of   
common stock at an exercise price of $4.41 per share. For additional            
information, see "Stock Plans."                                                 

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION                     

  None of our executive officers serve as a member of the board of directors
or compensation committee of any entity that has one or more executive officers 
serving as a member of our board of directors. No member of our compensation    
committee has at any time been an officer or employee of our company. However,  
we have issued in private placement transactions shares of preferred stock to   
Flatiron Partners, Oak Investment Partners and entities affiliated with them.   
Mr. Greene is a managing partner of Flatiron Partners and Mr. Gallagher is a    
general partner of Oak Investment Partners. See                                 

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"Certain Relationships and Related Transactions" for a description of the       
transactions between us, Flatiron Partners, Oak Investment Partners and entities
associated with them.                                                           

EXECUTIVE COMPENSATION                                                          

The following table sets forth a summary of the compensation paid by us 
during the year ended December 31, 1999 to our chief executive officer and our  
four other mostly highly compensated executive officers (collectively, the      
"named executive officers") for services rendered in all capacities to Kozmo.   

SUMMARY COMPENSATION TABLE

                                                        [Enlarge/Download Table]

                                                                                LONG TERM     
                                                                              COMPENSATION    
                                                                                 AWARDS       
                                                                           -------------------
                                                       1999 COMPENSATION       SECURITIES     
                                                      -------------------      UNDERLYING     
NAME AND PRINCIPAL POSITION                            SALARY     BONUS          OPTIONS      
---------------------------                           --------   --------  -------------------
                                                                                              
Joseph Park.......................................... $127,885    $   --         650,000      
  Chief Executive Officer                                                                     

Yong Kang............................................   73,077        --         650,000      
  President                                                                                   

Gerardo Burdo(1).....................................   38,462        --         582,026      
  Chief Financial Officer                                                                     

Kenneth Trevathan(2).................................   48,077    15,000         994,920      
  Chief Operating Officer                                                                     

Christopher Shimojima(3).............................       --        --         800,000      
  Chief Marketing Officer                                                                     

------------------------                                                        

1.  Mr. Burdo was hired as chief financial officer in November 1999. On an      
annualized basis, Mr. Burdo's salary would have been $200,000.          

2.  Mr. Trevathan was hired as chief operating officer in November 1999. On an  
annualized basis, Mr. Trevathan's salary would have been $250,000.      

3.  Mr. Shimojima was hired as chief marketing officer in December 1999. On an  
annualized basis, Mr. Shimojima's salary would have been $200,000.      

OPTION GRANTS                                                                   

  The following table sets forth information regarding stock options granted
to each of the named executive officers during the year ended December 31, 1999.
The options were granted under our 1999 Incentive Stock Option Plan and are     
subject to the terms of that plan. These options were granted at an exercise    
price equal to the fair market value of our common stock as determined by our   
board of directors on the date of grant. Except as the compensation committee   
may otherwise determine, 25% of the options granted under the plan will become  
exercisable twelve months following the date of grant, and 1/48(th) of the      
options will vest each month thereafter, on the last day of the month, until all
the options are vested. As described below under "Employment Contracts and      
Change in Control Arrangements", the options granted to each of our named       
executive officers are subject to accelerated vesting in certain specified      
circumstances. Stock price appreciation of 5% and 10% is assumed pursuant       

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to rules promulgated by the Securities and Exchange Commission and does not     
represent our prediction of our stock performance.                              

OPTION GRANTS IN LAST FISCAL YEAR 

                                                        [Enlarge/Download Table]

                                                     INDIVIDUAL GRANTS                POTENTIAL REALIZABLE  
                                        -------------------------------------------     VALUE AT ASSUMED    
                                         PERCENT OF                                   ANNUAL RATES OF STOCK 
                          NUMBER OF     TOTAL OPTIONS                                PRICE APPRECIATION FOR 
                         SECURITIES      GRANTED TO                                        OPTION TERM      
                         UNDERLYING     EMPLOYEES IN    EXERCISE PRICE   EXPIRATION  -----------------------
NAME                   OPTIONS GRANTED   FISCAL YEAR      PER SHARE         DATE         5%          10%    
----                   ---------------  -------------   --------------   ----------  ----------   ----------
                                                                                                            
Joseph Park...........     650,000          10.0%            $1.80        10/04/09     377,000    1,293,500 
Yong Kang.............     650,000          10.0              1.80        10/04/09     377,000    1,293,500 
Gerardo Burdo.........     582,026           9.0              1.80        11/01/09     925,421    2,089,473 
Kenneth Trevathan.....     994,920          15.3              1.80        11/27/09   2,556,944    5,123,838 
Christopher                                                                                                 
  Shimojima...........     800,000          12.3              1.80        12/06/09   2,328,000    4,560,000 

STOCK PLANS                                                                     

All three of our stock option plans provide for the grant of options to 
purchase our common stock to directors, officers, full-time employees, advisors 
and others affiliated with us. As of December 31, 1999, we had awarded options  
relating to an aggregate of 2,225,500 shares under the 1999 Stock Option Plan   
and the 1997 Stock Option Plan. The apportionment is as follows: 220,000 options
were awarded to our directors and advisers (200,000 at an exercise price of     
$1.11 per share for directors and 20,000 at an exercise price of $0.21 per share
for advisers), and 2,005,500 options were awarded to employees (180,000 options 
at an exercise price of $0.20 per share, 1,182,500 options at an exercise price 
of $0.21 per share, 92,500 options at an exercise price of $0.29 per share and  
550,500 options at an exercise price of $1.11 per share).                       

   As of December 31, 1999, we had awarded options relating to an aggregate of
5,587,696 shares under the 1999 Incentive Stock Option Plan. The apportionment  
is as follows: 100,000 options were awarded to our directors at an exercise     
price of $1.80 per share, 3,676,946 options were awarded to our executive       
officers at an exercise price of $1.80 per share, and 1,810,750 options were    
awarded to other employees at varying exercise prices.                          

1999 INCENTIVE STOCK OPTION PLAN                                                

We are authorized to issue options to purchase up to an aggregate of    
11,613,546 shares of our common stock under the 1999 Incentive Stock Option     
Plan. The Incentive Plan became effective on October 4, 1999, and was amended   
and restated as of March 16, 2000. The Incentive Plan is administered by the    
compensation committee of our board of directors. The compensation committee    
determines persons eligible to receive options, the number of shares for which  
options are granted, the option price, whether options will be non-qualified    
stock options or incentive stock options, the time when the options may be      
granted and exercised, the vesting schedule for the options, and the terms and  
provisions of the agreements by which the options will be evidenced.            

The option price per share of common stock underlying each non-qualified
stock option granted under the Incentive Plan generally will be the book value  
of our common stock on the date of grant as determined in accordance with       
generally accepted accounting principles. The maximum term of options granted   
under the Incentive Plan is ten years. However, incentive stock options granted 
to holders of more than 10% of our common stock must have option prices of not  
less than 110% of the fair market value of our common stock on the date of grant
and maximum terms of five years. Except as the compensation committee may       
otherwise determine, 25% of the options granted under the plan will become      
exercisable after twelve months following the date of grant, and thereafter     
1/48(th) of the options                                                         

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will vest following each subsequent month period, on the last day of the month, 
until all the options are vested.                                               

 If an optionee's affiliation with us terminates for any reason other than
death, any fully vested options held by that optionee will remain exercisable   
until the earlier of 90 days from the date of termination and the expiration    
date of the option. If we terminate an optionee's affiliation for cause, the    
optionee immediately forfeits the right to exercise any option granted under    
this plan. If an optionee's affiliation terminates as a result of a disability, 
all options held by that optionee will remain exercisable until the earlier of  
one year after the date of cessation of services and the expiration date of the 
option. In the event of the death of an optionee, the options will be           
exercisable by the person to whom such optionee's rights pass by will or by the 
laws of descent and distribution within the earlier of six months after the date
of such death or the expiration date of the options.                            

  Upon a change in control, all outstanding options under the Incentive Plan
will be fully vested and nonforfeitable. Upon changes in stock due to changes in
corporate structure and distributions to stockholders, the Incentive Plan       
provides for adjustments as to the classes and maximum number of shares subject 
to the Incentive Plan and the classes and number of shares and price per share  
subject to then outstanding options. If we are involved in a dissolution,       
liquidation, merger, or a combination in which we are not the surviving         
corporation, then each outstanding option granted will terminate 30 days after  
the effective date of the dissolution, liquidation, merger, or consolidation.   
Within this 30 day period, the optionee may exercise his option to the extent it
will not have previously been exercised.                                        

1999 STOCK OPTION PLAN                                                          

  The 1999 Stock Plan became effective on May 1, 1999 and is administered by
the compensation committee of our board of directors. We are authorized to issue
options to purchase up to an aggregate of 2,000,000 shares of common stock under
the plan. Except as the committee may otherwise determine, 25% of the options   
granted under the plan will become exercisable twelve months following the date 
of grant and 1/48(th) of the options will vest each month thereafter, on the    
last day of the month, until all the options are vested. Upon a change in       
control or a sale of our common stock pursuant to an initial public offering,   
all outstanding options under the 1999 Stock Plan will be fully vested and      
exercisable.                                                                    

1997 STOCK OPTION PLAN                                                          

   The 1997 Stock Plan was approved in a meeting of the board of directors and
stockholders on June 30, 1997. We are authorized to issue options to purchase up
to an aggregate of 1,500,000 shares of common stock under the plan. Except as   
the board of directors or committee may otherwise determine, 25% of the options 
granted under the plan will become exercisable twelve months following the date 
of grant and 1/48(th) of the options will vest each month thereafter, on the    
last day of the month, until all the options are vested. Upon a change in       
control or a sale of our common stock pursuant to an initial public offering,   
all outstanding options under the 1997 Stock Plan will be fully vested and      
exercisable.                                                                    

EMPLOYMENT CONTRACTS AND CHANGE OF CONTROL ARRANGEMENTS                         

We have entered into the following employment and change of control     
arrangements with our current officers. For a description of arrangements with  
our officers, directors, and substantial stockholders, see "Certain             
Relationships and Related Transactions."                                        

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EMPLOYMENT AGREEMENTS WITH JOSEPH PARK AND YONG KANG                            

On October 4, 1999, we entered into an employment agreement with each of
Joseph Park and Yong Kang. Mr. Park serves as our chief executive officer and   
Mr. Kang serves as our president. The agreements with Messrs. Park and Kang     
expire in September 2001 and October 2001, respectively, but each agreement will
be extended automatically for successive one-year terms, unless a party to      
either agreement gives notice declining to renew.                               

Messrs. Park and Kang receive annual salaries of $150,000 and $100,000, 
respectively. They may participate in all long-term incentive plans and         
programs, including annual incentive bonus programs approved by our board of    
directors. Under our 1999 Incentive Stock Option Plan, Messrs. Park and Kang    
have each been granted options to purchase 650,000 shares of our common stock at
an exercise price of $1.80 per share. Mr. Park has been granted additional      
options to purchase 1,000,000 shares of our common stock at an exercise price of
$4.41 per share, and Mr. Kang has been granted additional options to purchase   
500,000 shares of our common stock at an exercise price of $4.41 per share. We  
may terminate employment of Mr. Park or Mr. Kang for cause at any time by       
written notice. If we terminate the employment of either Mr. Park or Mr. Kang   
other than for cause, or if either resigns for good reason, that officer will be
entitled to receive severance payment in a lump sum equal to one year of his    
then base salary, and all of his unvested stock options will become fully       
vested. Under the employment agreements, good reason includes the occurrence of 
a change in control.                                                            

    Each of Mr. Park and Mr. Kang is subject to post-termination non-competition
and non-solicitation covenants of one year periods, or two years in the case of 
termination of employment for cause or resignation without good reason, and to  
confidentiality covenants of unlimited duration.                                

LETTER AGREEMENT WITH GERARDO BURDO                                             

We entered into a letter agreement with Gerardo Burdo, effective        
November 1, 1999, under which Mr. Burdo serves as a senior vice president and   
our chief financial officer. Mr. Burdo receives an annual base salary of        
$200,000 and is entitled to our standard benefits covering employees, as may be 
in effect from time to time.                                                    

   Mr. Burdo has been granted options to purchase 582,026 shares of our common
stock at an exercise price of $1.80 per share and 20,000 shares of our common   
stock at an exercise price of $4.41 per share under our 1999 Incentive Stock    
Option Plan. These options generally will vest over four years, with 25% of the 
options vesting upon the one-year anniversary of the date of grant and the      
remainder of the options vesting on a prorated monthly basis thereafter, subject
to the provisions of the plan and Mr. Burdo's continued employment with us. A   
percentage of these options, based on Mr.Burdo's tenure with us, will vest      
automatically upon the completion of this offering, with the remaining options  
following the normal vesting schedule.                                          

LETTER AGREEMENT WITH KENNETH TREVATHAN                                         

We entered into a letter agreement with Kenneth Trevathan, effective    
November 15, 1999, under which Mr. Trevathan serves as a senior vice president  
and our chief operating officer. Mr. Trevathan received a $15,000 bonus upon the
signing of the letter agreement and receives an annual base salary of $250,000, 
as well as a targeted bi-annual bonus of 20% of his annual base salary.         
Mr. Trevathan is also entitled to life and personal liability insurance         
policies. If we terminate Mr. Trevathan's employment for reasons other than     
cause, he will be entitled to salary continuation for up to three months.       

Mr. Trevathan has been granted options to purchase 994,920 shares of our
common stock at an exercise price of $1.80 per share and 10,000 shares of our   
common stock at an exercise price of $4.41 per share under our 1999 Incentive   
Stock Option Plan. The options will vest over four years, with 25%              

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of the options vesting upon the one-year anniversary of the date of grant and   
the remainder of the options vesting on a prorated monthly basis thereafter,    
subject to the provisions of the plan and Mr. Trevathan's continued employment  
with us. All accrued options will vest immediately upon the completion of this  
offering or a change in control.                                                

LETTER AGREEMENT WITH CHRISTOPHER SHIMOJIMA                                     

We entered into a letter agreement with Christopher Shimojima, effective
December 20, 1999, under which Mr. Shimojima serves as a senior vice president  
and our chief marketing officer. Mr. Shimojima receives an annual base salary of
$200,000 and unspecified bi-annual bonuses. Mr. Shimojima is entitled to        
standard benefits covering our employees and we will reimburse him for certain  
insurance-related payments made by him.                                         

Mr. Shimojima has been granted options to purchase 800,000 shares of our
common stock at an exercise price of $1.80 per share under our 1999 Incentive   
Stock Option Plan. The options will vest over four years, with 25% of the       
options vesting upon the one-year anniversary of the date of grant and the      
remainder of the options vesting on a prorated monthly basis thereafter, subject
to the provisions of our incentive plan and Mr. Shimojima's continued employment
with us.                                                                        

LETTER AGREEMENT WITH WILLIAM HERALD                                            

We entered into a letter agreement with William Herald, effective       
February 14, 2000, under which Mr. Herald serves as a senior vice president and 
our chief technology officer. Mr. Herald receives an annual base salary of      
$300,000 and an unspecified annual bonus. Mr. Herald will be entitled, during   
the term of his employment, to standard benefits covering our employees.        

Mr. Herald has been granted options to purchase 1,000,000 shares of our 
common stock at an exercise price of $4.41 per share under our 1999 Incentive   
Stock Option Plan. The options will vest over four years, with 25% of the       
options vesting upon the one-year anniversary of the date of grant and the      
remainder of the options vesting on a prorated monthly basis thereafter, subject
to the provisions of our incentive plan and Mr. Herald's continued employment   
with us. Upon the completion of this offering, 100,000 of Mr. Herald's options  
will vest automatically, with the remaining 900,000 options continuing to be    
subject to the normal four-year vesting schedule. In the event of a change in   
control, all of Mr. Herald's unvested options will vest immediately.            

We may terminate Mr. Herald's employment for cause at any time. If we   
terminate Mr. Herald's employment without cause or if Mr. Herald resigns with   
good reason, including in connection with a change in control, Mr. Herald is    
entitled to a severance payment in a lump sum equal to one-half times the sum   
of: (i) his annual salary as in effect on the date of termination, or, if       
greater, the date immediately before the event giving rise to good reason, and  
(ii) his annual bonus for the last completed fiscal year (or his target annual  
bonus for 2000, if termination occurs in 2000). We also will pay accrued        
compensation and vested benefits if we terminate Mr. Herald's employment without
cause or if Mr. Herald resigns with good reason. If Mr. Herald resigns in       
connection with a change in control, we will "gross up" Mr. Herald for any      
excise taxes that may be imposed on him under Internal Revenue Code             
Section 280G.                                                                   

LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS                             

 Our amended and restated certificate of incorporation limits the personal
liability of our directors to the fullest extent permitted by Delaware law.     
Delaware law provides that directors of a corporation will not be personally    
liable for monetary damages for breach of their fiduciary duties as directors,  
except for liability for the following:                                         

- any breach of their duty of loyalty to the corporation or its         
stockholders;                                                       

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- acts or omissions not in good faith or which involve intentional      
misconduct or a knowing violation of law;                           

- unlawful payments of dividends or unlawful stock repurchases or       
redemption; or                                                      

- any transaction from which the director derived an improper personal  
benefit.                                                            

  This limitation of liability does not apply to liability arising under the
federal securities laws and does not affect the availability of equitable       
remedies such as injunctive relief and recission.                               

  Our amended and restated certificate of incorporation provides that we are
required to indemnify any individual made a party to a proceeding because that  
individual is or was a director, officer, employee or agent of Kozmo.           

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PRINCIPAL STOCKHOLDERS

The following table sets forth information regarding the beneficial     
ownership of our common stock as of March 17, 2000, and as adjusted to reflect  
the sale of the common stock offered by us under this prospectus by:            

- each person known by us to own beneficially more than 5% of our common
stock;                                                              

- each of our directors and named executive officers; and               

- all directors and executive officers as a group.                      

    Except as otherwise noted, the address of each person listed in the table is
c/o Kozmo.com, Inc., 80 Broad Street, New York, New York 10004. Except as       
otherwise indicated in the footnotes to the table, each of the stockholders has 
sole voting and investment power with respect to the shares beneficially owned  
by such stockholders, subject to community property laws where applicable. In   
computing the number of shares beneficially owned by a person and the percentage
of ownership of that person, shares of common stock that a person has the right 
to acquire within 60 days of March 17, 2000 are deemed outstanding. Those       
shares, however, are not deemed outstanding for the purposes of computing the   
percentage ownership of any other person. The percent of beneficial ownership   
for each stockholder is based on 77,272,703 shares of common stock outstanding  
as of March 17, 2000, which assumes that all of our convertible preferred stock 
outstanding on that date is converted, on a one-for-one basis, into common stock
and       shares of common stock outstanding after this offering.               

                                                        [Enlarge/Download Table]

                                                                           PERCENT BENEFICIALLY 
                                                                                   OWNED        
                                                             BENEFICIALLY  ---------------------
                                                                OWNED       BEFORE       AFTER  
NAME                                                            SHARES     OFFERING    OFFERING 
----                                                         ------------  ---------   ---------
                                                                                                
Amazon.com, Inc.(1).........................................  29,659,275     31.8%              
  1200 12th Avenue South                                                                        
  Suite 1200                                                                                    
  Seattle, Washington 98144                                                                     

Chase Venture Capital Associates, L.P.......................   7,441,686      9.6               
  c/o Chase Capital Partners                                                                    
  380 Madison Avenue                                                                            
  New York, New York 10017                                                                      

Oak Investment Partners(2)..................................   7,138,159      9.2               
  90 South 7th Street                                                                           
  Suite. 4550                                                                                   
  Minneapolis, Minnesota 55402                                                                  

SOFTBANK(3).................................................   6,894,990      8.9               
  10 Langley Road                                                                               
  Suite 403                                                                                     
  Newton Center, Massachusetts 02459                                                            

Gerald Gallagher(4).........................................   7,138,159      9.2               

Joseph Park.................................................   6,000,000      7.8               

Yong Kang...................................................   4,000,000      5.2               

Hugh Evans(5)...............................................   2,755,460      3.6               

Robert Greene(6)............................................   2,425,501      3.1               

Seth Goldstein(7)...........................................   2,425,501      3.1               

Jack Chen(8)................................................     672,833        *               

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                                                        [Enlarge/Download Table]

                                                                           PERCENT BENEFICIALLY 
                                                                                   OWNED        
                                                             BENEFICIALLY  ---------------------
                                                                OWNED       BEFORE       AFTER  
NAME                                                            SHARES     OFFERING    OFFERING 
----                                                         ------------  ---------   ---------
                                                                                                
Gerardo Burdo(9)............................................     126,393        *               

Kenneth Trevathan(10).......................................      86,423        *               

Christopher Shimojima.......................................      14,733        *               

William Herald(11)..........................................     100,000        *               

All executive officers and directors as a group (11                                             
  persons)(12)..............................................  25,745,003     33.1               

------------------------                                                        

* Less than 1%                                                                  

(1) Includes 16,060,000 shares of convertible preferred stock issuable pursuant 
to warrants exercisable within 60 days of March 17, 2000.               

(2) Includes 7,002,534 shares of convertible preferred stock owned by Oak       
Investment Partners VIII Limited Partnership and 135,625 shares of      
convertible preferred stock owned by Oak VIII Affiliates Fund Limited   
Partnership.                                                            

(3) Includes 98,598 shares of convertible preferred stock owned by SOFTBANK     
    Capital Advisors Fund LP and 6,796,392 shares of convertible preferred stock
owned by SOFTBANK Capital Partners LP.                                  

(4) Includes 7,002,534 shares of convertible preferred stock owned by Oak       
    Investment Partners VIII Limited Partnership and 135,625 shares owned by Oak
    VIII Affiliates Fund Limited Partnership. Mr. Gallagher is a general partner
  of Oak Investment Partners, which is the general partner of Oak Investment
Partners VIII Limited Partnership and Oak VIII Affiliates Fund Limited  
Partnership, and disclaims beneficial ownership of such shares.         

(5) Includes 100,000 shares issuable upon exercise of options exercisable within
60 days of March 17, 2000, 2,189,827 shares owned by Merion Partners and
 132,398 shares owned by eTrillium, LLC. Mr. Evans is a limited partner of
Merion Partners and a member of eTrillium, LLC and disclaims beneficial 
ownership of such shares.                                               

(6) Includes 2,425,501 shares of convertible preferred stock owned by Flatiron  
Partners. Mr. Greene is a managing partner of Flatiron Partners and     
disclaims beneficial ownership of such shares.                          

(7) Includes 2,425,501 shares of convertible preferred stock owned by Flatiron  
 Partners. Mr. Goldstein is a principal of Flatiron Partners and disclaims
beneficial ownership of such shares.                                    

(8) Includes 200,000 shares issuable upon exercise of options exercisable within
60 days of March 17, 2000 and 100,622 shares owned by EQUUSFUND LLC. Mr.
    Chen is a member of EQUUSFUND LLC and disclaims beneficial ownership of such
shares.                                                                 

(9) Includes 58,397 shares issuable upon exercise of options exercisable within 
60 days of March 17, 2000 and 31,505 shares of Series E convertible     
preferred stock held by PaineWebber as IRA custodian for Mr. Burdo.     

(10) Includes 86,423 shares issuable upon exercise of options exercisable within
60 days of March 17, 2000.                                              

(11) Includes 100,000 shares issuable upon exercise of options exercisable      
within 60 days of March 17, 2000.                                       

(12) Includes an aggregate of 544,820 shares issuable upon the exercise of      
options, 2,425,501 shares owned by Flatiron Partners, 2,189,827 shares  
   beneficially owned by Merion Partners, 132,398 shares beneficially owned by
eTrillium, LLC, 7,002,534 shares beneficially owned by Oak Investment   

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Partners, and 108,622 shares beneficially owned by EQUUSFUND LLC.       
   Messrs. Greene and Goldstein, managing partner and principal, respectively,
of Flatiron Partners, disclaim beneficial ownership of such shares.     
   Mr. Evans, limited partner of Merion Partners and member of eTrillium, LLC,
disclaims beneficial ownership of such shares. Mr. Gallagher, general   
  partner of Oak Investment Partners, disclaims beneficial ownership of such
    shares. Mr. Chen, member of EQUUSFUND LLC, disclaims beneficial ownership of
such shares.                                                            

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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

    Since our inception, we have issued and sold shares of our capital stock and
warrants to acquire shares of our capital stock as follows:                     

   - 10,512,500 shares of common stock at a weighted average price of $.01 per
share;                                                              

- 1,133,332 shares of Series A convertible preferred stock at a price of
$.21 per share in November 1997;                                    

  - an aggregate of 4,998,517 shares of Series B convertible preferred stock
  at a weighted average price of $.21 per share, consisting of 3,206,707
shares in December 1998 and 1,791,810 shares in January 1999;       

- 2,508,500 shares of Series C convertible preferred stock at a price of
$1.11 per share in April 1999;                                      

 - 15,616,119 shares of Series D convertible preferred stock at a price of
$1.80 per share in October 1999;                                    

   - an aggregate of 27,198,554 shares of Series E convertible preferred stock
at a price of $4.41 per share, consisting of 19,859,568 shares in   
December 1999 and 7,338,986 shares in January 2000;                 

 - 15,305,181 shares of Series F convertible preferred stock at a price of
$7.55 per share in March 2000;                                      

 - warrants to purchase an aggregate of 50,000 shares of common stock at a
price of $.001 per share issued in September 1999;                  

 - warrants to purchase 4,513,472 shares of Series E convertible preferred
stock at a price of $4.41 per share and 3,692,140 shares of Series E
      convertible preferred stock at a price of $5.52 per share, in each case in
December 1999;                                                      

- warrants to purchase an aggregate of 8,672,676 shares of Series E     
    convertible preferred stock, 22,676 issued in January 2000 at a price of
   $4.41 per share and 8,650,000 issued in March 2000 at a price of $5.52;

 - warrants to purchase 2,699,145 shares of Series F convertible preferred
stock at a price of $7.55 per share issued in March 2000; and       

    - warrants to purchase 13,240 shares of common stock at a price of $7.55 per
share issued in March 2000.                                         

STOCK ISSUANCES TO OUR DIRECTORS, OFFICERS AND PRINCIPAL STOCKHOLDERS           

The following describes the shares of capital stock purchased by our    
executive officers, directors and 5% stockholders and person and entities       
associated with them in the private placement transactions described above.     
Shares held by affiliated persons and entities have been added together for the 
purposes of this chart.                                                         

                                                        [Enlarge/Download Table]


                                       SERIES B     SERIES C     SERIES D     SERIES E     SERIES F      OPTIONS  
                                      CONVERTIBLE  CONVERTIBLE  CONVERTIBLE  CONVERTIBLE  CONVERTIBLE  TO PURCHASE
                           COMMON      PREFERRED    PREFERRED    PREFERRED    PREFERRED    PREFERRED     COMMON   
INVESTOR                    STOCK        STOCK        STOCK        STOCK        STOCK        STOCK        STOCK   
--------                  ---------   -----------  -----------  -----------  -----------  -----------  -----------
                                                                                                                  
Amazon.com, Inc..........        --           --           --           --   13,599,275           --           -- 
SOFTBANK(1)..............        --           --           --           --    6,233,001      661,989           -- 
Chase Venture Capital                                                                                             
  Associates L.P.........        --           --           --    5,226,667    1,741,432      473,587           -- 
Oak Investment                                                                                                    
  Partners(2)............        --           --           --    4,333,333    2,142,837      661,989           -- 
Joseph Park(3)........... 6,160,000           --           --           --           --           --    1,650,000 
Yong Kang(4)............. 4,190,000           --           --           --           --           --    1,150,000 
Gerardo Burdo............        --           --           --           --       67,996           --      602,026 
Kenneth Trevathan........        --           --           --           --           --           --    1,004,920 
Christopher Shimojima....        --           --           --           --       14,733           --      800,000 
Hugh Evans(5)............        --    2,523,062           --           --           --      132,398      100,000 
Robert Greene(6).........        --           --           --    1,440,000      797,099      188,402           -- 
Seth Goldstein(7)........        --           --           --    1,440,000      797,099      188,402           -- 
Gerald Gallagher(8)......        --           --           --    4,333,333    2,142,837      661,989           -- 
Jack Chen(9).............        --           --       90,000       55,556      226,655      100,622      200,000 
Warren Jenson(10)........        --           --           --           --   13,599,275           --           -- 


                          OUTSTANDING                                                                             
                           WARRANTS                                                                               
                          TO PURCHASE                                                                             
                           SERIES E                                                                               
                          CONVERTIBLE                                                                             
                           PREFERRED                                                                              
INVESTOR                     STOCK                                                                                
--------                  -----------                                                                             
                                                                                                                  
Amazon.com, Inc.......... 16,060,000                                                                              
SOFTBANK(1)..............         --                                                                              
Chase Venture Capital                                                                                             
  Associates L.P.........         --                                                                              
Oak Investment                                                                                                    
  Partners(2)............         --                                                                              
Joseph Park(3)...........         --                                                                              
Yong Kang(4).............         --                                                                              
Gerardo Burdo............         --                                                                              
Kenneth Trevathan........         --                                                                              
Christopher Shimojima....         --                                                                              
Hugh Evans(5)............         --                                                                              
Robert Greene(6).........         --                                                                              
Seth Goldstein(7)........         --                                                                              
Gerald Gallagher(8)......         --                                                                              
Jack Chen(9).............         --                                                                              
Warren Jenson(10)........ 16,060,000                                                                              

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------------------------                                                        
(1) Inclues 89,132 and 6,143,869 shares of Series E convertible preferred stock 
    held and 9,466 and 652,523 shares of Series F convertible preferred stock by
SOFTBANK Capital Advisors Fund LP and SOFTBANK Capital Partners LP,     
respectively.                                                           

(2) Includes 4,251,000 and 82,333 shares of Series D convertible preferred      
  stock, 2,102,123 and 40,714 shares of Series E convertible preferred stock
  and 649,411 and 12,578 shares of Series F convertible preferred stock held
by Oak Investments Partners VIII, Limited Partnership and Oak VIII      
Affiliates Fund Limited Partnership, respectively.                      

(3) Includes 160,000 shares held by James Park. Mr. Park is the father of Joseph
Park.                                                                   

(4) Includes 190,000 shares held by Charlie Kang. Mr. Kang is the father of Yong
Kang.                                                                   

(5) Includes 2,189,827 shares of Series B convertible preferred stock held by   
  Merion Partners and 132,398 shares of Series F convertible preferred stock
 held by eTrillium, LLC. Mr. Evans is a limited partner of Merion Partners
and a member of eTrillium, LLC.                                         

(6) Includes 133,333 and 1,306,667 shares of Series D convertible preferred     
  stock held by Flatiron Associates, LLC and The Flatiron Fund 1998/99, LLC,
    respectively and 50,771 and 746,328 shares of Series E convertible preferred
   stock and 13,240 and 175,162 shares of Series F convertible preferred stock
   held by Flatiron Associates, LLC and The Flatiron Fund, 2000, respectively.
Mr. Greene is a managing member of Flatiron Associate, LLC, The Flatiron
Fund 1998/99 LLC and The Flatiron Fund 2000 LLC.                        

(7) Includes 133,333 and 1,306,667 shares of Series D convertible preferred     
  stock held by Flatiron Associates, LLC and The Flatiron Fund 1998/99, LLC,
    respectively and 50,771 and 746,328 shares of Series E convertible preferred
   stock and 13,240 and 175,162 shares of Series F convertible preferred stock
   held by Flatiron Associates, LLC and The Flatiron Fund, 2000, respectively.

(8) Includes 4,251,000 and 82,333 shares of Series D convertible preferred      
  stock, 2,102,123 and 40,714 shares of Series E convertible preferred stock
  and 649,411 and 12,578 shares of Series F convertible preferred stock held
   by Oak Investment Partners VIII Limited Partnership and Oak VIII Affiliates
  Fund Limited Partnership, respectively. Mr. Gallagher is a managing member
   of the general partners to Oak Investment Partners VIII Limited Partnership
and Oak VIII Affiliates Fund Limited Parnership.                        

(9) Includes 100,622 shares of Series E convertible preferred stock held by     
EQUUSFUND LLC.                                                          

(10) Includes 13,599,275 shares of Series E convertible preferred stock and     
warrants to purchase 16,060,000 shares of Series E convertible preferred
stock held by Amazon.com, Inc.                                          

TRANSACTIONS WITH AMAZON.COM                                                    

In March 2000, we entered into a supply and delivery agreement with     
Amazon.com LLC, an affiliate of Amazon.com, Inc., one of our 5% stockholders, to
provide Amazon.com customers with the option of having books, music and toy     
products delivered under one hour. For more information regarding the agreement 
with Amazon.com see "Business--Relationship with Amazon.com."                   

In March 2000, we granted a fully vested warrant to purchase 8,650,000  
shares of Series E convertible preferred stock to Amazon.com, Inc. at an        
exercise price of $5.52 per share. This warrant expires upon the earlier of an  
initial public offering of our common stock in which certain criteria are met or
March 2005.                                                                     

    In December 1999, we granted fully vested warrants to purchase 3,717,860 and
3,692,140 shares of Series E preferred stock to Amazon.com, Inc. at exercise    
prices of $4.41 and $5.52 per share, respectively. These warrants expire upon   
the earlier of an initial public offering of our common stock, in which certain 
criteria are met, or December 2004.                                             

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In December 1999, we issued 13,599,275 shares of Series E convertible   
preferred stock to Amazon.com, Inc. at $4.41 per share for an aggregate purchase
price of $60.0 million.                                                         

OTHER TRANSACTIONS                                                              

The following members of our board of directors are affiliated with     
investors that participated in the transactions listed above: Robert Greene and 
Seth Goldstein (Flatiron Partners and entities affiliated with Flatiron         
Partners), Hugh Evan (Merion Partners) and Jerry Gallagher (Oak Investment      
Partners).                                                                      

 In September 1999, we entered into consulting agreements with Monkey Rock
Ventures and various other consultants pursuant to which we granted warrants to 
purchase 50,000 shares of common stock, at an exercise price of $.001 per share,
for advisory services provided to Kozmo. Gideon J. Stein, one of the consultants
to whom a warrant was granted, is the son of Robert Stein, a former director of 
ours.                                                                           

REGISTRATION RIGHTS AGREEMENTS                                                  

   We have entered into a registration rights agreement with Joseph Park, Yong
Kang and the holders of Series B, C, D, E and F convertible preferred stock that
gives those stockholders demand, piggyback and shelf registration rights. Any   
time after we complete this offering, the holders of 33% of the registrable     
securities are entitled to demand that we register their registrable securities 
under the Securities Act. Additionally, the holders of the registrable          
securities are entitled to require us to include their registrable securities in
future registration statements that we may file.                                

    For a more detailed description of these registration rights agreements, see
"Description of Capital Stock--Registration Rights."                            

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DESCRIPTION OF CAPITAL STOCK

  Upon completion of the offering, our authorized capital stock will consist
of 150,000,000 shares of common stock, $.001 par value per share, and 10,000,000
shares of undesignated preferred stock, $.01 per share.                         

COMMON STOCK                                                                    

 As of December 31, 1999, there were 10,512,500 shares of our common stock
outstanding that were held of record by twelve stockholders. After giving effect
to this offering and the conversion of all of our convertible preferred stock   
outstanding as of December 31, 1999 and our Series E and Series F convertible   
preferred stock issued in January and March 2000 into 66,760,203 shares of      
common stock upon the closing of this offering, there will be         shares of 
common stock outstanding, assuming no exercise of the underwriters'             
over-allotment option.                                                          

    The holders of our common stock are entitled to one vote for each share held
of record on all matters submitted to a vote of the stockholders. Subject to    
preferences that may be applicable to any outstanding preferred stock, holders  
of our common stock are entitled to receive ratably such dividends as may be    
declared by the board of directors out of funds legally available for that      
purpose. In the event of the liquidation, dissolution or winding up of Kozmo,   
the holders of our common stock are entitled to share ratably in all assets     
remaining after payment of liabilities, subject to the prior distribution rights
of any outstanding preferred stock. The common stock has no preemptive or       
conversion rights or other subscription rights.                                 

PREFERRED STOCK                                                                 

Upon the closing of the offering, the board of directors will have the  
authority, without further action by the stockholders, to issue up to           
10,000,000 shares of preferred stock. The board of directors will also have the 
authority to designate the rights, preferences, privileges and restrictions of  
each series of preferred stock, including dividend rights, dividend rates,      
conversion rights, voting rights, terms of redemption, redemption prices,       
liquidation preferences and the number of shares constituting any series.       

  The issuance of preferred stock may have the effect of delaying, deferring
or preventing a change of control of Kozmo without further action by the        
stockholders. The issuance of preferred stock with voting and conversion rights 
may also adversely affect the voting power of the holders of common stock. In   
some circumstances, an issuance of preferred stock could have the effect of     
decreasing the market price of our common stock. As of the closing of this      
offering, no shares of preferred stock will be outstanding and we currently have
no plans to issue any shares of preferred stock.                                

WARRANTS                                                                        

As of December 31, 1999, there were outstanding warrants to purchase an 
aggregate of 50,000 shares of our common stock, at an exercise price of $.001   
per share. These warrants expire, if not exercised, in September 2009. Warrants 
to purchase 13,240 shares of common, at an exercise price of $7.55 per share,   
were issued in March 2000 and expire upon the earlier of an initial public      
offering of our common stock or March 2002.                                     

    Warrants to purchase 16,878,288 shares of our Series E convertible preferred
stock are outstanding, including warrants to purchase 8,672,676 shares of       
Series E convertible preferred stock issued subsequent to December 31, 1999.    
Warrants to purchase 16,878,288 shares of our Series E convertible preferred    
stock will expire upon the earlier of an initial public offering of our common  
stock in which certain criteria are met or at dates between December 2004 and   
March 2005.                                                                     

ANTI-TAKEOVER PROVISIONS OF DELAWARE LAW AND OUR CHARTER DOCUMENTS              

Provisions of Delaware law and our charter documents could make the     
acquisition of Kozmo and the removal of incumbent officers and directors more   
difficult. These provisions, summarized below, are expected to discourage       
coercive takeover practices and inadequate takeover bids and to encourage       
persons seeking to acquire control of our company to negotiate with us first. We
believe that the benefits of increased protection of our potential ability to   
negotiate with the proponent of an unfriendly or unsolicited proposal to acquire
or restructure Kozmo outweigh the disadvantages of                              

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discouraging such proposals because, among other things, negotiation of such    
proposals could result in an improvement of their terms.                        

DELAWARE LAW.  We are subject to the provisions of Section 203 of the   
Delaware law. In general, the statute prohibits a publicly held Delaware        
corporation from engaging in a "business combination" with an "interested       
stockholder" for a period of three years after the date that the person became  
an interested stockholder unless, subject to exceptions, the business           
combination or the transaction in which the person became an interested         
stockholder is approved in a prescribed manner. Generally, a "business          
combination" includes a merger, asset or stock sale, or other transaction       
resulting in a financial benefit to the stockholder. Generally, an "interested  
stockholder" is a person who, together with affiliates and associates, owns, or 
within three years prior, did own, 15% or more of the corporation's voting      
stock. These provisions may have the effect of delaying, deferring or preventing
a change of control of our company without further action by the stockholders.  

CHARTER DOCUMENTS.  Upon the closing of this offering, our amended and  
restated certificate of incorporation will provide that stockholder action can  
be taken only at an annual or special meeting of stockholders and may not be    
taken by written consent. Our bylaws will provide that special meetings of      
stockholders can be called only by our board of directors, the chairman of the  
board, our president and holders of at least 50% of the votes entitled to be    
cast at a meeting. The business permitted to be conducted at any special meeting
of stockholders will be limited to the business brought before the meeting by   
our board of directors, the chairman of the board, our president or any 50%     
holder. Our bylaws will set forth an advance notice procedure with regard to the
nomination, other than by or at the direction of the board of directors, of     
candidates for election as directors and with regard to business to be brought  
before a meeting of stockholders.                                               

REGISTRATION RIGHTS                                                             

  Under a registration rights agreement, the holders of 75,626,871 shares of
common stock (assuming the conversion of all of our outstanding preferred stock 
upon completion of this offering) or their transferees are entitled to rights   
with respect to the registration of these shares under the Securities Act. These
rights expire in December 2006. Subject to limitations in the agreement, the    
holders of at least 33% of the then outstanding registrable shares may require, 
on two occasions beginning three months after the completion of this offering,  
that we use our best efforts to register at least 20% of the registrable shares 
held by them for public resale. If we register any of our common stock either   
for our own account or for the account of other stockholders, all holders of    
registrable shares are entitled to include their shares of our common stock in  
that registration, subject to the ability of the underwriters to limit the      
number of shares included in the offering. Subject to limitations in the        
agreement, the holders of at least 33% of the then outstanding registrable      
shares may also require that we register at least 20% of the registrable shares 
held by them in a registration statement of Form S-3 when the use of that form  
becomes available to us. In each registration under the agreement, we will be   
responsible for paying all registration expenses, and the holders selling their 
shares will be responsible for paying all underwriting discounts and selling    
commissions. Holders of all of these shares are restricted from exercising these
rights until 180 days after the date of this prospectus.                        

TRANSFER AGENT AND REGISTRAR                                                    

The transfer agent and registrar for the common stock is             .  

NASDAQ STOCK MARKET LISTING                                                     

  We intend to apply for listing for quotation on the Nasdaq National Market
under the trading symbol "KZMO."                                                

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SHARES ELIGIBLE FOR FUTURE SALE 

Prior to this offering, there has been no market for our common stock.  
Future sales of substantial amounts of common stock in the public market could  
adversely affect the market price of our common stock.                          

Upon completion of this offering, we will have          shares of common
stock outstanding, assuming conversion of all of our outstanding convertible    
preferred stock into 66,760,203 shares of common stock. The      shares being   
sold in this offering, plus any shares issued upon the exercise of the          
underwriter's over-allotment option will be freely tradable in the public market
without restrictions or further registration under the Securities Act, unless   
the shares are purchased by "affiliates," as that term is defined in            
Rule 144(a) under the Securities Act. Shares purchased by affiliates will be    
subject to the resale limitations of Rule 144. The remaining       shares       
outstanding will be "restricted securities" under the Securities Act and may not
be sold in the absence of registration under the Securities Act or an exemption 
therefrom, including pursuant to Rule 144. In addition, at December 31, 1999,   
(i) 7,813,196 shares were reserved for issuance upon exercise of outstanding    
stock options pursuant to our stock option plans at prices ranging from $.20 to 
$4.41 per share, and (ii) 5,925,133 shares were reserved for future issuance    
under our various stock option plans.                                           

  Each of our directors, officers and certain shareholders have entered into
lock-up agreements in connection with this offering generally providing that    
they will not offer, sell, contract to sell or grant any option to purchase or  
otherwise dispose of common stock or any securities exercisable for or          
convertible into our common stock owned by them for a period of 180 days after  
the date of this prospectus without the prior written consent of Credit Suisse  
First Boston. Notwithstanding possible earlier eligibility for sale under the   
provisions of Rules 144, 144(k) and 701, shares subject to lock-up agreements   
will not become eligible for resale until these agreements expire or are waived 
by Credit Suisse First Boston. Taking into account the lock-up agreements, and  
assuming Credit Suisse First Boston does not release shareholders from these    
agreements, the following shares will be eligible for sale in the public market 
at the following times:                                                         

- beginning on the effective date of this prospectus,       shares,     
   including those sold in the offering, will be immediately available for
sale in the public market;                                          

  - beginning 90 days after the effective date, approximately 112,500 shares
will be eligible for sale under Rule 701; and                       

- beginning 180 days after the effective date, approximately            
 45,862,285 shares will be eligible for sale under Rule 144 at various
times;                                                              

  In general, under Rule 144 as currently in effect, after the expiration of
the lock-up agreements, a person who has beneficially owned restricted          
securities for at least one year would be entitled to sell within any           
three-month period a number of shares that does not exceed the greater of:      

- 1% of the number of shares then outstanding, which will equal         
approximately       shares immediately after the offering; or       

  - the average weekly trading volume of the shares during the four calendar
weeks preceding the sale.                                           

    Sales under Rule 144 are also subject to requirements with respect to manner
of sale, notice, and the availability of current public information about us.   
Under Rule 144(k), a person who is not deemed to have been our affiliate at any 
time during the three months preceding a sale, and who has beneficially owned   
the shares proposed to be sold for at least two years, is entitled to sell these
shares without complying with the manner of sale, public information, volume    
limitation or notice provisions of Rule 144.                                    

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    Rule 701, as currently in effect, permits our employees, officers, directors
or consultants who purchased shares under a written compensatory plan or        
contract to resell these shares in reliance upon Rule 144 but without compliance
with specific restrictions. Rule 701 provides that affiliates may sell their    
Rule 701 shares under Rule 144 without complying with the holding period, public
information, volume limitation or notice provisions of Rule 144.                

 In addition, we intend to file a registration statement on Form S-8 under
the Securities Act within 180 days following the date of this prospectus to     
register shares subject to outstanding stock options or reserved for issuance   
under our stock option plans. This registration statement will permit the resale
of these shares by nonaffiliates in the public market without restriction under 
the Securities Act, upon completion of the lock-up period described above.      
However, such shares held by affiliates will still be subject to the volume     
limitation, manner of sale, notice and public information requirements of       
Rule 144 unless otherwise resalable under Rule 701. As of December 31, 1999,    
options to purchase approximately 7,813,196 shares of common stock were         
outstanding, of which options to purchase approximately 461,511 shares were     
vested and exercisable.                                                         

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UNDERWRITING

  Under the terms and subject to the conditions contained in an underwriting
agreement dated       , 2000, we have agreed to sell to the underwriters named  
below, for whom Credit Suisse First Boston Corporation, Salomon Smith           
Barney Inc. and U.S. Bancorp Piper Jaffray Inc. are acting as representatives,  
the following respective numbers of Shares of our Common Stock:                 

                                                                [Download Table]

                                                              NUMBER OF
UNDERWRITER                                                    SHARES  
-----------                                                   ---------
                                                                       
Credit Suisse First Boston Corporation......................           
Salomon Smith Barney Inc. ..................................           
U.S. Bancorp Piper Jaffray Inc. ............................           
                                                               ------- 
      Total.................................................           
                                                               ======= 

  The underwriting agreement provides that the underwriters are obligated to
purchase all the shares of common stock in this offering if any are purchased,  
other than those shares covered by the over-allotment option described below.   
The underwriting agreement also provides that if an underwriter defaults, the   
purchase commitments of non-defaulting underwriters may be increased or the     
offering of common stock may be terminated.                                     

We have granted to the underwriters a 30-day option to purchase on a pro
rata basis up to       additional shares of our common stock at the initial     
public offering price less the underwriting discounts and commissions. The      
option may be exercised only to cover any over-allotments of common stock.      

 The underwriters propose to offer the shares of common stock initially at
the public offering price on the cover page of this prospectus and to the       
selling group members at that price less a concession of $    per share. The    
underwriters and the selling group members may allow a discount of $    per     
share on sales to other broker/dealers. After the initial public offering, the  
public offering price and concession and discount to dealers may be changed by  
the representatives.                                                            

 The following table summarizes the compensation and estimated expenses we
will pay.                                                                       

                                                        [Enlarge/Download Table]

                                                    PER SHARE                          TOTAL             
                                         -------------------------------  -------------------------------
                                            WITHOUT            WITH          WITHOUT            WITH     
                                         OVER-ALLOTMENT   OVER-ALLOTMENT  OVER-ALLOTMENT   OVER-ALLOTMENT
                                         --------------   --------------  --------------   --------------
                                                                                                         
Underwriting Discounts and Commissions                                                                   
  paid by us............................  $                     $               $                $       
Expenses payable by us..................  $                     $               $                $       

The underwriters have informed us that they do not expect discretionary 
sales to exceed 5% of the shares of common stock being offered.                 

We have agreed that we will not offer, sell, contract to sell, pledge or
otherwise dispose of, directly or indirectly, or file with the Securities and   
Exchange Commission a registration statement under the Securities Act relating  
to, any shares of our common stock or securities convertible into or            
exchangeable or exercisable for any shares of our common stock, or publicly     
disclose the intention to make any such offer, sale, pledge, disposition or     
filing, without the prior written consent of Credit                             

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Suisse First Boston Corporation for a period of 180 days after the date of this 
prospectus, except issuances pursuant to the exercise of employee stock options 
outstanding on the date hereof.                                                 

   Our officers, directors and certain stockholders have agreed that they will
not offer, sell, contract to sell, pledge or otherwise dispose of, directly or  
indirectly, any shares of our common stock or securities convertible into or    
exchangeable or exercisable for any shares of our common stock, enter into a    
transaction which would have the same effect, or enter into any swap, hedge or  
other arrangement that transfers, in whole or in part, any of the economic      
consequences of ownership of our common stock, whether any such aforementioned  
transaction is to be settled by delivery of our common stock or such other      
securities, in cash or otherwise, or publicly disclose the intention to make any
such offer, sale, pledge or disposition, or to enter into any such transaction, 
swap, hedge or other arrangement, without, in each case, the prior written      
consent of Credit Suisse First Boston Corporation for a period of 180 days after
the date of this prospectus.                                                    

The underwriters have reserved for sale, at the initial public offering 
price up to       shares of our common stock for employees, directors and       
several other persons associated with us who have expressed an interest in      
purchasing common stock in this offering. The number of shares available for    
sale to the general public in this offering will be reduced to the extent these 
persons purchase the reserved shares. Any reserved shares not so purchased will 
be offered by the underwriters to the general public on the same terms as the   
other shares.                                                                   

  We have agreed to indemnify the underwriters against liabilities under the
Securities Act or contribute to payments which the underwriters may be required 
to make in that respect.                                                        

We intend to apply to list our common stock on The Nasdaq Stock Market's
National Market under the symbol "KZMO."                                        

Prior to this offering, there has been no public market for our common  
stock. The initial public offering price will be determined by negotiation      
between our management and representatives of the underwriters. The principal   
factors that will be considered in determining the public offering price        
include:                                                                        

 - the information set forth in this prospectus and otherwise available to
the underwriters;                                                   

- the history and the prospects for the industry in which we compete;   

- the ability of our management;                                        

- the prospects for our future earnings;                                

   - the present state of our development and our current financial condition;

- the general condition of the securities markets at the time of this   
offering; and                                                       

 - the recent market prices of, and the demand for, publicly traded common
stock of generally comparable companies.                            

   The representatives may engage in over-allotment, stabilizing transactions,
syndicate covering transactions and penalty bids in accordance with             
Regulation M under the Securities Exchange Act of 1934.                         

  - Over-allotment involves syndicate sales in excess of this offering size,
which creates a syndicate short position.                           

  - Stabilizing transactions permit bids to purchase the underlying security
so long as the stabilizing bids do not exceed a specified maximum.  

  - Syndicate covering transactions involve purchases of the common stock in
 the open market after the distribution has been completed in order to
cover syndicate short positions.                                    

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 - Penalty bids permit the representatives to reclaim a selling concession
from a syndicate member when the common stock originally sold by the
      syndicate member is purchased in a syndicate covering transaction to cover
syndicate short positions.                                          

These stabilizing transactions, syndicate covering transactions and penalty bids
may cause the price of the common stock to be higher than it would otherwise be 
in the absence of these transactions. These transactions may be effected on The 
Nasdaq National Market or otherwise and, if commenced, may be discontinued at   
any time.                                                                       

A prospectus in electronic format may be made available on the web sites
maintained by one or more of the underwriters participating in this offering.   
The representatives may agree to allocate a number of shares to underwriters for
sale to their online brokerage account holders. Internet distributions will be  
allocated by the underwriters that will make internet distributions on the same 
basis as other allocations.                                                     

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NOTICE TO CANADIAN RESIDENTS

RESALE RESTRICTIONS                                                             

The distribution of the common stock in Canada is being made only on a  
private placement basis exempt from the requirement that we prepare and file a  
prospectus with the securities regulatory authorities in each province where    
trades of common stock are effected. Accordingly, any resale of our common stock
in Canada must be made in accordance with applicable securities laws which will 
vary depending on the relevant jurisdiction, and which may require resales to be
made in accordance with available statutory exemptions or pursuant to a         
discretionary exemption granted by the applicable Canadian securities regulatory
authority. Purchasers are advised to seek legal advice prior to any resale of   
the common stock.                                                               

REPRESENTATIONS OF PURCHASERS                                                   

Each purchaser of common stock in Canada who receives a purchase        
confirmation will be deemed to represent to us and the dealer from whom the     
purchase confirmation is received that (i) the purchaser is entitled under      
applicable provincial securities laws to purchase the common stock without the  
benefit of a prospectus qualified under Canadian securities laws; (ii) where    
required by law, that the purchaser is purchasing as principal and not as agent;
and (iii) the purchaser has reviewed the text above under "Resale Restrictions."

RIGHTS OF ACTION FOR ONTARIO PURCHASERS                                         

The securities being offered are those of a foreign issuer and Ontario  
purchasers will not receive the contractual right of action prescribed by       
Ontario securities law. As a result, Ontario purchasers must rely on other      
remedies that may be available, including common law rights of action for       
damages or rescission or rights of action under the civil liability provisions  
of the U.S. federal securities laws.                                            

ENFORCEMENT OF LEGAL RIGHTS                                                     

  All of the issuer's directors and officers as well as the experts named in
this prospectus may be located outside of Canada and, as a result, it may not be
possible for Canadian purchasers to effect service of process within Canada upon
the issuer or those persons. All or a substantial portion of the assets of the  
issuer and those persons may be located outside of Canada and, as a result, it  
may not be possible to satisfy a judgment against the issuer or those persons in
Canada or to enforce a judgment obtained in Canadian courts against the issuer  
or persons outside of Canada.                                                   

NOTICE TO BRITISH COLUMBIA RESIDENTS                                            

 A purchaser of common stock to whom the SECURITIES ACT (British Columbia)
applies is advised that the purchaser is required to file with the British      
Columbia Securities Commission a report within ten days of the sale of any      
common stock acquired by the purchaser pursuant to this offering. The report    
must be in the form attached to British Columbia Securities Commission Blanket  
Order BOR # 95/17, a copy of which may be obtained from us. Only one report must
be filed in respect of common stock acquired on the same date and under the same
prospectus exemption.                                                           

TAXATION AND ELIGIBILITY FOR INVESTMENT                                         

  Canadian purchasers of common stock should consult their own legal and tax
advisors with respect to the tax consequences of an investment in our common    
stock in their particular circumstances and with respect to the eligibility of  
our common stock for investment by the purchaser under relevant Canadian        
legislation.                                                                    

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LEGAL MATTERS 

  The validity of the common stock offered hereby will be passed upon for us
by Shearman & Sterling, New York, New York. Shearman & Sterling beneficially    
owns shares of our Series D Preferred Stock and Series E Preferred Stock which  
upon consummation of this offering will convert into an aggregate of 85,558     
shares of our common stock. Certain legal matters in connection with the        
offering will be passed upon for the underwriters by Weil, Gotshal & Manges LLP,
New York, New York.                                                             

EXPERTS 

    The financial statements of Kozmo.com, Inc. as of December 31, 1998 and 1999
and for the period from April 17, 1997 (inception) to December 31, 1997 and for 
the years ended December 31, 1998 and 1999 have been included in this prospectus
and elsewhere in the registration statement in reliance on the report of KPMG   
LLP, independent accountants, appearing elsewhere herein and upon the authority 
of said firm as experts in auditing and accounting.                             

WHERE YOU CAN FIND ADDITIONAL INFORMATION 

 This prospectus is a part of a registration statement on Form S-1 that we
have filed with the Securities and Exchange Commission under the Securities Act,
with respect to the common stock offered in this prospectus. This prospectus    
does not contain all the information which is in the registration statement.    
Certain parts of the registration statement are omitted as allowed by the rules 
and regulations of the SEC. We refer you to the registration statement for      
further information about our company and the securities offered in this        
prospectus. Statements contained in this prospectus concerning the provisions of
documents filed as exhibits are not necessarily complete, and reference is made 
to the copy so filed, each such statement being qualified in all respects by    
such reference. You can inspect and copy the registration statement and the     
reports and other information we file with the SEC at Room 1024, Judiciary      
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. You can obtain           
information on the operation of the public reference room by calling the SEC at 
1-800-SEC-0330. The same information will be available for inspection and       
copying at the regional offices of the SEC located at 7 World Trade Center, 13th
Floor, New York, N.Y. 10048 and at Citicorp Center, 500 West Madison Street,    
Suite 1400, Chicago, Illinois 60661. You can also obtain copies of this material
from the public reference room of the SEC at 450 Fifth Street, N.W., Washington,
D.C. 20549, at prescribed rates. The SEC also maintains a web site which        
provides online access to reports, proxy and information statements and other   
information regarding registrants that file electronically with the SEC at the  
address HTTP://WWW.SEC.GOV.                                                     

    Upon the effectiveness of the registration statement, we will become subject
to the information requirements of the Exchange Act. We will then file reports, 
proxy statements and other information under the Exchange Act with the SEC. You 
can inspect and copy these reports and other information of our company at the  
locations set forth above or download these reports from the SEC's web site.    

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KOZMO.COM, INC. 

INDEX TO FINANCIAL STATEMENTS 

                                                                [Download Table]

                                                                PAGE  
                                                              --------
                                                                      
Independent Auditors' Report................................    F-2   

Balance Sheets as of December 31, 1998 and 1999.............    F-3   

Statements of Operations for the period from April 17, 1997           
  (inception)                                                         
  to December 31, 1997 and for the years ended December 31,           
  1998 and 1999.............................................    F-4   

Statements of Stockholders' Equity (Deficit) for the period           
  from April 17, 1997 (inception)                                     
  to December 31, 1997 and for the years ended December 31,           
  1998 and 1999.............................................    F-5   

Statements of Cash Flows for the period from April 17, 1997           
  (inception)                                                         
  to December 31, 1997 and for the years ended December 31,           
  1998 and 1999.............................................    F-6   

Notes to Financial Statements...............................    F-7   

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INDEPENDENT AUDITORS' REPORT

The Board of Directors                                                          
Kozmo.com, Inc.                                                                 

We have audited the accompanying balance sheets of Kozmo.com, Inc. (the 
"Company") as of December 31, 1998 and 1999, and the related statements of      
operations, stockholders' equity (deficit) and cash flows for the period from   
April 17, 1997 (inception) to December 31, 1997 and for the years ended         
December 31, 1998 and 1999. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these  
financial statements based on our audits.                                       

We conducted our audits in accordance with generally accepted auditing  
standards. Those standards require that we plan and perform the audit to obtain 
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting 
the amounts and disclosures in the financial statements. An audit also includes 
assessing the accounting principles used and significant estimates made by      
management, as well as evaluating the overall financial statement presentation. 
We believe that our audits provide a reasonable basis for our opinion.          

  In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Company as of           
December 31, 1998 and 1999, and the results of its operations and its cash flows
for the period from April 17, 1997 (inception) to December 31, 1997 and for the 
years ended December 31, 1998 and 1999, in conformity with generally accepted   
accounting principles.                                                          

                /s/ KPMG LLP

New York, New York                                                              
March 14, 2000                                                                  

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KOZMO.COM, INC. 

BALANCE SHEETS

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) 

                                                                [Download Table]

                                                                 DECEMBER 31,     
                                                              ------------------- 
                                                                1998       1999   
                                                              --------   -------- 
                                                                                  
                           ASSETS                                                 
Current assets:                                                                   
  Cash and cash equivalents.................................  $     82   $ 88,867 
  Accounts receivable, net of allowance for doubtful                              
    accounts of $4 and $86, respectively....................        30        550 
  Product inventory.........................................         8      2,741 
  Preferred stock subscription receivable...................       149         -- 
  Prepaid expenses and other assets.........................         6        505 
                                                              --------   -------- 
      Total current assets..................................       275     92,663 
Rental product inventory, net of accumulated amortization of                      
  $14 and $309, respectively................................       144      2,269 
Property and equipment, net.................................       109      7,019 
Security deposits and other assets..........................        30      1,047 
                                                              --------   -------- 
      Total assets..........................................  $    558   $102,998 
                                                              ========   ======== 
       LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)                             
Current liabilities:                                                              
  Accounts payable..........................................  $    215   $  7,314 
  Accrued expenses..........................................       121      6,763 
  Short-term borrowings--related party......................       103         -- 
  Other liabilities.........................................        22        208 
                                                              --------   -------- 
      Total current liabilities.............................       461     14,285 

Other liabilities...........................................        38        173 

Commitments and contingencies                                                     

Mandatorily redeemable convertible preferred stock:                               
  Series A, $.01 par value; 1,133,332 shares authorized,                          
    issued and outstanding; with an aggregate liquidation                         
    preference of $285......................................       285         -- 
  Series B, $.01 par value; 4,998,517 shares authorized,                          
    issued and outstanding; with an aggregate liquidation                         
    preference of $683......................................       683         -- 

Stockholders' equity (deficit):                                                   
  Series A convertible preferred stock, $.01 par value;                           
    1,133,332 shares authorized, issued and outstanding;                          
    with an aggregate liquidation preference of $333........        --         11 
  Series B convertible preferred stock, $.01 par value;                           
    4,998,517 shares authorized, issued and outstanding;                          
    with an aggregate liquidation preference of $1,275......        --         50 
  Series C convertible preferred stock, $.01 par value;                           
    2,508,500 shares authorized, issued and outstanding;                          
    with an aggregate liquidation preference of $3,196......        --         25 
  Series D convertible preferred stock, $.01 par value;                           
    15,616,119 shares authorized, issued and outstanding;                         
    with an aggregate liquidation preference of $57,186.....        --        156 
  Series E convertible preferred stock, $.01 par value;                           
    45,500,000 shares authorized; 19,859,568 shares issued                        
    and outstanding; with an aggregate liquidation                                
    preference of $87,500...................................        --        199 
  Common stock $.001 par value; 90,918,897 shares                                 
    authorized; 10,350,000 shares issued and outstanding at                       
    December 31, 1998 and 10,400,000 shares issued and                            
    outstanding at December 31, 1999........................        10         10 
  Additional paid-in capital................................        12    118,150 
  Contribution receivable...................................        --       (158)
  Deferred compensation.....................................        --     (2,602)
  Accumulated deficit.......................................      (931)   (27,301)
                                                              --------   -------- 
      Total stockholders' equity (deficit)..................      (909)    88,540 
                                                              --------   -------- 
      Total liabilities and stockholders' equity                                  
       (deficit)............................................  $    558   $102,998 
                                                              ========   ======== 

See accompanying notes to financial statements. 

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KOZMO.COM, INC

STATEMENTS OF OPERATIONS

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) 

                                                        [Enlarge/Download Table]

                                                        PERIOD FROM                              
                                                       APRIL 17, 1997                            
                                                       (INCEPTION) TO   YEAR ENDED DECEMBER 31,  
                                                        DECEMBER 31,   ------------------------- 
                                                            1997          1998          1999     
                                                       --------------  -----------   ----------- 
                                                                                                 
Revenues:                                                                                        
  Rental..............................................  $        --    $       108   $     1,706 
  Product sales.......................................           --             47         1,803 
                                                        -----------    -----------   ----------- 
    Total revenues....................................           --            155         3,509 
                                                        -----------    -----------   ----------- 
Costs of revenues:                                                                               
  Cost of rental......................................           --             14           671 
  Cost of product sales...............................           --             21         1,326 
                                                        -----------    -----------   ----------- 
    Total costs of revenues...........................           --             35         1,997 
                                                        -----------    -----------   ----------- 
      Gross profit....................................           --            120         1,512 

Operating expenses:                                                                              
  Marketing and sales.................................           --            117        10,252 
  Product development.................................           --             49         1,964 
  General and administrative..........................          118            674        11,551 
  Delivery............................................           --             66         3,265 
  Depreciation and amortization.......................           --             24           801 
  Non-cash compensation...............................           --              3           208 
                                                        -----------    -----------   ----------- 
    Total operating expenses..........................          118            933        28,041 
                                                        -----------    -----------   ----------- 

Loss from operations..................................         (118)          (813)      (26,529)
Interest income, net of $46 of interest expense.......           --             --           159 
                                                        -----------    -----------   ----------- 
Net loss..............................................         (118)          (813)      (26,370)
Dividends and accretion of redemption value on                                                   
  mandatorily redeemable convertible preferred                                                   
  stock...............................................           (5)           (55)       (2,589)
                                                        -----------    -----------   ----------- 
Net loss attributable to common stockholders..........  $      (123)   $      (868)  $   (28,959)
                                                        ===========    ===========   =========== 
Basic and diluted net loss per common share...........  $      (.01)   $      (.08)  $     (2.79)
                                                        ===========    ===========   =========== 
Weighted-average shares outstanding used in computing                                            
  basic and diluted net loss per common share.........   10,182,000     10,350,000    10,362,192 
                                                        ===========    ===========   =========== 
Pro forma basic and diluted net loss per common                                                  
  share...............................................                               $     (1.29)
                                                                                     =========== 
Weighted-average shares outstanding used in computing                                            
  pro forma basic and diluted net loss per common                                                
  share...............................................                                22,430,968 
                                                                                     =========== 

See accompanying notes to financial statements

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KOZMO.COM, INC
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS, EXCEPT SHARE DATA) 

                                                        [Enlarge/Download Table]

                                                               SERIES A                SERIES B               SERIES C              
                                                              CONVERTIBLE            CONVERTIBLE            CONVERTIBLE             
                                                            PREFERRED STOCK        PREFERRED STOCK        PREFERRED STOCK           
                                                         ---------------------   --------------------   --------------------        
                                                           SHARES      AMOUNT     SHARES      AMOUNT     SHARES      AMOUNT         
                                                         ----------   --------   ---------   --------   ---------   --------        
                                                                                                                                    
BALANCE AT APRIL 17, 1997 (INCEPTION)..................          --   $    --           --    $   --           --     $--           
    Issuance of common stock...........................          --        --           --        --           --      --           
    Accretion of Series A mandatorily redeemable                                                                                    
      convertible preferred stock......................          --        --           --        --           --      --           
    Net loss for the period from April 17, 1997                                                                                     
      (inception) to December 31, 1997.................          --        --           --        --           --      --           
                                                         ----------   -------    ---------    ------    ---------     ---           
BALANCE AT DECEMBER 31, 1997...........................          --        --           --        --           --      --           
    Issuance of stock options to non-employees for                                                                                  
      services.........................................          --        --           --        --           --      --           
    Issuance costs in connection with Series B                                                                                      
      mandatorily redeemable convertible preferred                                                                                  
      stock............................................          --        --           --        --           --      --           
    Accretion of Series A and Series B mandatorily                                                                                  
      redeemable convertible preferred stock...........          --        --           --        --           --      --           
    Net loss...........................................          --        --           --        --           --      --           
                                                         ----------   -------    ---------    ------    ---------     ---           
BALANCE AT DECEMBER 31, 1998...........................          --        --           --        --           --      --           
    Issuance of warrants to non-employees for                                                                                       
      services.........................................          --        --           --        --           --      --           
    Issuance costs in connection with Series B, Series                                                                              
      C and Series D mandatorily redeemable convertible                                                                             
      preferred stock..................................          --        --           --        --           --      --           
    Exercise of common stock warrant...................          --        --           --        --           --      --           
    Contribution of capital through forgiveness of                                                                                  
      loans from founders..............................          --        --           --        --           --      --           
    Unutilized portion of advertising credits issued                                                                                
      for Series D mandatorily redeemable convertible                                                                               
      preferred stock..................................          --        --           --        --           --      --           
    Accretion of Series A, Series B, Series C and                                                                                   
      Series D mandatorily redeemable convertible                                                                                   
      preferred stock..................................          --        --           --        --           --      --           
    Conversion of Series A, Series B, Series C and                                                                                  
      Series D mandatorily redeemable convertible                                                                                   
      preferred stock to convertible preferred stock...   1,133,332        11    4,998,517        50    2,508,500      25           
    Issuance of Series E convertible preferred stock,                                                                               
      net of issuance costs of $3,667..................          --        --           --        --           --      --           
    Deferred compensation..............................          --        --           --        --           --      --           
    Amortization of deferred compensation..............          --        --           --        --           --      --           
    Net loss...........................................          --        --           --        --           --      --           
                                                         ----------   -------    ---------    ------    ---------     ---           
BALANCE AT DECEMBER 31, 1999...........................   1,133,332   $    11    4,998,517    $   50    2,508,500     $25           
                                                         ==========   =======    =========    ======    =========     ===           


                                                               SERIES D                SERIES E                                     
                                                              CONVERTIBLE             CONVERTIBLE                                   
                                                            PREFERRED STOCK         PREFERRED STOCK          COMMON STOCK           
                                                         ---------------------   ---------------------   ---------------------      
                                                           SHARES      AMOUNT      SHARES      AMOUNT      SHARES      AMOUNT       
                                                         ----------   --------   ----------   --------   ----------   --------      
                                                                                                                                    
BALANCE AT APRIL 17, 1997 (INCEPTION)..................          --     $ --             --    $   --            --     $--         
    Issuance of common stock...........................          --       --             --        --    10,350,000      10         
    Accretion of Series A mandatorily redeemable                                                                                    
      convertible preferred stock......................          --       --             --        --            --      --         
    Net loss for the period from April 17, 1997                                                                                     
      (inception) to December 31, 1997.................          --       --             --        --            --      --         
                                                         ----------     ----     ----------    ------    ----------     ---         
BALANCE AT DECEMBER 31, 1997...........................          --       --             --        --    10,350,000      10         
    Issuance of stock options to non-employees for                                                                                  
      services.........................................          --       --             --        --            --      --         
    Issuance costs in connection with Series B                                                                                      
      mandatorily redeemable convertible preferred                                                                                  
      stock............................................          --       --             --        --            --      --         
    Accretion of Series A and Series B mandatorily                                                                                  
      redeemable convertible preferred stock...........          --       --             --        --            --      --         
    Net loss...........................................          --       --             --        --            --      --         
                                                         ----------     ----     ----------    ------    ----------     ---         
BALANCE AT DECEMBER 31, 1998...........................          --       --             --        --    10,350,000      10         
    Issuance of warrants to non-employees for                                                                                       
      services.........................................          --       --             --        --            --      --         
    Issuance costs in connection with Series B, Series                                                                              
      C and Series D mandatorily redeemable convertible                                                                             
      preferred stock..................................          --       --             --        --            --      --         
    Exercise of common stock warrant...................          --       --             --        --        50,000      --         
    Contribution of capital through forgiveness of                                                                                  
      loans from founders..............................          --       --             --        --            --      --         
    Unutilized portion of advertising credits issued                                                                                
      for Series D mandatorily redeemable convertible                                                                               
      preferred stock..................................          --       --             --        --            --      --         
    Accretion of Series A, Series B, Series C and                                                                                   
      Series D mandatorily redeemable convertible                                                                                   
      preferred stock..................................          --       --             --        --            --      --         
    Conversion of Series A, Series B, Series C and                                                                                  
      Series D mandatorily redeemable convertible                                                                                   
      preferred stock to convertible preferred stock...  15,616,119      156             --        --            --      --         
    Issuance of Series E convertible preferred stock,                                                                               
      net of issuance costs of $3,667..................          --       --     19,859,568       199            --      --         
    Deferred compensation..............................          --       --             --        --            --      --         
    Amortization of deferred compensation..............          --       --             --        --            --      --         
    Net loss...........................................          --       --             --        --            --      --         
                                                         ----------     ----     ----------    ------    ----------     ---         
BALANCE AT DECEMBER 31, 1999...........................  15,616,119     $156     19,859,568    $  199    10,400,000     $10         
                                                         ==========     ====     ==========    ======    ==========     ===         



                                                         ADDITIONAL                                                      TOTAL      
                                                          PAID-IN     CONTRIBUTION     DEFERRED      ACCUMULATED     STOCKHOLDERS'  
                                                          CAPITAL      RECEIVABLE    COMPENSATION      DEFICIT      EQUITY (DEFICIT)
                                                         ----------   ------------   -------------   ------------   ----------------
                                                                                                                                    
BALANCE AT APRIL 17, 1997 (INCEPTION)..................   $     --      $               $    --        $                $     --    
    Issuance of common stock...........................         90           --              --              --              100    
    Accretion of Series A mandatorily redeemable                                                                                    
      convertible preferred stock......................         (5)          --              --              --               (5)   
    Net loss for the period from April 17, 1997                                                                                     
      (inception) to December 31, 1997.................         --           --              --            (118)            (118)   
                                                          --------      -------         -------        --------         --------    
BALANCE AT DECEMBER 31, 1997...........................         85           --              --            (118)             (23)   
    Issuance of stock options to non-employees for                                                                                  
      services.........................................          3           --              --              --                3    
    Issuance costs in connection with Series B                                                                                      
      mandatorily redeemable convertible preferred                                                                                  
      stock............................................        (25)          --              --              --              (25)   
    Accretion of Series A and Series B mandatorily                                                                                  
      redeemable convertible preferred stock...........        (51)          --              --              --              (51)   
    Net loss...........................................         --           --              --            (813)            (813)   
                                                          --------      -------         -------        --------         --------    
BALANCE AT DECEMBER 31, 1998...........................         12           --              --            (931)            (909)   
    Issuance of warrants to non-employees for                                                                                       
      services.........................................        137           --              --              --              137    
    Issuance costs in connection with Series B, Series                                                                              
      C and Series D mandatorily redeemable convertible                                                                             
      preferred stock..................................       (274)          --              --              --             (274)   
    Exercise of common stock warrant...................         --           --              --              --               --    
    Contribution of capital through forgiveness of                                                                                  
      loans from founders..............................         83           --              --              --               83    
    Unutilized portion of advertising credits issued                                                                                
      for Series D mandatorily redeemable convertible                                                                               
      preferred stock..................................         --         (158)             --              --             (158)   
    Accretion of Series A, Series B, Series C and                                                                                   
      Series D mandatorily redeemable convertible                                                                                   
      preferred stock..................................     (1,863)          --              --              --           (1,863)   
    Conversion of Series A, Series B, Series C and                                                                                  
      Series D mandatorily redeemable convertible                                                                                   
      preferred stock to convertible preferred stock...     33,748           --              --              --           33,990    
    Issuance of Series E convertible preferred stock,                                                                               
      net of issuance costs of $3,667..................     83,634           --              --              --           83,833    
    Deferred compensation..............................      2,673           --          (2,673)             --               --    
    Amortization of deferred compensation..............         --           --              71              --               71    
    Net loss...........................................         --           --              --         (26,370)         (26,370)   
                                                          --------      -------         -------        --------         --------    
BALANCE AT DECEMBER 31, 1999...........................   $118,150      $  (158)        $(2,602)       $(27,301)        $ 88,540    
                                                          ========      =======         =======        ========         ========    

See accompanying notes to financial statements. 

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KOZMO.COM, INC. 

STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

                                                        [Enlarge/Download Table]

                                                                PERIOD FROM                         
                                                              APRIL 17, 1997        YEAR ENDED      
                                                              (INCEPTION) TO       DECEMBER 31,     
                                                               DECEMBER 31,     ------------------- 
                                                                   1997           1998       1999   
                                                             -----------------  --------   -------- 
                                                                                                    
Cash flows from operating activities:                                                               
  Net loss..................................................       $(118)        $ (813)   $(26,370)
  Adjustments to reconcile net loss to net cash used in                                             
    operating activities:                                                                           
      Amortization of inventory of rental products..........          --             14         295 
      Depreciation and amortization.........................          --             24         801 
      Non-cash compensation.................................          --              3         208 
      Non-cash advertising..................................          --             --         342 
      Provision for doubtful accounts.......................          --              4         165 
      Deferred rent.........................................          --             31         134 
  Changes in operating assets and liabilities:                                                      
      Accounts receivable...................................          --            (34)       (602)
      Product inventory.....................................          --             (8)     (2,481)
      Prepaid expenses and other assets.....................          --             (6)       (499)
      Security deposits and other assets....................         (22)            (8)     (1,017)
      Accounts payable......................................          --            215       3,532 
      Accrued expenses......................................          --            121       3,693 
      Other liabilities.....................................          --             13         189 
                                                                   -----         ------    -------- 
Net cash used in operating activities.......................        (140)          (444)    (21,610)
                                                                   -----         ------    -------- 
Cash flows from investing activites:                                                                
  Purchases of property and equipment.......................         (45)           (62)     (5,207)
  Purchases of rental product inventory.....................         (49)          (109)     (2,392)
                                                                   -----         ------    -------- 
Net cash used in investing activities.......................         (94)          (171)     (7,599)
                                                                   -----         ------    -------- 
Cash flows from financing activities:                                                               
  Payments on capital lease obligations.....................          --            (10)        (15)
  Net proceeds from short-term borrowings-related party.....          35             68         (20)
  Net proceeds from issuance of common stock................         100             --          -- 
  Net proceeds from issuance of Series A convertible                                                
    preferred stock.........................................         135            103          -- 
  Net proceeds from issuance of Series B convertible                                                
    preferred stock.........................................          --            500         500 
  Net proceeds from issuance of Series C convertible                                                
    preferred stock.........................................          --             --       2,770 
  Net proceeds from issuance of Series D convertible                                                
    preferred stock.........................................          --             --      27,279 
  Net proceeds from issuance of Series E convertible                                                
    preferred stock.........................................          --             --      87,480 
                                                                   -----         ------    -------- 
Net cash provided by financing activities...................         270            661     117,994 
                                                                   -----         ------    -------- 
Net increase in cash and cash equivalents...................          36             46      88,785 

Cash and cash equivalents, beginning of year................          --             36          82 
                                                                   -----         ------    -------- 
Cash and cash equivalents, end of year......................       $  36         $   82    $ 88,867 
                                                                   =====         ======    ======== 
Supplemental cash flow information:                                                                 
Cash paid for interest......................................       $  --         $   --    $     46 

Supplemental noncash investing and financing activities:                                            
Issuance of Series A convertible preferred stock                                                    
  subscription receivable...................................       $ 103         $   --    $     -- 
Issuance of Series B convertible preferred stock                                                    
  subscription receivable...................................          --            149          -- 
Accrual for addition of property and equipment..............          --             --       2,490 
Equipment acquired under capital leases.....................          --             26          14 
Accrual for addition of inventory...........................          --             --         459 
Decrease in paid-in-capital due to stock issuance costs                                             
  included in accounts payable..............................          --             --       3,567 
Contribution of capital through forgiveness of short-term                                           
  borrowings from founders..................................          --             --          83 
Conversion of mandatorily redeemable convertible preferred                                          
  stock to convertible preferred stock......................          --             --      34,720 

See accompanying notes to financial statements. 

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KOZMO.COM, INC. 

NOTES TO FINANCIAL STATEMENTS 

(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1999 IS UNAUDITED)

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) 

1. SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES                    

SUMMARY OF OPERATIONS                                                           

Kozmo.com, Inc. (the "Company") enables consumers to order a variety of 
entertainment, food and convenience products over the Internet for delivery in  
under one hour. The Company offers free delivery for rental or purchase of high 
turnover products. The Company focuses on selling frequently purchased, high    
margin items with well known brand names.                                       

The Company was originally incorporated in New York in April 1997 and   
subsequently re-incorporated in Delaware in August 1999. The Company began      
offering its products and services in New York City in March 1998 and launched  
in the Seattle market in June 1999, the San Francisco and Boston markets in     
September 1999 and in the Washington D.C. market in November 1999.              

USE OF ESTIMATES                                                                

The preparation of financial statements in accordance with generally    
accepted accounting principles requires management to make estimates and        
assumptions that affect the reported amounts of assets and liabilities and the  
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.             

CASH AND CASH EQUIVALENTS                                                       

    The Company considers all highly liquid securities, with original maturities
of three months or less when acquired, to be cash equivalents.                  

CONCENTRATIONS OF CREDIT RISK                                                   

 Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist of cash and cash equivalents and accounts 
receivable. At December 31, 1998 and 1999, the fair value of these instruments  
approximated their financial statement carrying amounts because of the          
short-term maturity of these instruments. Substantially all of the Company's    
cash equivalents were invested in money market accounts managed by high-credit  
quality financial institutions. No single customer exceeded 10% of either       
revenue or accounts receivable for any period presented. Accounts receivable are
from credit card companies. The Company believes it is not exposed to any       
significant credit risk related to cash and cash equivalents or accounts        
receivable.                                                                     

The Company relies on a limited number of product manufacturers and     
third-party distributors to fulfill customer demand for products offered. While 
management believes that alternate suppliers could provide products at          
comparable terms, the loss of any one manufacturer or distributor could delay   
shipments and have an adverse effect on the Company's business, financial       
position or results of operations.                                              

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KOZMO.COM, INC. 

NOTES TO FINANCIAL STATEMENTS (CONTINUED) 

(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1999 IS UNAUDITED)

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) 

1. SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)        
INVENTORY                                                                       

   The Company maintains two types of inventory, products and rental products.

 Product inventory consists of products sold through the web site, such as
books, music, food, convenience items, video cassettes, DVDs and video games,   
and is stated at the lower of cost or market. Product inventory cost is         
determined using the first-in, first-out basis.                                 

  Rental product inventory consists of entertainment products rented through
the web site such as video cassettes, DVDs and video games. Rental product      
inventory is stated at cost. Rental product inventory does not deplete itself   
through sales as with product inventory, nor does it wear in the sense of       
typical fixed assets over a period of time. Rather, the Company's revenue stream
related to each title decreases over time due to satisfaction of customer       
demands. When a new title is released, demand for that title is immediate.      
Within a short period of time, the demand substantially decreases.              

  Rental product inventory such as video cassettes and DVDs considered to be
base stock ("catalog stock") are amortized over thirty-six months on a          
straight-line basis to a $4 salvage value. New-release video cassettes and DVDs 
are amortized as follows: (i) copies one to three of each title per location are
amortized as catalog stock; (ii) the fourth and any succeeding copies of each   
title per location are amortized on a straight-line basis over the first six    
months to a net book value of $4, which is then fully amortized on a            
straight-line basis over the next thirty months or until the video cassettes or 
DVD is sold, at which time the unamortized book value is charged to cost of     
sales; and (iii) video games are amortized on a straight-line basis to a $10    
salvage value over eighteen months.                                             

    Accumulated amortization of rental product inventory totaled $14 and $309 at
December 31, 1998 and 1999, respectively, and is included in costs of revenues  
in the Company's statements of operations.                                      

PROPERTY AND EQUIPMENT                                                          

   Property and equipment are stated at cost less accumulated depreciation and
amortization. Depreciation is calculated using the straight-line method over the
estimated useful lives of the related assets, which range from three to seven   
years. Equipment under capital leases are stated at the present value of future 
minimum lease payments. Equipment acquired under capital leases and leasehold   
improvements are amortized using the straight-line method over the shorter of   
the lease terms or their estimated useful lives.                                

CAPITALIZED SOFTWARE                                                            

   In the first quarter of 1999, the Company adopted the American Institute of
Certified Public Accountants ("AICPA") Statement of Position No. 98-1,          
ACCOUNTING FOR THE COSTS OF COMPUTER SOFTWARE DEVELOPED OR OBTAINED FOR INTERNAL
USE ("SOP No. 98-1"). SOP No. 98-1 requires all costs related to the development
of internal use software other than those incurred during the application       
development stage to be expensed as incurred. It also provides guidance on the  
capitalization of costs incurred during the application development stage for   
computer software developed or obtained for internal use. The Company has       
capitalized $2,060 of computer software costs as of December 31, 1999.          

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KOZMO.COM, INC. 

NOTES TO FINANCIAL STATEMENTS (CONTINUED) 

(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1999 IS UNAUDITED)

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) 

1. SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)        
IMPAIRMENT OF LONG-LIVED ASSETS                                                 

   Long-lived assets are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying value of such assets may not be        
recoverable. Impairment is measured by comparing the carrying value of          
long-lived assets to the estimated undiscounted pre-tax cash flows expected to  
result from the use of such assets and their ultimate disposition. In           
circumstances where impairment is determined to exist, the Company will write   
down the asset to its fair value based on the present value of estimated future 
cash flows. To date, no such impairment has been identified.                    

SHORT-TERM BORROWINGS-RELATED PARTY                                             

 As of December 31, 1998, short-term borrowings represented amounts due to
the Company's founders. During 1999, the Company repaid $20 of such amounts and 
the remaining $83 was forgiven and treated as a contribution of capital.        

INCOME TAXES                                                                    

In accordance with Statement of Financial Accounting Standards ("SFAS") 
No. 109, ACCOUNTING FOR INCOME TAXES, the Company uses the asset and liability  
method in accounting for income taxes. Under this method, deferred tax assets   
and liabilities are recognized for the future tax consequences attributable to  
differences between the financial statement carrying amounts of existing assets 
and liabilities and their respective tax bases and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured using enacted   
tax rates expected to apply to taxable income in the years in which those       
temporary differences are expected to be recovered or settled. The effect on    
deferred tax assets and liabilities of a change in tax rates is recognized in   
results of operations in the period that the tax change occurs. Valuation       
allowances are established, when necessary, to reduce deferred tax assets to the
amount expected to be realized.                                                 

REVENUE RECOGNITION                                                             

The Company recognizes revenues from rentals and product sales, net of  
discounts and returns, when products are delivered to customers. Discounts and  
returns have been insignificant to date. Sales of previously rented video       
cassettes, DVDs and video games are included in product sales.                  

MARKETING AND SALES                                                             

Marketing and sales expenses primarily includes the costs of advertising
through various media channels such as television, radio, print, direct mailing,
outdoor marketing and public relations. The Company expenses the costs of       
advertising as incurred. No advertising costs were incurred during 1997.        
Advertising costs totaled approximately $60 and $7,421 for the years ended      
December 31, 1998 and 1999, respectively.                                       

    Included in marketing and sales expense for the year ended December 31, 1999
is $342 of advertising credits the Company received from an investor in         
connection with the issuance of its Series D preferred stock.                   

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KOZMO.COM, INC. 

NOTES TO FINANCIAL STATEMENTS (CONTINUED) 

(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1999 IS UNAUDITED)

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) 

1. SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)        
PRODUCT DEVELOPMENT                                                             

   Product development expense primarily consists of costs for consultants and
payroll and related expenses for personnel responsible for web site maintenance,
systems infrastructure and web site content. Costs related to product           
development are expensed as incurred.                                           

DELIVERY                                                                        

Delivery expenses primarily consist of payroll and related expenses for 
delivery personnel.                                                             

DEFERRED COMPENSATION                                                           

The Company has adopted SFAS No. 123, ACCOUNTING FOR STOCK-BASED        
COMPENSATION. As permitted by SFAS No. 123, the Company has elected to follow   
Accounting Principles Board Opinion No. 25, ACCOUNTING FOR STOCK ISSUED TO      
EMPLOYEES ("APB No. 25"), and related interpretations, in accounting for        
employee stock options. As opposed to SFAS No. 123, which is a fair value based 
method, APB No. 25 provides that compensation expense related to the Company's  
employee stock options be measured based on the intrinsic value of the stock    
option. SFAS No. 123 requires companies that elect to follow APB No. 25 to      
provide pro forma disclosure of the impact of applying the fair value method of 
SFAS No. 123.                                                                   

BASIC AND DILUTED NET LOSS PER SHARE                                            

Loss per share is presented in accordance with the provisions of SFAS   
No. 128, EARNINGS PER SHARE, and the Securities and Exchange Commission Staff   
Accounting Bulletin No. 98. Under SFAS No. 128, basic EPS is computed by        
dividing income or loss available to common stockholders by the weighted average
number of common shares outstanding for the period. Diluted EPS reflects the    
potential dilution that could occur if securities or other contracts to issue   
common stock were exercised or converted into common stock and resulted in the  
issuance of common stock. As a result of the Company's recurring net losses,    
diluted net loss per share was the same as basic net loss per share for all     
periods presented since the effect of any potentially dilutive securities would 
be anti-dilutive.                                                               

Diluted net loss per common share for the period from April 17, 1997    
(inception) to December 31, 1997 and for the years ended December 31, 1998 and  
1999, does not include the effects of (i) options to purchase 263,750,          
1,360,000, and 7,813,196 shares of common stock, respectively, (ii) warrants to 
purchase 0, 0, and 8,255,612 shares of convertible preferred and common stock,  
respectively, and (iii) the issuance of 1,133,332, 4,998,517, 2,508,500,        
15,616,119 and 19,859,568 shares of common stock issuable upon the conversion of
Series A, B, C, D and E preferred stock on an "as if" converted basis,          
respectively, as the effect of their inclusion is anti-dilutive for each period.

   Pro forma net loss per common share for the year ended December 31, 1999 is
computed by dividing the net loss by the sum of the weighted average number of  
shares of common stock outstanding and the shares issuable upon the automatic   
conversion of all of the Company's convertible preferred stock as if such       
conversion occurred at the date of their original issuance. The number of pro   

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KOZMO.COM, INC. 

NOTES TO FINANCIAL STATEMENTS (CONTINUED) 

(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1999 IS UNAUDITED)

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) 

1. SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)        
forma weighted average shares used in computing basic and diluted net loss per  
common share is as follows:                                                     

                                                                [Download Table]
                                                                        
Actual weighted average common shares outstanding...........  10,362,192
  Series A convertible preferred stock......................   1,133,332
  Series B convertible preferred stock......................   4,924,881
  Series C convertible preferred stock......................   1,786,877
  Series D convertible preferred stock......................   3,788,408
  Series E convertible preferred stock......................     435,278
                                                              ----------
Weighted average shares outstanding used in computing pro               
  forma basic and diluted net loss per common share.........  22,430,968
                                                              ==========

COMPREHENSIVE INCOME                                                            

  The Company reports comprehensive income in accordance with the provisions
of SFAS No. 130, REPORTING COMPREHENSIVE INCOME. SFAS No. 130 establishes       
standards for reporting comprehensive income and its components in the body of  
the financial statements. Comprehensive income includes net income (loss) as    
currently reported under generally accepted accounting principles, all changes  
in equity during a period from non-owner sources including, as applicable,      
foreign currency items, minimum pension liability adjustments and unrealized    
gains and losses on certain investments in debt and equity securities. There    
were no differences between the Company's comprehensive loss and its net loss as
reported for all periods presented.                                             

SEGMENT REPORTING                                                               

    The Company adopted SFAS No. 131, DISCLOSURE ABOUT SEGMENTS OF AN ENTERPRISE
AND RELATED INFORMATION. SFAS No. 131 establishes standards for the way that    
public enterprises report information about operating segments. It also         
establishes standards for related disclosures about products and services,      
geographic areas and major customers. Under the definitions of SFAS No. 131, the
Company does not have any separately reportable segments.                       

RECENT ACCOUNTING PRONOUNCEMENTS                                                

In 1999, the Company adopted the AICPA Statement of Position No. 98-5,  
REPORTING ON THE COSTS OF START-UP ACTIVITIES ("SOP No. 98-5"). SOP No. 98-5    
requires all costs of start-up activities and organization costs be expensed as 
incurred. The adoption of the provisions of SOP No. 98-5 did not have a material
impact on the Company's financial position or results of operations.            

   In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES. SFAS     
No. 133 establishes accounting and reporting standards for derivative           
instruments, including derivative instruments embedded in other contracts, and  
for hedging activities. Subsequently, the FASB issued SFAS No. 137 which        
deferred the effective date of SFAS No. 133. SFAS No. 137 is effective for all  
fiscal quarters of fiscal years beginning                                       

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KOZMO.COM, INC. 

NOTES TO FINANCIAL STATEMENTS (CONTINUED) 

(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1999 IS UNAUDITED)

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) 

1. SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)        
after June 15, 2000. The Company has not yet determined the impact of this      
pronouncement on its financial position or results of operations.               

2. BALANCE SHEET COMPONENTS                                                     

Property and equipment, stated at cost, consists of:                    

                                                                [Download Table]

                                                                 DECEMBER 31,    
                                                              -------------------
                                                                1998       1999  
                                                              --------   --------
                                                                                 
Computer software and equipment.............................    $ 87      $6,470 
Furniture and fixtures......................................      16         804 
Leasehold improvements......................................      --         495 
Equipment under capital leases..............................      27          40 
Delivery vehicles...........................................       3          35 
                                                                ----      ------ 
                                                                 133       7,844 
Less accumulated depreciation and amortization, including $9                     
  and $21 related to capital leases, respectively...........     (24)       (825)
                                                                ----      ------ 
    Total...................................................    $109      $7,019 
                                                                ====      ====== 

Accrued expenses consists of:                                           

                                                                [Download Table]

                                                                DECEMBER 31,    
                                                             -------------------
                                                               1998       1999  
                                                             --------   --------
                                                                                
Purchases of property and equipment.........................   $ --      $2,490 
Salaries and wages..........................................      7       1,282 
Marketing costs.............................................     --       1,249 
Administrative and other expenses...........................     --       1,045 
Purchases of inventory......................................     --         459 
Professional fees...........................................     95         188 
Sales tax...................................................     19          50 
                                                               ----      ------ 
    Total...................................................   $121      $6,763 
                                                               ====      ====== 

3. COMMITMENTS AND CONTINGENCIES                                                

LEASES                                                                          

The Company leases facilities and certain equipment under agreements    
accounted for as operating leases. These leases generally require the Company to
pay all executory costs such as maintenance and insurance. Rental expense for   
operating leases for the period from April 17, 1997 (inception) to December 31, 
1997 and for the years ended December 31, 1998 and 1999 were approximately $22, 
$112 and $677, respectively.                                                    

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KOZMO.COM, INC. 

NOTES TO FINANCIAL STATEMENTS (CONTINUED) 

(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1999 IS UNAUDITED)

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) 

3. COMMITMENTS AND CONTINGENCIES (CONTINUED)                                    
Future minimum lease payments under capital and non-cancelable operating
leases (with initial or remaining lease terms in excess of one year) as of      
December 31, 1999 are as follows:                                               

                                                                [Download Table]

                                                             CAPITAL   OPERATING
YEAR ENDING DECEMBER 31,                                      LEASES    LEASES  
------------------------                                     --------  ---------
                                                                                
2000........................................................   $  8     $ 1,971 
2001........................................................      3       2,076 
2002........................................................      3       2,151 
2003........................................................      2       2,240 
2004........................................................      1       2,175 
Thereafter..................................................     --       5,956 
                                                               ----     ------- 
Total minimum lease payments................................     17     $16,569 
                                                                        ======= 
Less amount representing interest at a weighted-average                         
  interest rate of approximately 7.29%......................     (2)            
                                                               ----             
Present value of net minimum lease payments.................     15             
Less current portion of obligations under capital leases....     (7)            
                                                               ----             
Obligations under capital leases, excluding current                             
  portion...................................................   $  8             
                                                               ====             

LEGAL PROCEEDINGS                                                               

   The Company is involved in claims and legal actions arising in the ordinary
course of business. In the opinion of management, the ultimate disposition of   
these matters will not have a material effect on the Company's financial        
position, results of operation or liquidity.                                    

4. CAPITAL STOCK                                                                

COMMON STOCK                                                                    

    In April 1997, the Company issued 10,000,000 shares of common stock at $.003
per share to its founders in exchange for $30. In August 1997, the Company      
issued 350,000 shares of common stock at $.20 per share to friends and family of
the founders for an aggregate purchase price of $70. In September 1999, the     
Company issued 50,000 shares of common stock at $.001 per share to an advisor of
the Company in connection with the exercise of a common stock warrant.          

 Holders of common stock are entitled to one vote for each share of common
stock held and have the right to receive dividends, if declared by the board of 
directors.                                                                      

PREFERRED STOCK                                                                 

In November 1997, the Company issued 1,133,332 shares of Series A       
mandatorily redeemable convertible preferred stock ("Series A") at $.21 per     
share for an aggregate purchase price of $238 of which $103 was received in     
January 1998. There were no issuance costs incurred in connection with this     
offering.                                                                       

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KOZMO.COM, INC. 

NOTES TO FINANCIAL STATEMENTS (CONTINUED) 

(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1999 IS UNAUDITED)

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) 

4. CAPITAL STOCK (CONTINUED)                                                    
  In December 1998 and January 1999, the Company issued 3,206,707 shares and
1,791,810 shares of Series B mandatorily redeemable convertible preferred stock 
("Series B") at $.21 per share, respectively, for an aggregate purchase price of
$674 and $376, respectively. The Company incurred $50 of issuance costs, of     
which $25 was applied against the amounts received in each of 1998 and 1999. The
Company received $149 of the first issuance of the Series B preferred stock in  
1999. Such amount is recorded as a preferred stock subscription receivable in   
the accompanying December 31, 1998 balance sheet.                               

  In April 1999, the Company issued 2,508,500 shares of Series C mandatorily
redeemable convertible preferred stock ("Series C") at $1.11 per share for an   
aggregate purchase price of $2,787. The Company incurred $17 of issuance costs  
in connection with this offering.                                               

In October 1999, the Company issued 15,616,119 shares of Series D       
mandatorily redeemable convertible preferred stock ("Series D") at $1.80 per    
share for an aggregate purchase price of $28,000. The Company incurred $341 of  
issuance costs in connection with this offering including 60,556 shares of      
Series D shares issued in consideration for legal fees of $109. Of the total    
Series D shares, 277,778 were issued in exchange for $500 of credits against    
future advertising costs. The advertising credits have been recorded as a       
contribution receivable and are recorded as marketing and sales expense in the  
Company's statement of operations as credits are utilized. The Company has      
utilized $342 of such credits as of December 31, 1999.                          

In December 1999, the Company issued 19,859,568 shares of Series E      
convertible preferred stock ("Series E") at $4.41 per share for an aggregate    
purchase price of $87,500. The Company incurred $3,667 of issuance costs in     
connection with this offering comprised of an underwriting fee of 4% or $3,567  
and other professional fees of $100. Of the total Series E shares, 27,292 were  
issued in consideration of legal fees of $120.                                  

In January 2000, the Company issued an additional 7,338,986 shares of   
Series E preferred stock at $4.41 per share for an aggregate purchase price of  
$32,350. Of the total shares issued, 6,775 shares were issued in consideration  
of legal fees of $30 and 86,509 shares were issued in exchange for $382 of      
advertising credits.                                                            

   In March 2000, the Company issued 15,305,181 shares of Series F convertible
preferred stock ("Series F") at $7.55 per share. Of the total Series F shares   
issued, 11,333,250 shares were issued for cash proceeds of $81,640, net of      
$3,960 of issuance costs, and 2,647,954 shares were issued in connection with   
strategic agreements entered into by the Company with Warner Home Video         
("Warner") and Columbia Tri-Star Home Video ("Columbia") valued at $20,000. In  
addition, 1,323,977 shares, valued at $10,000, were issued in exchange for      
$10,000 worth of common stock of a publicly traded company.                     

  All preferred stockholders are entitled to one vote for each share held as
well as the right to convert such shares, in whole or in part, at any time into 
common stock at a conversion ratio of one-to-one. The conversion ratio is       
subject to adjustment to reflect certain changes in the common stock, such as   
stock splits, stock dividends, reclassifications and sales of additional capital
stock below certain threshold amounts. All preferred stock will automatically   
convert into common stock at the then applicable conversion ratio upon the      
closing of an initial public offering ("IPO"), provided the offering price is at
least $12 per share and the gross offering proceeds are at least $30,000.       

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KOZMO.COM, INC. 

NOTES TO FINANCIAL STATEMENTS (CONTINUED) 

(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1999 IS UNAUDITED)

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) 

4. CAPITAL STOCK (CONTINUED)                                                    

    Holders of Series B, C, D and E preferred stock are entitled to receive cash
dividends payable semi-annually in arrears, if declared by the board of         
directors, in the amount of 8% per year of the price per share that such shares 
were purchased from the Company and 8% per year on any declared but unpaid      
dividends on such shares. Holders of Series A preferred stock are not entitled  
to dividends. Cumulative undeclared dividends in arrears were $4 and $915 as of 
December 31, 1998 and 1999, respectively.                                       

Prior to the sale by the founders of their shares of common stock to any
third parties, the holders of Series D and Series E preferred stock, the Company
and the holders of Series B preferred stock, in such order of priority, shall   
have a pro rata right of first refusal enabling them to purchase such shares. In
addition, holders of Series D and Series E preferred stock have preemptive      
rights to participate in subsequent equity offerings of the Company to maintain 
their pro rata ownership of the Company.                                        

  Upon a liquidation of the Company, the holders of Series D preferred stock
are entitled to a liquidation preference amount equal to 200% of the aggregate  
price originally paid for such shares, plus any declared but unpaid dividends on
such shares. Subsequent liquidation preference payments will be made to the     
holders of Series E, C, B and A preferred stock, in such order of priority, in  
an amount equal to the price originally paid, plus any declared but unpaid      
dividends on such shares. Upon a liquidation of the Company, after the holders  
of the Series D preferred stock have been paid their liquidation preference, if 
the remaining net assets are insufficient for payment in full to the holders of 
the remaining preferred stock, then the remaining net assets shall be           
distributed ratably to the remaining holders of preferred stock.                

   As of December 31, 1998 and up through December 23, 1999 (the date on which
the Series E preferred stock was issued), the holders of Series A, B, C and D   
preferred stock had certain rights of redemption. Pursuant to these rights, at  
the election of a majority of any such preferred stockholders, the Company was  
required to redeem the shares of such preferred stock outstanding on October 4, 
2004 at a redemption price equal to 300% of the price originally paid for such  
shares plus any declared but unpaid dividends.                                  

As of December 31, 1998, the Company has presented the Series A and B   
preferred stock as temporary equity at their accreted values which were $285 and
$683, respectively. On December 23, 1999, in connection with the issuance of the
Series E preferred stock, the redemption rights on Series A, B, C and D         
preferred stock were cancelled. Consequently, the Series A, B, C and D preferred
stock have been presented as a contribution to stockholders' equity in 1999 at  
their respective accreted values as of December 23, 1999, which were $333,      
$1,275, $3,196 and $29,186, respectively.                                       

5. WARRANTS AND STOCK OPTIONS                                                   

WARRANTS                                                                        

In August 1999, the Company granted a 10-year fully vested warrant to   
purchase an aggregate of 50,000 shares of common stock, at an exercise price of 
$.001 per share to a consultant. The Company recorded $65 of compensation       
expense in 1999 using the Black-Scholes pricing model. In September 1999, this  
warrant was exercised.                                                          

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KOZMO.COM, INC. 

NOTES TO FINANCIAL STATEMENTS (CONTINUED) 

(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1999 IS UNAUDITED)

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) 

5. WARRANTS AND STOCK OPTIONS (CONTINUED)                                       
In September 1999, the Company granted a 10-year fully vested warrant to
purchase an aggregate of 50,000 shares of common stock, at an exercise price of 
$.001 per share to a consultant. The Company recorded $72 of compensation       
expense in 1999 using the Black-Scholes pricing model.                          

   In December 1999, in connection with the Series E preferred stock offering,
the Company granted fully vested warrants to purchase 3,717,860 and 3,692,140   
shares of Series E preferred stock to an investor at exercise prices of $4.41   
and $5.52 per share, respectively. These warrants expire upon the earlier of the
closing of an IPO at an offering price of at least $12 per share and gross      
proceeds of at least $30,000 or December 23, 2004.                              

   In December 1999, in connection with the Series E preferred stock offering,
the Company granted a fully vested warrant to purchase 795,612 shares of        
Series E preferred stock to the placement agent at an exercise price of $4.41   
per share. This warrant expires upon the earlier of the closing of an IPO or    
December 23, 2004.                                                              

In January 2000, the Company granted a fully vested warrant to purchase 
22,676 shares of Series E preferred stock to the lessor of its corporate office 
at an exercise price per share of $4.41 in exchange for rental space. The       
Company valued the warrant at $28 using the Black-Scholes pricing model. This   
amount will be expensed over the lease term. This warrant expires upon the      
earlier of the closing of an IPO at an offering price of at least $12 per share 
and gross proceeds of at least $30,000 or January 18, 2005.                     

In March 2000, the Company issued a one-year fully vested warrant to    
purchase 2,699,145 shares of Series F preferred stock to Ticketmaster           
Online--CitySearch Inc. ("CitySearch") at an exercise price of $7.55 per share. 
The Company ascribed a value to this warrant of $3,752 using the Black-Scholes  
pricing model. The value of the warrant will be recorded as a deferred expense  
and will be ratably amortized over the term of the three-year strategic         
agreement.                                                                      

In March 2000, the Company granted a fully vested warrant to purchase   
8,650,000 shares of Series E preferred stock to Amazon.com LLC ("Amazon") at an 
exercise price of $5.52 per share. This warrant expires upon the earlier of the 
closing of an IPO at an offering price of at least $12 per share and gross      
proceeds of at least $30,000 or March 13, 2005. The Company ascribed a value to 
this warrant of $35,725 using the Black-Scholes pricing model. The value of the 
warrant will be recorded as a deferred expense and will be amortized evenly over
the three-year term of the strategic agreement.                                 

    In March 2000, in connection with the Series F preferred stock offering, the
Company granted a fully vested warrant to purchase 13,240 shares of common stock
to an investor at an exercise price of $7.55 per share. This warrant expires on 
the earlier of the closing of an IPO or March 14, 2002. In addition, the Company
agreed to grant a second fully vested warrant to purchase 13,240 shares of      
common stock to the same investor at an exercise price of $7.55 per share if the
investor assists the Company in establishing alliances in Japan. This second    
warrant, if granted, will expire thirty days from the date of grant.            

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KOZMO.COM, INC. 

NOTES TO FINANCIAL STATEMENTS (CONTINUED) 

(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1999 IS UNAUDITED)

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) 

5. WARRANTS AND STOCK OPTIONS (CONTINUED)                                       
STOCK OPTIONS                                                                   

 On June 30, 1997, the Company established the 1997 Stock Option Plan (the
"1997 Plan"). The vesting schedule of the options issued under the 1997 Plan is 
as follows: 25% of the options will become exercisable after twelve months      
following the date of grant and, thereafter, 1/48th of the options will vest in 
each subsequent month. The options also vest upon a change of control of the    
Company. The 1997 Plan's definition of change in control provides, among other  
things, that the sale of the Company's common stock in an IPO constitutes a     
change in control.                                                              

In February 1998, the Company granted stock options to purchase 20,000  
shares of common stock, at an exercise price of $.21 per share, to consultants. 
The Company recorded $3 of compensation expense in 1998 using the Black-Scholes 
pricing model.                                                                  

On May 1, 1999, the Company established the 1999 Stock Option Plan (the 
"1999 Plan"). The 1999 Plan's vesting terms and definition of a change in       
control are substantially the same as in the 1997 Plan.                         

   On October 4, 1999, the Company established the 1999 Incentive Stock Option
Plan (the "1999 Incentive Plan"), which was amended in March 2000. The maximum  
aggregate number of shares of common stock that may be issued under the 1999    
Incentive Plan is 11,613,546.                                                   

In October 1999, the Company's board of directors voted to cease issuing
stock options under the 1997 Plan and 1999 Plan. Consequently, the stock options
issued and outstanding as of December 31, 1999 of 1,440,300 and 805,200 under   
the 1997 Plan and 1999 Plan, respectively, represent the total stock options    
authorized and issuable under such plans. Subsequent to December 31, 1999, 8,217
stock options under the 1997 Plan were forfeited and 112,500 stock options were 
exercised.                                                                      

  The vesting terms of the 1999 Incentive Plan are identical to the 1997 and
1999 Plans; however, a difference exists in the definition of change in control.
The 1999 Incentive Plan provides that a change in control is generally deemed to
have occurred when the beneficial ownership of securities representing more than
50% of the Company's authorized common stock is acquired by a third party or the
Company's stockholders approve a definitive agreement to merge or consolidate   
the Company with another company other than one that the Company controls or to 
sell all or substantially all of the Company's assets to another company.       

 Under APB No. 25, no compensation expense is recognized when the exercise
price of the Company's employee stock options equals or exceeds the fair value  
of the underlying stock on the date of grant. Deferred compensation is recorded 
for those situations where the exercise price of an option is lower than the    
deemed fair value for financial reporting purposes of the underlying common     
stock.                                                                          

  The Company recorded $2,673 of deferred compensation during the year ended
December 31, 1999 in connection with the issuance of stock options that were    
granted with an exercise price less than the deemed fair value of the common    
stock at the date of grant. The amortization of deferred compensation is charged
to operations over the vesting period of the options. Total amortization of     
deferred compensation recognized was $71 for the year ended December 31, 1999.  
The Company expects to amortize the following amounts of deferred compensation  
as of December 31, 1999 in each                                                 

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KOZMO.COM, INC. 

NOTES TO FINANCIAL STATEMENTS (CONTINUED) 

(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1999 IS UNAUDITED)

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) 

5. WARRANTS AND STOCK OPTIONS (CONTINUED)                                       
year as follows: 2000--$669; 2001--$669; 2002--$669; 2003--$595. As of          
December 31, 1999, $139 of deferred compensation is attributable to options     
issued under the 1997 and 1999 stock option plans.                              

    Upon the closing of an IPO, as a result of an automatic vesting acceleration
clause, 2,498,081 options issued under the 1997 Plan, 1999 Plan and 1999        
Incentive Plan will vest immediately which will not result in any additional    
charge of deferred compensation.                                                

 The Company applies APB No. 25 and related interpretations, in accounting
for its stock option issuances to employees. Accordingly, except as mentioned   
above, no compensation expense has been recognized relating to these stock      
option grants. Had compensation expense for the Company's stock options issued  
at the fair value of the Company's common stock been determined based on the    
fair value of the stock options at the grant date for awards in 1997, 1998 and  
1999 consistent with the provisions of SFAS No. 123, the Company's net loss     
attributable to common stockholders and net loss per common share would have    
increased to the following pro forma amounts:                                   

                                                                [Download Table]

                                                 PERIOD FROM                        
                                               APRIL 17, 1997                       
                                               (INCEPTION) TO       YEAR ENDED      
                                                DECEMBER 31,       DECEMBER 31,     
                                               ---------------  ------------------- 
                                                    1997          1998       1999   
                                               ---------------  --------   -------- 
                                                                                    
Net loss attributable to common stockholders:                                       
As reported..................................       $(123)       $(868)    $(28,959)
                                                    =====        =====     ======== 
Pro forma....................................       $(123)       $(868)    $(33,387)
                                                    =====        =====     ======== 
Basic and diluted net loss per common share:                                        
As reported..................................       $(.01)       $(.08)    $  (2.79)
                                                    =====        =====     ======== 
Pro forma....................................       $(.01)       $(.08)    $  (3.22)
                                                    =====        =====     ======== 

The resulting effect on the pro forma net loss per common share for the 
period from April 17, 1997 (inception) to December 31, 1997 and for the years   
ended December 31, 1998 and 1999 is not likely to be representative of the      
effects on the net loss on a pro forma basis in future years, because the pro   
forma results include the impact of only one, two and three years, respectively,
of grants and related vesting, while subsequent years will include additional   
grants and vesting.                                                             

   The fair value of each option grant is estimated on the date of grant using
the Black-Scholes pricing model with the following weighted average assumptions 
used for grants in the period from April 17, 1997 (inception) to December 31,   
1997 and for the years ended December 31, 1998 and 1999: dividend yield of zero 
percent (0%), risk-free interest rates ranging from 5.0% to 6.0% and expected   
life of 5 years. As permitted under the provisions of SFAS No. 123 and based on 
the historical lack of a public market for the Company's stock, no factor for   
volatility has been reflected in the option pricing calculation.                

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KOZMO.COM, INC. 

NOTES TO FINANCIAL STATEMENTS (CONTINUED) 

(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1999 IS UNAUDITED)

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) 

5. WARRANTS AND STOCK OPTIONS (CONTINUED)                                       
The following summarizes the Company's stock option activity and related
information:                                                                    

                                                        [Enlarge/Download Table]

                                                                     WEIGHTED       WEIGHTED  
                                                      NUMBER OF      AVERAGE        AVERAGE   
                                                       SHARES     EXERCISE PRICE   FAIR VALUE 
                                                      ---------   --------------  ------------
                                                                                              
Outstanding at April 17, 1997 (inception)............        --        $  --                  
  Granted............................................   263,750          .20         $ .15    
                                                      ---------        -----                  
Outstanding at December 31, 1997.....................   263,750          .20                  
  Granted............................................ 1,145,833          .21         $ .15    
  Forfeited..........................................   (49,583)         .20                  
                                                      ---------        -----                  
Outstanding at December 31, 1998..................... 1,360,000          .21                  
  Granted............................................ 6,491,296         1.71         $1.95    
  Forfeited..........................................   (38,100)        1.44                  
                                                      ---------        -----                  
Outstanding at December 31, 1999..................... 7,813,196        $1.45                  
                                                      =========        =====                  

    The following summarizes information concerning outstanding stock options at
December 31, 1999:                                                              

                                                        [Enlarge/Download Table]

                       OUTSTANDING                                EXERCISABLE        
---------------------------------------------------------  --------------------------
                                         WEIGHTED-AVERAGE                            
                                            REMAINING                                
                                         CONTRACTUAL LIFE                WEIGHTED-   
      NUMBER OF                           OF OPTIONS IN    NUMBER OF      AVERAGE    
       OPTIONS          EXERCISE PRICE        YEARS         OPTIONS    EXERCISE PRICE
---------------------   --------------   ----------------  ---------   --------------
                                                                                     
        180,000              $ .20              7.9          94,844        $  .20    
      1,202,500                .21              8.8         366,667           .21    
         92,500                .29              9.3              --            --    
        750,500               1.11              9.5              --            --    
      5,521,096               1.80              9.8              --            --    
         66,600               4.41             10.0              --            --    
      ---------                                ----         -------        ------    
      7,813,196                                 9.6         461,511        $  .21    
      =========                                ====         =======        ======    

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KOZMO.COM, INC. 

NOTES TO FINANCIAL STATEMENTS (CONTINUED) 

(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1999 IS UNAUDITED)

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) 

6. INCOME TAXES                                                                 

There is no provision for federal, state or local income taxes for all  
periods presented, since the Company has incurred losses since inception.       

 The effects of temporary differences and tax loss carryforwards that give
rise to significant portions of federal deferred tax assets and deferred tax    
liabilities at December 31, 1998 and 1999 are presented below:                  

                                                                [Download Table]

                                                               DECEMBER 31,     
                                                            ------------------- 
                                                              1998       1999   
                                                            --------   -------- 
                                                                                
Deferred tax assets:                                                            
  Net operating loss carryforwards.........................  $ 296     $ 10,801 
  Non-cash compensation....................................      1           59 
  Deferred rent............................................     12           66 
  Start-up costs...........................................     39           30 
  Deferred revenue.........................................      5           72 
  Allowance for bad debt...................................      2           34 
  Depreciation and amortization............................      1           16 
                                                             -----     -------- 
Deferred tax assets........................................    356       11,078 
                                                             -----     -------- 
Deferred tax liabilities:                                                       
  Prepaid expenses.........................................     (2)        (167)
                                                             -----     -------- 
Deferred tax liabilities...................................     (2)        (167)
                                                             -----     -------- 
Net deferred tax assets....................................    354       10,911 
Less valuation allowance...................................   (354)     (10,911)
                                                             -----     -------- 
  Net deferred tax assets..................................  $  --     $     -- 
                                                             =====     ======== 

   At December 31, 1999, the Company had $27,003 of federal net operating loss
carryforwards available to offset future taxable income. Such carryforwards     
expire through 2019. The Company has recorded a full valuation allowance against
its net deferred tax assets since management believes that, after considering   
all the available objective evidence, it is not more likely than not that these 
assets will be realized. The tax effect of temporary differences that give rise 
to significant portions of federal deferred tax assets principally consists of  
the Company's net operating loss carryforward.                                  

   The difference between the Company's U.S. federal statutory rate of 35%, as
well as its state and local rates, net of federal tax benefit, when compared to 
the effective rate is principally comprised of the valuation allowance.         

Under Section 382 of the Internal Revenue Code of 1986, as amended (the 
"Code"), the utilization of net operating loss carryforwards may be limited     
under the change in stock ownership rules of the Code. The Company has not yet  
determined whether an ownership change has occurred.                            

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KOZMO.COM, INC. 

NOTES TO FINANCIAL STATEMENTS (CONTINUED) 

(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1999 IS UNAUDITED)

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) 

7. VALUATION AND QUALIFYING ACCOUNTS                                            

                                                        [Enlarge/Download Table]

                                                     BALANCE AT                                    
                                                     BEGINNING   ADDITIONS                 BALANCE 
                                                         OF      CHARGED TO  DEDUCTIONS/  AT END OF
                                                       PERIOD     EXPENSES   WRITE-OFFS    PERIOD  
                                                     ----------  ----------  -----------  ---------
                                                                                                   
For the year ended December 31, 1997:                                                              
Allowance for doubtful accounts.....................    $ --        $ --         $ --       $ --   
                                                        ====        ====         ====       ====   
For the year ended December 31, 1998:                                                              
Allowance for doubtful accounts.....................    $ --        $  4         $ --       $  4   
                                                        ====        ====         ====       ====   
For the year ended December 31, 1999:                                                              
Allowance for doubtful accounts.....................    $  4        $165         $(83)      $ 86   
                                                        ====        ====         ====       ====   

8. SUBSEQUENT EVENTS--UNAUDITED                                                 

STRATEGIC AGREEMENTS                                                            

    In January 2000, the Company entered into an agreement with CitySearch which
expires in December 2001. The Company will be the exclusive online one-hour     
delivery service advertised on CitySearch web sites in all cities where both the
Company and CitySearch operate. The Company issued a warrant to purchase        
2,699,145 shares of Series F preferred stock at an exercise price of $7.55 per  
share to CitySearch in connection with this agreement.                          

  In February 2000, the Company entered into a five-year strategic agreement
with Starbucks Corporation ("Starbucks") to place a drop box in each Starbucks  
store located in the Company's current and future markets to collect items      
returned by the Company's customers. The agreement also provides for exclusive  
joint marketing and promotional activities, such as the placement of the Company
brand on Starbucks napkins, cups and posters, free product samples for Starbucks
customers that register on the Company's website and links to the Company's web 
site from the Starbucks web site. In addition, the Company will offer Starbucks 
products such as coffee by the pound, teas, ice cream and bottled beverages for 
delivery in under one hour. The Company is committed to making the following    
cash payments to Starbucks: 2000--$15,000; 2001--$25,000; 2002--$35,000;        
2003--$35,000; and 2004--$40,000 in connection with this agreement.             

    In March 2000, the Company entered into a supply and delivery agreement with
Amazon to deliver books, music and toy products offered on the Amazon.com web   
site to Amazon customers in our markets in under one hour. The agreement is     
subject to establishing mutually acceptable customer service standards and      
acceptable pricing for the delivery service. In addition, Amazon will engage in 
selected promotional activities to introduce the Company's delivery service to  
its customer base. The Company issued a warrant to purchase 8,650,000 shares of 
Series E preferred stock at an exercise price of $5.52 per share to Amazon in   
connection with this agreement.                                                 

 In March 2000, the Company entered into a revenue sharing agreement under
which Columbia will provide the Company with a greater number of movie titles,  
and more of each title than the Company currently obtains, on VHS cassettes and 
DVDs, at a substantially lower initial cost than the Company would otherwise    
pay, in exchange for a percentage of the rental revenues generated by those     

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KOZMO.COM, INC. 

NOTES TO FINANCIAL STATEMENTS (CONTINUED) 

(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1999 IS UNAUDITED)

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) 

8. SUBSEQUENT EVENTS--UNAUDITED (CONTINUED)                                     
movie titles. The Company issued 1,323,977 shares of Series F preferred stock at
$7.55 per share to Columbia in connection with this agreement.                  

In March 2000, the Company entered into a revenue sharing agreement with
Warner under which Warner will provide the Company with a greater number of     
movie titles, and more copies of each title than we currently obtain, on VHS    
cassettes and DVDs, at a substantially lower initial cost than the Company would
otherwise pay, in exchange for a percentage of the rental revenues generated by 
those movie titles. The Company issued 1,323,977 shares of Series F preferred   
stock at $7.55 per share to Warner in connection with this agreement.           

STOCK OPTIONS                                                                   

  For the period from January 1, 2000 through February 29, 2000, the Company
granted stock options to purchase 5,239,125 shares of common stock,             
respectively, to employees at a weighted-average exercise price of $4.35. The   
deemed fair value of the Company's common stock ranged from $3.51 to $6.17 per  
share during such period. For the period from January 1, 2000 through           
February 29, 2000, the Company recorded deferred compensation of approximately  
$5,623, in connection with the grant of these options to employees, representing
the difference between the deemed fair value of its common stock as of the grant
dates and the exercise price of the related options. This amount will be        
presented as deferred compensation in the financial statements and will be      
amortized over the four year vesting period. During the period from January 1,  
2000 through February 29, 2000, 112,500 options were exercised at a weighted    
average exercise price of $.21 per share.                                       

9. INITIAL PUBLIC OFFERING AND PRO FORMA BALANCE SHEET--UNAUDITED               

In March 2000, the Board of Directors authorized the filing of a        
registration statement with the Securities and Exchange Commission that would   
permit the Company to sell shares of its common stock in connection with a      
proposed IPO.                                                                   

 If the IPO is consummated under the terms presently anticipated, upon the
closing of the proposed IPO, each of the then outstanding shares of the         
Company's convertible preferred stock will automatically convert, on a          
one-for-one basis, into an aggregate of 66,760,203 shares of common stock.      

  The following pro forma balance sheet as of December 31, 1999 gives effect
to the following transactions as if such transactions occurred on December 31,  
1999:                                                                           

   - the issuance of 7,338,986 shares of Series E preferred stock at $4.41 per
share in January 2000 for net proceeds of $32,350, including $382 of
credits against future advertising costs;                           

    - the issuance of 11,333,250 shares of Series F preferred stock at $7.55 per
share during March 2000 for net cash proceeds of $81,640;           

- the issuance of an aggregate of 2,647,954 shares of Series F preferred
stock at $7.55 per share during March 2000 in connection with the   
execution of strategic agreements. The $20,000 value ascribed to the
shares will be recorded as a deferred expense;                      

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KOZMO.COM, INC. 

NOTES TO FINANCIAL STATEMENTS (CONTINUED) 

(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1999 IS UNAUDITED)

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) 

9. INITIAL PUBLIC OFFERING AND PRO FORMA BALANCE SHEET--UNAUDITED (CONTINUED)   
   - the issuance of 1,323,977 shares of Series F preferred stock at $7.55 per
share during March 2000 in connection with the Series F financing in
exchange for $10,000 of common stock of a publicly traded company;  

- the issuance of a warrant to purchase 8,650,000 shares of Series E    
    preferred stock at an exercise price of $5.52 per share in March 2000 in
 connection with the execution of a supply and delivery agreement with
      Amazon.com LLC. The $35,725 value ascribed to the warrant will be recorded
as a deferred expense;                                              

- the issuance of a warrant to purchase 2,699,145 shares of Series F    
    preferred stock, at an exercise price of $7.55 per share in January 2000
 in connection with the execution of a strategic agreement. The $3,752
 value ascribed to the warrant will be recorded as a deferred expense;

  - the automatic conversion on a one-for-one basis of 1,133,332, 4,998,517,
2,508,500, 15,616,119, 27,198,554 and 15,305,181 shares of Series A,
Series B, Series C, Series D, Series E and Series F preferred stock,
      respectively, representing all outstanding shares of convertible preferred
  stock, into an aggregate of 66,760,203 shares of common stock upon the
closing of the proposed IPO.                                        

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KOZMO.COM, INC. 

NOTES TO FINANCIAL STATEMENTS (CONTINUED) 

(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1999 IS UNAUDITED)

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) 

9. INITIAL PUBLIC OFFERING AND PRO FORMA BALANCE SHEET--UNAUDITED (CONTINUED)   
PRO FORMA BALANCE SHEET 
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) 

                                                        [Enlarge/Download Table]

                                                              HISTORICAL    PRO FORMA  
                                                             DECEMBER 31,  DECEMBER 31,
                                                                 1999          1999    
                                                             ------------  ------------
                                                                                       
                           ASSETS                                                      
Current assets:                                                                        
  Cash and cash equivalents.................................   $ 88,867      $202,475  
  Accounts receivable.......................................        550           550  
  Product inventory.........................................      2,741         2,741  
  Marketable securities.....................................         --        10,000  
  Prepaid expenses and other assets.........................        505           505  
                                                               --------      --------  
      Total current assets..................................     92,663       216,271  
Deferred expense............................................         --        59,476  
Rental product inventory....................................      2,269         2,269  
Property and equipment, net.................................      7,019         7,019  
Security deposits and other assets..........................      1,047         1,047  
                                                               --------      --------  
      Total assets..........................................   $102,998      $286,082  
                                                               ========      ========  
            LIABILITIES AND STOCKHOLDERS' EQUITY                                       
Current liabilities:                                                                   
  Accounts payable..........................................   $  7,314      $  7,314  
  Accrued expenses..........................................      6,763         6,763  
  Other liabilities.........................................        208           208  
                                                               --------      --------  
      Total current liabilities.............................     14,285        14,285  

Other liabilities...........................................        173           173  

Stockholders' equity:                                                                  
  Series A convertible preferred stock......................         11            --  
  Series B convertible preferred stock......................         50            --  
  Series C convertible preferred stock......................         25            --  
  Series D convertible preferred stock......................        156            --  
  Series E convertible preferred stock......................        199            --  
  Common stock $.001 par value; 90,918,897 shares                                      
    authorized; 10,400,000 shares issued and outstanding                               
    historical; 77,160,203 issued and outstanding pro                                  
    forma...................................................         10            77  
  Additional paid-in capital................................    118,150       301,990  
  Contribution receivable...................................       (158)         (540) 
  Deferred compensation.....................................     (2,602)       (2,602) 
  Accumulated deficit.......................................    (27,301)      (27,301) 
                                                               --------      --------  
      Total stockholders' equity............................     88,540       271,624  
                                                               --------      --------  
      Total liabilities and stockholders' equity............   $102,998      $286,082  
                                                               ========      ========  

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 [SEVERAL PHOTOS OF KOZMO'S WEBSITE AND OPERATIONS, INCLUDING OUR SPLASH
  PAGE, SEARCH RESULTS, PRODUCT CATEGORIES AND ONE OF OUR WAREHOUSES.]

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[KOZMO LOGO]

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PART II 
INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.                           

    The following table indicates the expenses to be incurred in connection with
the offering described in this Registration Statement, other than underwriting  
discounts and commissions, all of which will be paid by the Company. All amounts
are estimates, other than the registration fee and the NASD fee.                

                                                                [Download Table]
                                                                     
Registration fee............................................  $39,600
NASD fee....................................................   15,500
Nasdaq National Market application and listing fee..........     *   
Accounting fees and expenses................................     *   
Legal fees and expenses.....................................     *   
Printing and engraving......................................     *   
Transfer Agent fees and expenses............................     *   
Blue sky fees and expenses..................................     *   
Miscellaneous expenses......................................     *   
                                                              -------
  Total.....................................................  $  *   
                                                              =======

------------------------                                                        

*   To be completed by amendment.                                               

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.                             

Section 102 of the Delaware General Corporation Law, as amended ("DGCL")
amended allows a corporation to eliminate the personal liability of directors of
a corporation to the corporation or its stockholders for monetary damages for   
breach of fiduciary duty as a director, except where the director breached his  
duty of loyalty, failed to act in good faith, engaged in intentional misconduct 
or knowingly violated a law, authorized the payment of a dividend or approved a 
stock repurchase in violation of Delaware corporate law or obtained an improper 
personal benefit.                                                               

   Section 145 of the DGCL provides, among other things, that we may indemnify
any person who was or is a party or is threatened to be made a party to any     
threatened, pending or completed action, suit or proceeding (other than an      
action by or in the right of Kozmo) by reason of the fact that the person is or 
was a director, officer, agent or employee of the Kozmo or is or was serving at 
our request as a director, officer, agent, or employee of another corporation,  
partnership, joint venture, trust or other enterprise against expenses,         
including attorneys' fees, judgment, fines and amounts paid in settlement       
actually and reasonably incurred by the person in connection with such action,  
suit or proceeding. The power to indemnify applies (a) if such person is        
successful on the merits or otherwise in defense of any action, suit or         
proceeding, or (b) if such person acted in good faith and in a manner he        
reasonably believed to be in the best interest, or not opposed to the best      
interest, of Kozmo, and with respect to any criminal action or proceeding had no
reasonable cause to believe his conduct was unlawful. The power to indemnify    
applies to actions brought by or in the right of Kozmo as well but only to the  
extent of defense expenses (including attorneys' fees but excluding amounts paid
in settlement) actually and reasonably incurred and not to any satisfaction of  
judgment or settlement of the claim itself, and with the further limitation that
in such actions no indemnification shall be made in the event of any            
adjudication of negligence or misconduct in the performance of his duties to    
Kozmo, unless the court believes that in light of all the circumstances         
indemnification should apply.                                                   

 Section 174 of the DGCL provides, among other things, that a director who
willfully or negligently approves of an unlawful payment of dividends or an     
unlawful stock purchase or redemption may be held liable for such actions. A    
director who was either absent when the unlawful actions were approved          

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or dissented at the time may avoid liability by causing his or her dissent to   
such actions to be entered in the books containing the minutes of the meetings  
of the board of directors at the time such action occurred or immediately after 
such absent director receives notice of the unlawful acts.                      

At the time of the closing of the offering, our Amended and Restated    
Certificate of Incorporation will include a provision that eliminates the       
personal liability of its directors for monetary damages for breach of fiduciary
duty as a director, except for liability:                                       

- for any breach of the director's duty of loyalty to Kozmo or its      
stockholders;                                                       

- for acts or omissions not in good faith or that involve intentional   
misconduct or a knowing violation of law;                           

- under section 174 of the DGCL regarding unlawful dividends and stock  
purchases; or                                                       

  - for any transaction from which the director derived an improper personal
benefit.                                                            

These provisions are permitted under Delaware law.                      

Our Amended and Restated Bylaws provide that:                           

- we must indemnify our directors and officers to the fullest extent    
permitted by Delaware law;                                          

    - we may indemnify our other employees and agents to the same extent that we
      indemnified our officers and directors, unless otherwise determined by our
Board of Directors; and                                             

- we must advance expenses, as incurred, to our directors and executive 
officers in connection with a legal proceeding to the fullest extent
permitted by Delaware law.                                          

The indemnification provisions contained in our Amended and Restated    
Certificate of Incorporation and Amended and Restated Bylaws will not be        
exclusive of any other rights to which a person may be entitled by law,         
agreement, vote of stockholders or disinterested directors or otherwise. In     
addition, we maintain insurance on behalf of its directors and executive        
officers insuring them against any liability asserted against them in their     
capacities as directors or officers or arising out of such status.              

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES                                

Since its inception, Kozmo has issued and sold the following securities:

In November 1997, we issued 1,133,332 shares of Series A mandatorily    
redeemable convertible preferred stock at a price of $0.21 per share to a group 
of accredited investors for an aggregate purchase price of $238,000.            

  In December 1998 and January 1999, the Company issued 3,206,707 shares and
1,791,810 shares of Series B mandatorily redeemable convertible preferred stock 
at $.21 per share for an aggregate purchase price of $1,050,000, to a group of  
accredited investors.                                                           

    In April 1999, we issued 2,508,500 shares of Series C mandatorily redeemable
convertible preferred stock at a price of $1.11 per share to a group of         
accredited investors for an aggregate purchase price of $2,787,000.             

In October 1999, we issued 15,616,119 shares of Series D mandatorily    
redeemable convertible preferred stock at a price of $1.80 per share to a group 
of accredited investors. 15,277,785 shares were sold for $27,500,000 in cash,   
277,778 shares of Series D shares were issued in exchange for $500 of credits   
against future advertising and 60,556 shares were issued in consideration of    
legal services performed in conjunction with the private placement.             

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In December 1999 and January 2000, we issued an aggregate of 27,198,554 
shares of Series E convertible preferred stock at a price of $4.41 per share to 
a group of accredited investors for an aggregate purchase price of $120,000,000.
Of the total Series E shares 34,067 shares were issued in consideration of legal
fees of $150,000 and 86,509 shares were issued in exchange for $381,678 of      
credits against future advertising. In connection with this issuance, we paid   
$3,567,000 as a placement fee to Thomas Weisel Partners LLP.                    

    In March 2000, we issued 15,305,181 shares of Series F convertible preferred
stock at a price of $7.55 per share to a group of accredited investors for an   
aggregate purchase price of $81,640. In connection with this issuance we paid   
$3,960,000 as a placement fee to Thomas Weisel Partners LLP.                    

In August 1999, we granted a 10-year fully vested warrant to purchase an
aggregate of 50,000 shares of common stock, at an exercise price of $.001 per   
share, to a consultant. On September 23, 1999, this warrant was exercised.      

   In September 1999, we granted a 10-year fully vested warrant to purchase an
aggregate of 50,000 shares of common stock, at an exercise price of $.001 per   
share, to a consultant.                                                         

In December 1999, in connection with the Series E convertible preferred 
stock offering, we granted fully vested warrants to purchase 3,717,860 and      
3,692,140 shares of Series E convertible preferred stock to Amazon.com at       
exercise prices of $4.41 and $5.52 per share, respectively.                     

In December 1999, in connection with the Series E convertible preferred 
stock offering, we granted a fully vested warrant to purchase 795,612 shares of 
Series E convertible preferred stock to the placement agent at an exercise price
of $4.41 per share.                                                             

    In January 2000, we granted a fully vested warrant to purchase 22,676 shares
of Series E convertible preferred stock to the lessor of our corporate office at
an exercise price per share of $4.41 in exchange for rental space.              

In March 2000, we granted a fully vested warrant to purchase 2,699,145  
shares of Series F convertible preferred stock, in connection with a service,   
licensing and distribution agreement with Ticketmaster Online-CitySearch, Inc., 
at an exercise price per share of $7.55.                                        

In March 2000, we granted a 10-year fully vested warrant to purchase    
8,650,000 shares of Series E convertible preferred stock to Amazon.com at an    
exercise price of $5.52 per share.                                              

  In March 2000, we granted a fully vested warrant to purchase 13,240 shares
of common stock to an accredited investor at an exercise price of $7.55 per     
share.                                                                          

   As of February 29, 2000, an aggregate of 112,500 shares of common stock had
been issued upon the exercise of stock options and an aggregate of 13,052,321   
shares of common stock were issuable upon exercise of outstanding options under 
our stock plans.                                                                

The issuances of the above securities were deemed to be exempt from     
registration under the Securities Act in reliance on Section 4(2) of the        
Securities Act as transactions by an issuer not involving any public offering.  
In addition, certain issuances described in Item 8 above were deemed exempt from
registration under the Securities Act in reliance upon Rule 701 under the       
Securities Act. The recipients of securities in each such transaction           
represented their intentions to acquire the securities for investment only and  
not with a view to, or for sale in connection with, any distribution thereof and
appropriate legends were affixed to the share certificates and warrants issued  
in such transactions.                                                           

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ITEM 16. EXHIBITS.                                                              

(A) EXHIBITS                                                                    

                                                                [Download Table]

EXHIBIT                                                                     
NUMBER           DESCRIPTION                                                
------           -----------                                                
                                                                            
   1.1*          Form of Underwriting Agreement                             

   3.1           Amended and Restated Certificate of Incorporation of       
                 Kozmo.com, Inc.                                            

   3.2           A&R By-Laws                                                

   4.1           Registration Rights Agreement                              

   4.2*          Form of Common Stock Certificate                           

   5.1*          Opinion of Shearman & Sterling, including consent          

  10.1*          Strategic Agreement between Starbucks Corporation and      
                 Kozmo.com, Inc. dated February 12, 2000                    

  10.2*          Supply and Delivery Agreement between Amazon.com LLC and   
                 Kozmo.com, Inc. dated March 13, 2000                       

  10.3*          Right of use agreement between Warner Home Video and       
                 Kozmo.com, Inc. dated February 28, 2000                    

  10.4*          Letter agreement between Columbia TriStar Home Video, Inc. 
                 and Kozmo.com, Inc. dated March 10, 2000                   

  10.5           Employment Agreement with Joseph Park dated October 4, 1999

  10.6           Employment Agreement with Yong Kang dated October 4, 1999  

  10.7           Letter Agreement with Gerardo Burdo effective November 1,  
                 1999                                                       

  10.8           Letter Agreement with Kenneth Trevathan effective          
                 November 15, 1999                                          

  10.9           Letter Agreement with Christopher Shimojima effective      
                 December 20, 1999                                          

 10.10           Letter Agreement with William Herald effective February 14,
                 2000                                                       

 10.11           Kozmo.com, Inc. 1999 Incentive Stock Option Plan           

 10.12           Kozmo.com, Inc. 1999 Stock Option Plan                     

 10.13           Kozmo.com, Inc. 1997 Stock Option Plan                     

  23.1           Consent of Independent Auditors                            

  23.2*          Consent of Counsel (Included in Exhibits 5.1)              

  24.1           Power of Attorney (see page II-6)                          

  27.1           Financial Data Schedule                                    

------------------------                                                        

*   to be filed by amendment.                                                   

(B) FINANCIAL STATEMENT SCHEDULE                                                

None                                                                            

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ITEM 17. UNDERTAKINGS.                                                          

The undersigned Registrant hereby undertakes that:                      

      (1) For purposes of determining any liability under the Securities Act
  of 1933, the information omitted from the form of prospectus filed as part
    of this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
 (4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.        

      (2) For purposes of determining any liability under the Securities Act
 of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the      
    securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.           

   Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the  
registrant pursuant to Item 15 of this registration statement, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange  
Commission such indemnification is against public policy as expressed in the    
Securities Act and is, therefore, unenforceable. In the event that a claim for  
indemnification against such liabilities (other than the payment by the         
registrant of expenses incurred or paid by a director, officer or controlling   
person of the registrant in the successful defense of any action, suit or       
proceeding) is asserted by such director, officer or controlling person in      
connection with the securities being registered, the registrant will, unless in 
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such         
indemnification by it is against public policy as expressed in the Securities   
Act and will be governed by the final adjudication of such issue.               

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SIGNATURES

  Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the   
undersigned, thereunto duly authorized, in the City of New York, on the 21st day
of March, 2000.                                                                 

                                                                [Download Table]
                                              
KOZMO.COM, INC.                               

By:               /s/ JOSEPH PARK             
     -----------------------------------------
     Name: Joseph Park                        
     Title: Chairman of the Board and Chief   
            Executive Officer                 

POWER OF ATTORNEY 

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints, jointly and severally, Yong Kang and Gerardo    
Burdo his or her true and lawful attorneys-in-fact and agents, each of whom may 
act alone, with full powers of substitution and resubstitution, for him or her  
and in his or her name, place and stead, in any and all capacities, to sign any 
or all amendments (including post-effective amendments) to this Registration    
Statement, and to sign any registration statement for the same offering covered 
by this Registration Statement that is to be effective upon filing pursuant to  
Rule 462(b) promulgated under the Securities Act of 1939, and all post-effective
amendments thereto, and to file the same, with all exhibits thereto, and in all 
documents in connection therewith, with the Securities and Exchange Commission, 
granting unto said attorneys-in-fact and agents, and each of them, full power   
and authority to do and perform each and every act and thing requisite and      
necessary to be done in and about the premises, as fully to all intents and     
purposes as he or she might or could do in person, and hereby ratifying and     
confirming all that such attorneys-in-fact and agents or any of them, or his or 
their substitute or substitutes, may lawfully do or cause to be done by virtue  
hereof.                                                                         

    PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT ON FORM S-1 HAS BEEN SIGNED BELOW BY THE FOLLOWING       
PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.                           

                                                        [Enlarge/Download Table]

                      SIGNATURE                          TITLE               DATE     
                      ---------                          -----               ----     
                                                                                      
/s/ JOSEPH PARK                                                                       
-------------------------------------------  Chairman of the Board and  March 21, 2000
Name: Joseph Park                            Chief Executive Officer                  

/s/ YONG KANG                                                                         
-------------------------------------------  President and Director     March 21, 2000
Name: Yong Kang                                                                       

/s/ GERARDO BURDO                                                                     
-------------------------------------------  Chief Financial Officer    March 21, 2000
Name: Gerardo Burdo                                                                   

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                                                                [Download Table]

                      SIGNATURE               TITLE         DATE     
                      ---------               -----         ----     
                                                                     
/s/ HUGH EVANS                                                       
-------------------------------------------  Director  March 21, 2000
Name: Hugh Evans                                                     

/s/ ROBERT GREENE                                                    
-------------------------------------------  Director  March 21, 2000
Name: Robert Greene                                                  

/s/ SETH GOLDSTEIN                                                   
-------------------------------------------  Director  March 21, 2000
Name: Seth Goldstein                                                 

/s/ JERRY GALLAGHER                                                  
-------------------------------------------  Director  March 21, 2000
Name: Jerry Gallagher                                                

/s/ JACK CHEN                                                        
-------------------------------------------  Director  March 21, 2000
Name: Jack Chen                                                      

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EXHIBITS

                                                                [Download Table]

       EXHIBIT                                                                    
       NUMBER          DESCRIPTION                                                
---------------------  -----------                                                
                                                                                  
          1.1*         Form of Underwriting Agreement                             

          3.1          Amended and Restated Certificate of Incorporation of       
                       Kozmo.com, Inc.                                            

          3.2          A&R By-Laws                                                

          4.1          Registration Rights Agreement                              

          4.2*         Form of Common Stock Certificate                           

          5.1*         Opinion of Shearman & Sterling, including consent          

         10.1*         Strategic Agreement between Starbucks Corporation and      
                       Kozmo.com, Inc. dated February 12, 2000                    

         10.2*         Supply and Delivery Agreement between Amazon.com LLC and   
                       Kozmo.com, Inc. dated March 13, 2000                       

         10.3*         Right of use agreement between Warner Home Video and       
                       Kozmo.com, Inc. dated February 28, 2000                    

         10.4*         Letter agreement between Columbia TriStar Home Video, Inc. 
                       and Kozmo.com, Inc. dated March 10, 2000                   

         10.5          Employment Agreement with Joseph Park dated October 4, 1999

         10.6          Employment Agreement with Yong Kang dated October 4, 1999  

         10.7          Letter Agreement with Gerardo Burdo effective November 1,  
                       1999                                                       

         10.8          Letter Agreement with Kenneth "Skip" Trevathan effective   
                       November 15, 1999                                          

         10.9          Letter Agreement with Christopher Shimojima effective      
                       December 20, 1999                                          

        10.10          Letter Agreement with William Herald effective February 14,
                       2000                                                       

        10.11          Kozmo.com, Inc. 1999 Incentive Stock Option Plan           

        10.12          Kozmo.com, Inc. 1999 Stock Option Plan                     

        10.13          Kozmo.com, Inc. 1997 Stock Option Plan                     

         23.1          Consent of Independent Auditors                            

         23.2*         Consent of Counsel (Included in Exhibits 5.1)              

         24.1          Power of Attorney (see page II-6)                          

         27.1          Financial Data Schedule                                    

------------------------                                                        

*   to be filed by amendment.                                                   

Dates Referenced Herein   and   Documents Incorporated By Reference

				Referenced-On Page
This S-1 Filing		Date		First		Last			Other Filings
		4/17/97		9		87
		6/30/97		50		85
		12/31/97		27		89
		12/31/98		27		89
		5/1/99		50		85
		8/16/99		47
		9/23/99		97
		10/4/99		49		102
		11/1/99		51		102
		11/15/99		51		102
		12/20/99		52		102
		12/23/99		29		83
		12/31/99		8		92
		1/1/00		29		90
		2/12/00		98		102
		2/14/00		52		102
		2/15/00		47
		2/28/00		98		102
		2/29/00		29		97
		3/10/00		44		102
		3/13/00		98		102
		3/14/00		70
		3/16/00		49
		3/17/00		54		55
Filed On		3/20/00
Filed As Of		3/21/00		1		101
		6/15/00		33		80
		12/31/00		32
		3/14/02		84
		10/4/04		83
		12/23/04		84
		1/18/05		84
		3/13/05		84
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